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HomeMy WebLinkAbout87-034BOARD O'F SUPERVISCURS CQIJNTY pF BUTTE, STATE CAF CAI IFpRNIA Kesolufion No. 87-34 A RESOLUTION OF THE BOARD OF SUPERVISORS OF THE COUNTY OF BUTTE AUTHORIZING THE EXECUTION AND DELIVERY OF A LIABILITY RISK COVERAGE AGREEMENT, A TRUST AGREEP~tENT, AND THE FILING OF A VALIDATION PROCEEGIIJG AND CERTAIN OTHER ACTIONS IN CONNECTION THEREWITH WHEREAS, the County of Butte (the "County") is a political subdivision duly organized and existing under the Constitution and laws of the State of California (the "State"); WHEREAS, the County i s authorized by Part 6 of Division 3.6 of Ti t1 e 1, Section 990 et sec., of the California Government Code (the "Act") to insure itself against tort or inverse condemnation liability, to insure its employees against injury resulting from an act or omission in the scope of his employment and to insure against the costs of defending such claims; WHEREAS, pursuant to Section 990.4 of the Act the County is authorized to provide insurance by self-insurance which may be funded by appropriations and to establish or maintain reserves for such purposes; WHEREAS, pursuant to Section 990.6 of the Act, the cost to the County of such self-insurance is a proper charge against the County and therefore the Board of Supervisors of the County is authorized to make premium payments for such coverage in an amount such Board of Supervisors determines~to be necessary to provide such coverage; IdHEREAS, pursuant to Section 990.8 of the Act, the County is empowered to obtain insurance coverage through a joint powers agreement with other local public entities, and such pooling of self-insured claims and the risk sharing of lasses is not considered insurance subject to regulation under the California Insurance Code; WHEREAS, the CSAC Excess Insurance Authority (the "Provider") is a joint exercise of powers agency of which the County is a member; WHEREAS, the Provider is authorized to exercise necessary powers to implement the purposes of the Provider through the Provider's Soard of Directors; WHEREAS, the Provider has determined to assist the County and certain other Counties which are members of the Provider to obtain self-insurance for liability risks (the "Coverage") through and on the terms set forth in the Liability ~z- Risk Coverage Agreement dated as of June 1, 1957 by and among the Provider, and the Counties named therein (each of the County and such Counties set forth in this paragraph being referred to herein individually as a "Providee" and collectively as the "Providees"); WHEREAS, this Soard of Supervisors proposes to authorize the execution of the Agreement for the purpose of providing Coverage for the County far the benefit of the County's residents and taxpayers and for the health and safety of the public; WHEREAS, the County proposes to authorize the sale and delivery pursuant to the Trust Agreement described below of Certificates of Participation (the "Certificates") evidencing undivided and proportionate interests in Basic Premium to be paid by the County and the other Providees under the Agreement in order to fund reserves initially in an amount determined sufficient to pay Settlements (as defined in the Agreement) when due and to provide the Coverage described in the terms set forth in the Agreement and in the Memorandum of Liability Coverage attached thereto in Exhibit B (the "Memorandum"); WHEREAS, the County has conclusively determined following investigation that either public entity 1iabi1ity insurance coverage is not available to the County from commercial insurers or from any other source or that such insurance is not available at a reasonable cost; WHEREAS, the County has further determined, based upon the advice of independent professional insurance consultants familiar with the cyclical nature of the reasonable availability of coverage in the commercial insurance market, that it is uncertain when such liability insurance is expected to become available at a reasonable cost, thereby in the interim exposing the County to self-insuring from available revenues on a year by year basis with the attendant risks of fiscal instability and ruinous burdens on its citizens in the event of large liability claims recoveries; WHEREAS, this Board of Supervisors hereby further determines that the periodic unwillingness of the commercial insurance market to provide primary or excess public entity liability insurance to local governments at reasonable rates or, in certain cases as at present, at any rate, mandates that the County seek not only an immediate solution but also a long-term permanent solution to this problem which will in future years free them from exposure to the vagaries of commercial insurance cycles; -3- WHEREAS, the County, the Provider and the other Providees, in consultation with independent professional insurance consultants, have formulated a joint risk-sharing insurance program to be administered by the Provider to meet the public entity liability insurance coverage needs of the Providees which will provide the following advantages, among others, to the Providees: (a) immediate funding of a c7 aims payment fund (the "Claims Payment Fund") through an initial deposit from the proceeds of the sale of the Certificates for the dual purpose of providing immediate protection from large claims loss and facilitating eventual access to the commercial reinsurance market, (b) mutual agreement by the Providees to pay annual premium amounts on both a prosepective and a retrospective basis calculated acturarially to spread and moderate the cost of claims loss to each Providee, (c) relief from the burden of paying premiums to commercial insurers at levels reflecting the insurers' high costs of underwriting, administration and brokerage fees since the Provider's costs will be limited to reasonable administrative costs, (d) relief from the commercial insurers' rights under excess liability policies to force claim settlements which are payable primarily in each case from the Providee's self-insurance funds, (e) access to the commercial reinsurance market in future years when commercial reinsurance is available at rates deemed favorable by the Providees, and (f) actuarially-determined premium payments calculated to provide amounts in each year necessary to maintain the C7 aims Payment Fund at an actuarially sound level and therefore sufficient to reserve against the incurred losses of the Providees. WHEREAS, this Board of Supervisors hereby further determines that the Participation Premium (as defined in the Agreement) to be paid in each year by each Providee including the County as provided for and upon the conditions set forth in the Agreement will be payable only upon the condition of the receipt of the consideration represented by the insurance protection to be provided in such - 4- year under this Agreement, but in the event that such protection is so provided in any year such Participation Premium will be a binding obligation of the County payable from legally available moneys; WHEREAS, this Board of Supervisors hereby further determines that the obtaining of the insurance protection and services provided for under the Agreement is essential in the preservation and fostering of the health, safety and property rights of the citizens of the County; WHEREAS, it is necessary and in the interest of the citizens of the County to establish, through the sale of the Certificates, and maintain through pro rata contributions of each Providee, including the County, a debt service reserve fund therefor, in order to establish adequate reserves to permit the Certificates to be marketed at the lowest possible interest rates; WHEREAS, this Board of Supervisors hereby determines that it is reasonably expected that the cost of funding and maintaining such reserve fund will be more than offset by the anticipated benefits and economies to be realized by the pooling of risks and losses pursuant to the Agreement; IJHEREAS, Article 16, Section 6 of the Constitution of the State, regarding lending of public credit or funds, provides, in relevant part, that such Section "shall not prohibit any county, city and county, city, township, or other political corporation or subdivision of the State from joining with other such agencies in providing for the payment of workers' compensation, unemployment compensation, tort liability, or public liability losses incurred by such agencies, by entry into an insurance pooling arrangement under a joint exercise of powers agreement, or by membership in such publicly-owned nonprofit corporation or other public agency as may be authorized by the Legislature"; WHEREAS, Premium shall be paid by the County in consideration of the Coverage offered by the Agreement and by the Memorandum and the sharing of the risk of liability for claims associated with the pooled self-insurance program during each Coverage Period (as defined in the Agreement); this Board of Supervisors hereby agrees and determines that such Premium payments represent the fair market value of the Coverage; in making such determination, consideration has been given - 5- to the initial costs of establishing the pooled insurance program, the unavailability of affordable commercial liability insurance to the County and to other Providees, the anticipated costs of commercial liability insurance in the future, the obligations of the Providees under the Agreement {including the other Providees' agreement to share the risk of costs imposed by liability claims to the County), the obligation of the Provider to provide insurance services, the benefits resulting from capitalization of a pooled insurance program (including the prospect of access to the commercial liability reinsurance market) and the other benefits therefrom which will accrue to the County and the health and safety of the general public; WHEREAS, the County receives benefit from the sharing of risk of costs imposed by liability claims under the terms of the Agreement during each Coverage Period; the assessment of Risk Premium and Risk Premium Adjustments is the means by which such risk-sharing is implemented; and the procedure established in the Agreement for the calculation, adjustment and assessment of Risk Premium and Risk Premium Adjustments is hereby determined to be fair, just and reasonable as a means of such risk-sharing; WHEREAS, Section 52511 of the California Government Code provides that "(a) local agency may bring an action to determine the validity of its bonds, warrants, contracts, obligations or evidences of indebtedness pursuant to Chapter 9 (commencing with Section 860) of Title 10 of Part 2 of the Code of Civil Procedure" and the County proposes to bring such an action together with the other Providees to validate the Providees' obligations under the Agreement and the Trust Agreement, and proposes to authorize legal counsel to conduct such proceedings; and WHEREAS, all acts, conditions and things required by the Constitution and laws of the State to exist, to have happened and to have been performed precedent to and in connection with the consummation of the financing authorized hereby do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the County is now duly authorized and empowered, pursuant to each and every requirement of law, to consummate such financing for the purpose, in the manner and upon the terms herein provided; NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF SUPERVISORS OF THE COUNTY OF BUTTE AS FOLLOWS: -6- SECTION 1. Declaration of Board of Supervisors. This Board of Supervisors hereby specifically finds and declares that the actions authorized hereby constitute and are with respect to public affairs of the County, and that the statements, findings and determinations of the County set forth in the preambles above and of the documents approved herein are true and correct. SECTION 2. Liability Risk Coverage Agreement. The form of Liability Risk Coverage Agreement, dated as of June 1, 1987 with an effective date of its date of execution, between the County and the other counties named therein as Providees and the CSAC Excess Insurance Authority (the "Provider"), as Provider, presented to this meeting and on file with the Clerk of the Board of Supervisors is hereby approved. The Chairman of the Board of Supervisors and any other County officer or official of the County authorized by the Chairman of the Board of Supervisors are hereby authorized and directed, for and in the name and on behalf of the County, to execute, acknowledge and deliver to the Provider, or after the date on which the judgment of validation referred to in Section 4 hereof becomes final, said Liability Risk Coverage Agreement in substantially said form, with such changes therein as such officer may require to approve, such approval to be conclusively evidenced by the execution and delivery thereof. SECTION 3. Trust Agreement. The form of Trust Agreement, dated as of June i, 1987 with an effective date of the date of execution thereof, among the County and the other Providees, the Provider and the trustee named therein (the "Trustee"), presented to this meeting and on file with the Clerk of the Board of Supervisors, is hereby approved. The Chairman of the Board of Supervisors and any other officer or official of the County authorized by the Chairman of the Board of Supervisors are hereby authorized and directed, for and in the name and on behalf of the County, to execute and deliver to the Provider and the Trustee, or after the date on which the judgment of validation referred to in Section 4 hereof becomes final, said Trust Agreement in substantially said form, with such changes therein as such officer may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. SECTION 4. Validation Proceedings. The Chairman of the Board of Supervisors and any other Officer or official of the County authorized by the -7- Chairman of the Board of Supervisors are hereby authorized and directed to participate and cooperate to the fullest extent practicable with the Provider, the other Providees and representatives of Brown & Wood ("Special Counsel"), which firm has heretofore been retained by the Provider as legal counsel with respect to the Certificates and validation proceedings and which retention is hereby ratified by this Board of Supervisors, in the conduct of validation proceedings regarding the Agreement and the Trust Agreement and to do any and all things and to execute and deliver any documents which such officers and staff may deem necessary or advisable in connection therewith. SECTION 5. Attestation and Seal. The Clerk of the Board of Supervisors is hereby authorized and directed to attest the signature of the authorized signatory, and to affix and attest the seal of the County, as may be required or appropriate in connection with the execution and delivery of said Liability Risk Coverage Agreement and Trust Agreement. SECTION 6. Further Actions. Officers of the Board of Supervisors and the Chairman of the Board of Supervisors and any other officer or official of the County authorized by the Chairman of the Board of Supervisors, are hereby authorized and directed, jointly and severally, to do any and all things and to execute and deliver any and all documents which they may deem necessary or advisable in order to consummate the sale, execution and delivery of the Certificates by the Trustee and otherwise to carry out, give effect to and comply with the terms and intent of this resolution, the Certificates, Liability Risk Coverage Agreement and Trust Agreement. Such actions heretofore taken by such officers are hereby ratified, confirmed and approved. SECTION 7. Effective Date. This resolution shall take effect immediately upon its passage. PASSED AND ADOPTED this 3rd day of March 1987 by the following vote: AYES: Supervisors Fulton, McInturf, Vercruse and 'Chair Dolan NOES: Supervisor McLaughlin ABSENT: None NOT VOTING: None _ ~ n ~HNt ~.Hiv; unary of the Butte ounty Board of Supervisors ATTEST: ~IA~R~-LN~L.~ICHOLS, Chief Administrative Officer and Clerk of the Board By: ~. ., DRAFT #3.0 BROWN & WOOD I/25/87 LIABILITY RISK COVERAGE AGREEMENT Dated as of June 1, X9$7 among the CSAC EXCESS INSURANCE AUTHORITY as Provider and THE COUNTY -0F :ALPINE, COUNTY OF AMADOR, COUNTY OF BUTTE, COUNTY OF CALAVERAS, COUNTY OF COLUSA, COUNTY OF DEL,NORTE, ::COUNTY OF FRESNO, COUNTY OF .GLENN, COUNTY OF HUMBOLDT; COUNTY OF ,IMPERIAL, COUNTY OF INYO, COUNTY OF KTNGS,`COUNTY OF LAKE, COUNTY OF LASSEN, COUNTY:OF MADERA; COUNTY OF MARIPOSA, COUNTY OF MENDOCINO, COUNTY OF MERGED, COUNTY OF MDDOC, COUNTY OF MONO, COUNTY OF NEVADA, COUNTY OF PLACER,. COUNTY OF PLUMAS, COUNTY OF SAN LUIS-OBISPO; COUNTY OF SANTA BARBARA, COUNTY .OF SANTA CRUZ, COUNTY OF SHASTA, COUNTY OE SIERRA, COUNTY OF SISKIYOU, COUNTY OF SOLANO, COUNTY OF SONOMA, COUNTY OF STANISLAUS, COUNTY OF SLITTER, COUNTY OF TEHAMA, COUNTY OF TRINITY, COUNTY OF TUOLUMNE AND COUNTY OF YUBA as Providees TABLE OF CONTENTS Page ARTICLE I DEFINITIONS AND EXHIBITS SECTION I..1 Definitions and Rules of Construction ..... 5 SECTION 1.2 Findings ... ....... .................... 9 SECTION ]..3 Exhibits .................................. 10 - ARTICLE TT REPRESENTATIONS, COVENANTS AND WARRANTIES SECTION 2.1 Representations, Covenants and Warranties of the Providees ........................ 11 SECTION 2.2 Representations, Covenants and Warranties of the Provider ......................... 13 ARTICLE III DEPOSIT OF MONEYS; COVERAGE; PAYMENT OF SETTLEMENTS; PURCHASE OF COMMERCIAL INSURANCE SECTION 3.1 Deposit of Moneys; Coverage; Payment of Settlements; Purchase of Commercial Insurance ... ... ..:.:....:..... .. :. 1S SECTION 3.2 -Coverage. ...................... ... 15 SEGTTON 3.3 Payment :of Delivery Costs .. .. .... .. 15 SECTION,3:4. Payment:of Settlements ...... .. 15 SECTION.3•.5 Purchase of Commercial Insurance•~ or Reinsurance :. . ............. .. 16 SECTION 3~6 Case Reserves; Loss Reserves; Projected.. Ultimate.Net Losses .: ................:.. 17 ARTICLE IV TERM OF AGREEMENT; PREMIUM SECTION 4.1. Term of Agreement; Termination of a Providee's Obligations to pay Participation Premium ................... ].9 SECTION 4:2 Budget and Appropriation of Premium Payments ................................ 20 SECTION 4.3 Obligation to Pay Premiums ................ 20 i SECTION 4.4 Premiums .................................. 22 SECTION 4.5 Risk Premium Adjustments .................. 24 SECTION 4.6 Providees Making a Cash Deposit into the Claims Payment Fund . . .................... 2S ARTICLE V RESERVES RELEASED FROM THE PLEDGE OF THE TRUST AGREEMENT SECTION S.1 -Receipt of.Reserves Upon Discharge of the. Trust Agreement ......................... 26 SECTION 5.2 Receipt of a Providee's Allocable Share Upon Withdrawal or Expulsion ............ 27 SECTION 5.3 Receipt of a Providee's Share of Debt Service Reserve Fund Upon Prepayment .... 27 ARTICLE VT ADMISSION T0, WITHDRAWAL FROM AND EXPULSION FROM THE POOLED SELF-INSURANCE PROGRAM SECTION 6.1 Conditions to Providing Coverage to a New Providee ............................ 28 SECTION 6.2 Conditions to Permitting Withdrawal of a Providee from Coverage .... ......... 29 SECTION 5.3 Conditions to Permitting Expulsion of a . Providee from Coverage .................. 3Q ARTICLE VII ABATEMENT SECTION 7.1. Abatement of Participation Premium in the Event of Failure to Pay Settlements ............................. 31 ARTICLE. VIII INDEMNIFICATION AND RELEASE OF PROVIDER, TRUSTEE AND PROVTDEES; DISCLAIMER SECTION 8.1 Release and Indemnification Covenants ..... 32 SECTION 8.2 Disclaimer .....:.......................... 32 ii Page ARTICLE IX ASSIGNMENT AND AMENDMENT SECTION 9.1 Assignment by the Provider ................ 32 SECTION 9.2 No Assignment by the Providees ............ 33 SECTION 9.3 Amendment ................................. 33 ARTICLE X EVENTS..OF DEFAULT AND REMEDIES SECTION 10.x. Events of Default .................:....... 34 SECTION 10.2 Remedies on Default ....................... 35 SECTION 10.3 No .Remedy Exclusive ........:.............. 36 SECTION 10.4 Agreement to: Pay Attorneys' Fees and . Expenses ................................ 36 SECTION 10.5 No Additional Waiver Implied by One Waiver .............................. 37 SECTION 10.6 Trustee and Owners to Exercise Rights ..... 37 ARTICLE XI SECURITY .FOR OR PREPAYMENT OF BASIC PREMIUM; TERMINATION PREMIUM SECTION 11.,1 Deposit:af Security for Basic Premium by a Providee ..................... .... . 37 SECTION 11.2 Deposit of Security for Basic Premium or. Optional Prepayment by A11 Providees .... 38 SECTION 11.3 Optional Prepayment of Certificates ....... 33 SECTION I1.4 Termination Premium ....................... 40 SECTION 11.5 Continuing.Premium Obligations ............ 41 ARTICLE XII MISCELLANEOUS SECTION 12.1 Notices ..........:........................ 47 SECTION 12.2 Binding Effect ............... ............ 41. SECTION 12.3 Severability .............................. 41 SECTION 12.4 Further Assurances and Corrective Instruments .......................... 42 SECTION 12.5 Execution in Counterparts ............... 42 SECTION. I2..b AppLicabl.e Law ...............:............. 42 iii Page Exhibit A - Schedule of Basic Fremium Payments .......... A-~. Exhibit B - Memorandum of Liability Coverage, .......... B-~. Underwriting and Claims Administration Standards and Liability Claims Quality Control-Guidelines -. . ............... B-l5 Exhibit C - Form of Requisition .................... .. C-1 Exhibit D .- Allocable Proportion for Each Providee :... D-~. Exhibit E - Providees Making a Cash Deposit Ento the. Claims Payment-Fund ... ......... ... E-~. Exhibit E - Initial Participation Premium ...:.. ...... F-1 Exhibit G - Notice Addresses ............................ G~l Schedule A - Methodology far Calculating Total Risk Premium and: Formula for Calculating Risk ,. Premium Proportion Schedule B - Formula for Calculating+Rsk~Premium .Adjustment ................. ...... ..... SB-1 iv LIABILITY RISK COVERAGE AGREEMENT THIS LIABILITY RISK OVERAGE AGREEMENT, dated as of June 1, 1987, by and among the CSAC EXCESS.TNSURANCE AUTHORITY, a joint exercise of powers. agency duly organized and existing-under the laws of the State of California, including, without limitation, Section 6500 et seg, of the Government Code of the State of California, as provider (the "Provider"), and the COUNTY OF ALPINE, COUNTY OF AMADOR, COUNTY OF BUTTE, COUNTY:-,OF CALAVERAS,.COUNTY OF COLUSA,. COUNTY OF DEL, NORTE, COUNTY _ OF FRESNO.; COUNTY. 'O~' GUENN; COUNTY OF HUMBOLDT, COUNTY OF IMPERIAL, COUNTY OF INYO, COUNTY OF KINGS; COUNTY OF LAKE, COUNTY OF LASSEN, COUNTY OF MADERA, COUNTY OF MARTP.OSA,.COUNTY OF MENDOCTNO, COUNTY OF ,MERGED, COUNTY OF MODOG, COUNTY OF MONO, COUNTY OF NEVADA, COUNTY OF PLACER, COUNTY OF PLUMAS, COUNTY OF SAN LUIS '` OBISPO, COUNTY OF SANTA. BARBARA, COUNTY OF-SANTA CRUZ, COUNTY OF SHASTA, COUNTY OF STERRA, COUNTY OF SISKIYOU, COUNTY OF SOLANO, COUNTY OF SONOMA, COUNTY OF STANISLAUS, COUNTY OF BUTTER, COUNTY OF TEHAMA, COUNTY OF TRINITY, COUNTY OF TUOLUMNE AND COUNTY OF YUBA, CALTFORNIA, each a political subdivision duly organized and existing under the Constitution and laws of said State (each a "Providee" and collectively, the "Providees"); W I T N E S S E T H WHEREAS, each Providee is authorized by Part 5 of Division 3.6 of Title 1, Section 990 et seq., of the California Government Cade (the "Act") to insure itself against tort or inverse condemnation liability, to insure its employees against injury resulting from an act or omission in the scope of his employment and to insure against the costs of defending such claims; WHEREAS, pursuant to Section 990.4 of the Act each Providee is authorized to provide insurance by self- insurance which may be funded by appropriations and to establish or maintain reserves for such purposes; WHEREAS, pursuant to Section 990.6 of the Act, the costs to each Providee of such self-insurance is a proper charge against the Providee and therefore the governing board of each Providee is authorized to pay premiums for Coverage in an amount such governing board determines to be necessary to provide such Coverage; WHEREAS, pursuant to Section 990.8 0£ the Act, each Providee is empowered to obtain Coverage through a joint powers agreement with other 1oca1 public entities, and such pooling of self-insured claims and the risk sharing of losses is not considered insurance subject to regulation under the California Insurance Code; WHEREAS, the Provider is a joint powers agency of which each Providee is a member; WHEREAS, the Provider is authorized to exercise necessary ,powers to implement the .purposes of the Provider as established by-the Proviiier's Governing Board; WHEREAS, the Provider has determined to assist each Providee to obtain self-insurance for liability risks through this Agreement; WHEREAS, the governing board of each Providee has authorized the execution of this Agreement for the purpose of providing Coverage for-the Providee for the benefit of the Providee's residents and taxpayers and for the health and safety of the public who interact with the Providee; WHEREAS, the Providees propose to authorize the sale and delivery pursuant to the Trust Agreement described herein of Certificates of Participation {the "Certificates"} evidencing proportionate interests in aggregate Basic Premium to be paid by the Providees-under this Agreement in order to initially fund reserves in an amount determined sufficient to pay Settlements when due and to provide the Coverage described in-the terms set forth herein and in the Memorandum of Liability Coverage attached hereto as Exhibit B (the "Memorandum"); WHEREAS, the Provider and the Providees have heretofore conclusively determined following investigation that either public. entity liability insurance is not available to the Providees from .commercial insurers or from any other source or that such insurance is not available at a commercially reasonable cost; WHEREAS, the Provider and the Providees have further determined, based upon the advice of independent professional insurance consultants familiar with the cyclical nature of the reasonable availability of coverage in the commercial insurance market, that it is uncertain when such liability insurance is expected to became available at a commercially reasonable cost, thereby in the interim exposing the Providees to self-insuring from 2 availab"le revenues on a year-by-year bases with the attendant risks of fiscal instability and ruinous burdens on its citizens in the event of large liability claims recoveries; WHEREAS, the Provider and the Providees have further determined that the periodic unwillingness of the commercial .insurance market to provide primary or excess public entity liability insurance to local governments. at reasonable rates or, in certain cases as at present, at any rate, mandates that the Providees seek not only an immediate solution but also_a."long-term permanent solution to this problem which"" wi"11"in future years free-them from exposure to the vagaries of commercial insurance cycles; WHEREAS, the Provider and the Providees, in consultation with independent professional insurance consultants,. have formulated a joint risk-sharing insurance program to be administered by the Provider to meet the public entity liability insurance .needs of the Providees which will provide the fallowing advantages, among others, to the Providees: (a) immediate funding of a claims payment fund {the "Claims Payment Fund") through an initial deposit from the proceeds of the sale of the Certificates for the dual purposes of providing immediate protection from large claims loss and facilitating eventual access to the commercial reinsurance market, -" (b) mutual ,agreement by the Providees to'pa"y annual premiums on bath a prospective and a retrospective basis calculated actuarially to spread and moderate the cost of liability losses to each Providee, {c) relief from-the. burden of payeng premiums to commercial insurers at Levels reflecting the insurers' high costs of underwriting, administration and brokerage fees since the Provider's costs will be limited to reasonable administrative costs, " (d) relief from the commercial ensurers' rights under excess liability policies to force claim settlements which are payable primarily in each case from the Providee's self-insurance funds, (e) access to the commercial reinsurance market in future years when,.commercial reinsurance is 3 available: at rates deemed favorable by the Providees, and ~f) actuarially determined premium payments calculated to provide amounts in each year.n~cessary to maintain the Claims Payment-Fund at an actuarially. sound level and. therefore sufficient to reserve agaixist the expected losses of the Providees; WHEREAS, ,the Providees have further determined 'that the Participation-Premium to be paid in each year by each Providee as provided-for and upon the conditions set forth in this Agreement will: be payable-only upon the `condition of the receipt of the consideration represented by the insurance protection and services to be provided in such year under this Agreement,-but in the event that such protection and services are so provided in any year such Participation Premium will be a binding abigation of each Providee payable from legally available moneys of each Providee; WHEREAS, the Providees have further determined that the obtaining of the insurance protection and services provided for under this Agreement:.is essential to the preservation and fostering of the health, safety and property rights of the citi-tens.of-each:Providee; WHEREAS, each Providee kiss heretofore determined that it is necessary and in the interest of the citizens of each such Providee to establish, through the sale of the Certificates, and maintain through pro rata contributions of each Providee a debt :service reserve fund therefor, in order to establish adequate reserves to permit the Certificates to be marketed.at;the,lowest possible interest rates; WHEREAS, the cost., of -funding arid maintaining' such; ' reserve fund has been determined'by each Providee to be mope than offs.et;by,the anticipated benefits and economies to be realized; by:-the pooling of risks and losses pursuant to this Agreement; WHEREAS.,:-,Article l6, Section 5`of the Constitution of .. the State;of California,-regarding lending of public credit. or funds, provides, in relevant part, that such Section "shall not:prahibit any .county; city and county, city, township,,or other political corporation or subdivision of .. the State from joining with other such agencies in providing for the payment of workers' compensation, unemployment compensation, tort liability, or public liability losses incurred by .,such. agencies, by entry into an insurance - 4 pooling arrangement under a joint exercise of powers agreement, or by membership in such publicly-owned nonprofit corporation or other public agency as may be authorized by the .Legislature"; WHEREAS, it is a matter .for the governing board of each Providee to .determine the amount of premiums which such Providee shall pay .for proper: insurance coverage; WHEREAS,-each Providee has heretofore. determined and -does hereby. confirm that, .in view..of the foregoing facts and circumstances,-the premiums to.be required hereunder are - . reasonable and advantageous and to the public benefit of the " `citizens-of such Providee; NOW, THEREFORE, in-consideration .of-the .above premises and of tYie mutual covenants hereinafter contained and for- . other good and.valuab3.e,consideration, the parties hereto-` agree as fo~.laws :. ARTICLE T DEFINITIONS AND EXHIBITS. SECTION 1.1 Definitions and Rules. of Constructon.- Unless the context otherwise requires, the capitalized terms used herein shall, £or all,:purposes of this Agree~ierit; have tae meanings specified in ~he.Trust Agreement, dated"as of the date hereo£,..by and among Seattle-First National Bank, ,as Trustee; thereunder, the Provider and.the Providees, together with any amendments-thereof or supplements thereto permitted to be made thereunder; and the additional~~terms defined in this Section; shall, for all. purposes of this Agreement, have the meanings herein specified. Unless the context otherwise inch.cafes, words importing the singular number-sha11 nclude.the-plural number-and'vice versa. TYe terms "hereby".,, "hereof", "hereto", ".herein", "hereunder."' and any siiiiilar terms, as used in this .Agreement,. refer to this Agreement as a whole. .. "Actuary" means a firm of national reputation,-with at least one employee who.i,s both a.Eellow of the Casualty Actuarial Society and a Member of the American Academy`of Actuaries,. which-firm. is apponted:by.theeProvider with `the approval of ,at least a majority of the Provider's Governing: Board. "Administrative Premium" means, with respect to each" Providee, such.Proyidee's Allocable Proportion of-all 5 administrative costs of the Provider relating to the Coverage or the Certificates, as further set forth in Section 4.4{d) hereof. "Allocable Pro ortion" means the percentages set forth in Exhibit D of this Agreement. "Authority", as used in the Memorandum, means the Provider. ~~ "Basic Premium"-means, with respect to each Providee, the. payments set forth in Exhibit A hereto representing principal and interest to be paid with respect to such Providee's portion of the Certificates, as set forth in Section 4.4(b) of this Agreement. "Basic Premium Pa ent Date"-means August 1, of each year during the period in which Certificates are outstanding, provided, however, that with respect to the first Coverage Period, the Basic Premium Payment Date sha~.l be the Closing Date. "Case Reserves" means amounts in the Claims Payment Fund required to be designated as reserves for payment of Settlements pursuant to Section 3.6 hereof, in accordance with prudent insurance practice and in accordance with the recommendations of the Claims Review Committee of the Provider and the annual report of the Qualified Claims Auditor. Case Reserves will be determined by the Qualified Claims Auditor annually, on or-prior to 3anuary 1, of each year,-and by the Claims Review Committee of the Provider quarterly. Case Reserves will be adjusted to reflect changed circumstances subsequent to the-year any Clairn is filed and to reflect the amount by'-which a Settlement exceeds reserves established for any Claim; provided, however, that there shall be no Case Reserves established far a Claim or any portion thereof within a Providee's Self-Insurance Reserve, as described in Exhibit B hereto, or which is covered by commercial insurance or reinsurance pursuant to Section 3.5 hereof. "Claim" means:a demand against a Providee to recover for losses or damages within ar alleged to be within the scope of the Memorandum. "Cavera~" means. the insurance provided pursuant to and in accordance with and on the terms set forth in this Agreement and in the Memorandum attached as Exhibit B hereto, including, but not limited to, rights to payment of 6 Settlements from funds on deposit in the Claims Payment Fund under the terms of this Agreement. "Coverage Period" means each Fiscal Year for which a Providee pays.Pa~ticipation Premium; provided, however, that the first Coverage Period shall be the period of 12:01'a.m. on the day next succeeding the Closing Date through July 1, 1987 at 12:01 a.m. California time. "Governing Board" means members of the Board of Directors of the Provider; provided that only members representing ProVidees shall be entitled to vote on any action with respect to the pooled self-insurance program'.' "Insured", as used in the Memorandum, means a Providee. "Lass Reserves" means the amount in the Claims Payment Fund required to be designated as reserves for payment of Settlements pursuant to Section 3.5 hereof in accordance- with the annual report of the Actuary. Loss Reserves shall include Case Reserves and amounts designated by the Actuary as required to be reserved far incurred but not reported Claims and projected loss development. "Low Reserves. Mode" means the occurrence and continuance of one or more of the following events: {1) the sum of the amounts in .the Claims Payment Fund, .the Debt Service Reserve Fund-and any other funds held by the. Trustee which are available to pay principal and ~.nterest with respect to the' Certificates is less than the greater of {a) $10,000,000 or (b} sixty percent (60%} of the outstanding principal amount represented.by.the Certificates; or (2} the sum of actual existing Loss Reserves plus amounts required to be designated as Loss Reserves pursuant to Section 3.5 hereof equals or exceeds 175% of the amounts then an deposit in the Claims"Payment Fund. "Memorandum" means the Memorandum of Liability Coverage set Earth in Exhibit B hereto. "Participation Premium" means, with respect to each Providee, Administrative-,:Premium, Basic Premium, Supplemental Basic Premium and Risk Premium, payable by such Providee on each Basic Premium:.Payment Date. 7 "Pra~ected Ultimate„Net Losses" means-the actuarially determined, amount (determined aspravided in Section 3,6 hereof) that, together with interest earnings thereon; is estimated to be paid out over. time by the Provider to satisfy all Settlements of Claims arising-during a given period of time.- "Providee" means each Gounty which is a party to this Agreement,: as this Agreement may be amended from time to time.. "Provider"-means the CSAC Excess~Insurarice Authority,-a joint exercise of powersauthority duly organized and' " existing under the Constitution and the laws of the State. " ualified Claims Auditor" means an individual or an organization experienced in the handling of public entity liability claims, appointed by the Provider with the approval of a majority of the members of the Provider's Governing Board, who-shall be independent of any party who. administers Claims. on behalf~of-the Provider throughput each Coverage Period. "Risk Premium" means, with respect to each Providee, an amount equal to such Providee's Risk Premium Proportion of the total amount necessary to fund estimated,. Loss Reserves required to be established.to pay Settlements .of all Providees for a Coverage Period:as.determined~according to the methodology set forth in Section 4.4{e) of this - Agreement. "Risk_Prezn~.um Adjustment" means:, with respect to each Providee, an amount~~payable by such Providee or refundable to such Providee, based on the Projected Ultimate Net Losses set forth in the.annual,report of the. Actuary described in Section 3.6 hereof-:reflecting events.:in the Coverage Period preceding such report relating to Claims with respect to all preceding Coverage Periods., as set forth in Section 4.5 of this Agreement and as determined according ao'.the formula set forth-in.Schedule,.B to this Agreement. "Risk Premium Proportion" means:-the percentage of Total Risk Premium and Adm~~_,._ ~inistrative Premium required to be paid by a Providee in each Coverage Period, commencing on or after July 1.,.1,987,- and determined as provided in Section 4.4{e) hereof and the formula set forth in Schedule A to this Agreement. 8 °Settlement" means the settlement by the Provider or Providee, in accordance with the Memorandum; of a Ciaim against such Providee, or the adjudication of such Claim without.. further. right of appeal. The amount of any Settlement may include any costs or expenses deemed appropriate by the Provider in connection therewith- including Defense Costs as described in the Memorandum. "Su lemental Basic Premium" means, with respect to each Providee, 10% of the-scheduled amount of Basic Premium. set forth in Exhibit A hereto payable by such Providee on arty: Basic Premium Payment: Date {before any credit to -Basic Premium has ;been made pursuant to Section 4.4{b}{2) hereof). "Term o£ the A reement" means the time during which this Agreement is in effect, as provided in .Section 4.1 of this Agreement. "Termination Premium".means the amount required to be paid by a Providee to voluntarily terminate Coverage for a. Coverage Period and all future Coverage Periods, as set forth in Sections 6.2 and ].1.4 of this Agreement, or the ` amount required to be paid to expel a Frovidee, as, set forth in Sec ions 6.3 and 11.4 hereof. _ ,. "Total Premium": or."Premium"means, with respect to each Providee, the sum of the Participation 'Premium and Risk Pxemium~Adjustment..payable by such Providee in any Coverage Period. _. "Total Risk Premium" means the total amount of Risk Premium.payable:by al°l Providees.in any Coverage Period determined asprovided'`in Section 4.4{e) hereof. "Trustee" means."Seattle-First National Bank, a na~iorial banking,a5sociation, or any successor thereof. - "Undesi noted Reserves" means the amount in the Claims Payment Fund .in excess of: the total-amount that has been- designated as Loss.Reserve.s pursuant to Section 3.6 hereof. SECTION 1.2 Findings. Each Providee:hereby finds and, ...._ determines that:.. -.. - (a) The: recitals-to this`-Agreement are true and correct. (b} Public entity liability insurance in the amount and scope described in the Memorandum is not commercially 9 available to such Providee in the private marketplace at a commercially reasonable price. (c} 'The Participation Premium shall be paid by each Providee in consideration of the Coverage offered hereby and by the Memorandum and the sharing o£ the risk of liability for claims associated with the pooled seI£-insurance program during each Coverage Period. The parties hereto have agreed and determined that such Participation Premium, together with any Risk Premium Adjustments, represents the fair market value of the Coverage. In making such determination, consideration has.been given to the initial costs of establishing the pooled insurance program, the unavailability of commercial liability insurance to such Providee and to other Providees, the anticipated future costs of commercial liability insurance should such insurance become available, the obligations of Providees under this Agreement (including the agreement to share the risk of costs imposed by liability claims}, the obligation of the Provider to provide insurance services, the benefits resulting from the funding of a pooled insurance program (including the prospect of access to the commercial liability reinsurance market) and the other benefits therefrom which will accrue to such Providee and the general public. (d) Such Providee receives benefit from the sharing of risk of costs imposed by liability claims under the terms of this Agreement during. each Coverage Period. The assessment of Risk Premium and Risk Premium Adjustment is the means by which such risk-sharing is implemented. The procedure established for the calculation, adjustment and assessment of Risk Premium and Risk Premium Adjustment is fair,-just and reasonable as a means of implementing such risk-sharing. SECTIGN 1.3 Exhibits. The following Exhibits and Schedule .are attached to, and by reference made a part of, this Agreement: Exhibit A: The schedule of Basic Premium to be paid by each. Providee to the Provider, showing-the date and amount of such payments. Exhibit B: Memorandum of Liability Coverage, Underwriting and Claims Administration Standards and Liability Claims„Quality Control Guidelines. Exhibit C: Form of Requisition. Exhibit D: Allocable Proportion for each Providee. l0 Exhibit E: Providees Making A Gash Deposit Into the Claims Payment Fund. Exhibit F: Initial Participation Premium. Exhibit G: Notice Addresses. Schedule A: Methodology for Calculating Risk Premium and Formula for Calculating Risk Premium Proportion. Schedule B: Formulae for Calculating Risk :Premium Adjustment. ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANTIES SECTION 2.1 Representations, Covenants and Warranties of the Providees. Each~Providee makes the following representations, covenants and warranties to the Provider. (a} Due Organization and Existence. Such Providee is a political subdivision ~of the State, duly organized and existing under the Constitution and laws. of the State. (b} Authorization; Enforceability. The Constitution and -laws of the State authorize such Providee to enter into this Agreement and the Trust-Agreement and to enter into the transactions contemplated by-and to carry out its. obligations under all o~ the aforesaid agreements, and the Providee has duly authorized and executed all of the aforesaid agreements. This Agreement and the Trust Agreement constitute the legal, valid, binding and enforceable obligations of-such Providee in accozdance with their respective terms, except to the extent limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles affecting the rights of creditors generally and except as to the limitations on remedies against public agencies generally. {c) No Violations. Neither the execution, and delivery of this Agreement or of the Trust Agreement by such Providee, nor-the fulfillment of or compliance with the terms and conditions hereof or thereof by such Providee, nor the consummation of the transactions contemplated hereby or thereby by such Providee, conflicts with or results in a breach of the terms, conditions or provisions of any 11 restriction ar any agreement or instrument to which such Providee is now a party or by which such Providee is bound, or constitutes a default under-any of the foregoing, (d) General Tax and Arbitrage Covenant. Such Y ding any ather- prov~s~.onhvfethisoAereementhait w~ll~maktan-~-~~ g e no use of the proceeds of the Certificates yr of any other amounts or property regardless. of the source yr take anyactan br refrain from taking any action that may cause 'the obligations of ahe Providees under-this Agreement to be "arbitrage bonds" subject to federal income taxation by reason of Section 148 of the Internal Revenue-Code of 1986, as amended. In addition, such Providee covenants that it will not make any. use. of-.the proceeds of the obligations provided herein or in the Trust Agreement or any other funds of such Providee or take or omit to take any other action that would cause such obligations to be a "private activity bond" within the meaning of. Section 141 of the Code,: or '!federally guaranteed" within the .meaning of Section 149(b) of the'` Code. To that end, so long as any Basic Premium is-unpaid, such Providee-, with respect to such proceeds 'and -such other .funds, will. comply with.-all -requirements cif= such Sectiors and all regal-ations of the United States Department of the Treasury :issued ...thereunder and under Section 103 of the Internal Revenue- Code"`of 1954, as amended, ~o-the extent that such;requir;ements are, at the time; applicable and in _, effect.- -,. (e) Structuring Settlements. Such Providee hereby covenants to cooperate-with'the Provider in'settling Claims in excess of the Providee's~Retained Limit as described in Exhibit B hereto, and, in particular, (i) to the extent .such Providee has control over, any negotiation or structuring of a Settlement and subject to the l-imitations _. in the Memorandum, not .to effect Settlement payment°dates - earlier-than the date the Claims Payment Fund has been'or will be fully funded to cover Loss Reserves established for the payment of such Claim, and (ii) at any time during which the_Low Reserves Mode is in effect ar when otherwise requested by the Provider, with respect to any judgment (as defined in California Government Code Sectc5n 970) in an amount of one million dollars. or more assuming such amount excEeds such Providee's Retained Limit to petition the court for payment of such judgment in installments pursuant to the provisions of :California Government Code"Section 970.6, 12 (f) Compliance with Memorandum. Such Providee hereby expressly covenants to comply with the terms and conditions set forth. in the Memorandum and. with the Underwriting and Claims Administration Standards {including the Liability Claims Quality Control Guidelines) set forth in Exhibit.B hereto. (g) Acknowledgment_of-_Security.2nte~est. Such Providee hereby expressly acknowledges the security interest of the Trustee an behalf of the Certificate-Owners in moneys to be paid hereunder and held by the Trustee. SECTION 2.2 Re resentations, Covenants .and Warranties of the Provider. The Provider represents, covenants and warrants to each Providee as follows. ,(a) Recitals Corre.ct.. The .recitals to-this Agreement. are true and correct. ;(b•) Due. Organization and Existence; Enforceability. The, Provider is a~joint~exercise of powers' authority duly organized, existing_and in good standing under:,and.by virtue oi'..the 1-aws of the State, authorized undex the Constitution and:..laws of the State to enter into this Agreement and the Trust Agreement; is .possessed of full power •ta provide .self--insurance.- to consenting pdbi:'ic entities; :and has:. duly authorized .the :execution anti delivery of all of the afore.sad,agreemerits. This Agreement and the- Trust Agreement :constitute,; the 1ega1, valid,. binding and enforceable obligations of the Provider in accordance with their respective terms, except to the extent limited by applicable bankruptcy,; insolvency,.reorganizatiari, moratorium, or simi3.ar laws or equitable principles 'affecting the rights of creditors. generally. -, -- .(c} No Encumbrances. The. Provider wz11'not pledge.-the Basic, Premium .or its other sights under this " Agreement except as provided under the terms 'of this Agreement. and as directed: by the Providees in the "Trust Agreement. .~ (d) E itable Exercise of Re's onsibilities. The Provider :will exercise all°rights and responsibilities hereunder :reasonably and equitably far the benefit of all Providees-,wi hoot-preference or discrimination among - Providees. ;.. (e} No Violations: Neither tiie execution -and delivery of this Agreement or the Trust Agreement, nor the fulfillment of or compliance with the terms and conditions 13 hereof ar thereof, nor contemplated hereby or a breach of the terms, Bylaws of the Provider or instrument to which which the Provider is any of the Foregoing. the consummation of the transactions thereby, conflicts with or results in conditions or provisions of the ar-any restriction or any agreement the Provider is now a party or by pound, ar constitutes a default under (f) General Tax and Arbitrage Covenant. The Provider covenants that, notwithstanding any other provision of this Agreement, it will make no use of the proceeds of .- the Certificates or of any other amounts or property regardless of the source or take any action or refrain from taking any action that may cause the obligations of the Pravidees under this Agreement to be "arbitrage bonds" subject to Federal income taxation by reason of Section 148 of the Internal Revenue Cade of 1986, as amended. In addition, the Provider covenants that it will not make any use of the .proceeds of the obligations provided herein or in the Trust Agreement or any other funds of the Providees or take or omit to take any other action that would cause such obligations to be a "private activity bond" within the meaning of Section 141 of the Code, or "federally guaranteed" within the meaning of Section 149(b) of the Code. To that end, sa iong as any Basic Premium is unpaid, the Provider with respect to such proceeds and such other funds, will comply with all requirements of such Sections and all regulations of the United States Department of the Treasury issued thereunder and-.under Section 103 of the Internal Revenue Code of 1954, as amended, to the extent that such requirements are, at .the tame, applicable and in effect. (g) Structurin .Settlements. The Provider hereby covenants, to the extent that it has control over any negotiation or .structuring of a Settlement, not to effect Settlement payment dates of earlier than the date the Claims Payment Fund has been or will be fully funded to cover Doss Reserves established for the payment of such Claim. (h) Com liance with Memorandum. The Provider hereby expressly covenants to comply with the terms and conditions set forth in the Memorandum. 14 ARTICLE III DEPOSIT OF MONEYS;. COVERAGE; PAYMENT OF SETTLEMENTS; PURCHASE OF COMMERCIAL INSURANCE SECTION 3.1 Deposit of Moneys. On .the Closing Date, -- the Provider agrees to direct the Trustee to deposit the proceeds of the Certificates as follows: {1) an amount equal to $ shall be deposited on behalf of the Providees in the Claims Payment Fund, {2) an amount equal to $ shall be deposited on behalf of the Providees in:the.-Delivery Co.sts~Fund and {3) an amount equal to $ shall be deposited on behalf of the Providees in the Debt Service Reserve Fund. All moneys held under the Trust. Agreement shall be invested in accordance with the restrictions set forth in Article VIII thereof and in the Letter of Instructions to the Trustee attached thereto as Exhibit C. SECTION 3.2 Coverage.. The Provider hereby provides the Coverage to- each Providee, and each Provide,e hereby agrees to accept the Coverage, upon the terms and conditions set forth in this Agreement and the Memorandum. SECTION 3.3 Pa ent of Deliver Costs. Payment of Delivery Costs shall be made from the moneys deposited with the Trustee in the Delivery Costs Fund established in Article IV of the Trust Agreement which shall be da.sbursed in accordance and upon compliance therewith. SECTION 3.4 Pa ent of Settlements.. Settlements shall be paid upon submission to the Trustee of properly completed Requisitions executed by the Provider requesting such payment in substantially the form attached as Exhibit C, to this Agreement from moneys in the Claims Payment Fund held by the Trustee. Such Regl.Fisitions will be submitted by the Provider to the Trustee in the- chronological order that the Provider receives written notice of Settlements. Requisitions shall be paid by the Trustee in the sequential order received, Payment of Settlements shall be made solely from any moneys in the Claims Payment Fund, including Loss Reserves and Undesignated Reserves as provided in Section 3.6 hereof. All amounts paid from the Claims Payment Fund as Settlements or designated as Loss Reserves shall be deemed to be paid or designated first from or with respect to amounts originally deposited from Certificate proceeds. Tf at any time, 15 sufficient moneys are .not on deposit in the Claims Payment Fund to pay in full any Settlement upon submission to the Trustee of a properly completed Requisition as described' herein, such Requisition for Settlement payment shall be paid in part to, the extent of available moneys in the Claims Payment Fund and. the Trustee shall promptly give notice of such insufficiency to the Provider,-who shall in turn give prompt notice.. to all.Providees; that an-event of abatement, as described further in Article viI hexeof,-shall have occurred.. •$ECTTON 3.5 Purchase of Commercial Insurance or Reinsurance. The Provider. may provide Coverage, or a portion of, Coverage, to the.Providees, by purchase of liability insurance from a commercial insurer or reinsurer, upon the- approval. of the Provider's Governing Board by at least a majority vote. The Provider may use Undesignated Reserves to purchase such commercial insurance ar reinsu:rance; provided, however., that the Provider may-use Loss Reserves to purchase such. commercial insurance or reinsurance if the policy of commercial insurance or reinsurance to be~~ purchased covers the Glaims for which such Loss Reserves were established. In either event; the Provider shall submit a, Requisition to the Trustee requesting a disbursement from the~Claims Payment Fund, attaching evidence of existence of the insurance policy being purchased and certifying that such amounts are to be used ~.n compliance with this Section. The Provider shall continue to be obligated to pay Settlements-which are covered by--such commercial excess insurance or reinsurance, purchased for coverage within the mandatory limits provided by the Authority, from moneys in the Claims Payment Fund even in the event such commercial excess insurance-or reinsurance,. purchased for coverage within the mandatory l.imits.provded by the.Authorty, fails to pay such"Settlement or is' insufficient for; such Settlemen~,• provided that the Provider shall have no obligation to pay Settlements which are covered by excess insurance purchased by the Authority for a Providee on an optional basis in excess of th.e mandatory limits provided by the Provider. In an event of dispute between the Provider or .any Providee and any commercial excess insurer or reinsurer as to payment of any Settlement, the failure in good faith.to pay such Settlement shah. not result in abatement of .any Provider's obligation to make 'any Premium payments. In a Coverage Period for which the Provider has purchased commercial insurance or reinsurance on behalf of 1~ each Providee, each .such Providee shall be obligated to pay its Risk Premium Proportion of the costs of such insurance in lieu of all or a portion of Risk Premium, in addi°tzon to Administrative Premium., Basic Premium, Supplemental Basic' Premium and Risk Prer~ium.Adjustments. In subsequent Coverage Periods no Providee shall have any obligation to pay and no right to receive Risk Premium Adjustments with respect to any Coverage for which the Provider has purchased commercial excess insurance or reinsurance on.behalf of such Providee, except such obligations or rights which may arise under such commercial excess insurance or reinsurance; provided, howevex,-that, i£ such coverage zs within the mandatory limits provided by the Provider, in the event that a commercial insurer providing excess insurance or reinsurance fails to pay a Settlement within the-scope of such excess insurance or reinsurance coverage, the Providees shall be obligated to pay Risk Premium Adjustments with respect to such excess insurance or reinsurance coverage. SECTION 3.6 Case Reserves; Loss Reserves; Projected Ultimate Net Losses. On or prior to ,3anuary 1 of each-year, commencing ,3anuary 1, 1989, the Provider shall retain a Qualified C~.aims.Auditor for the purpose of submitting ari annual report on or prior to such date to the Provider-and the Trustee setting forth (a) the amount of Case Reserves necessary-to be established-with respect to each Claim arising during .the preceding.-full Coverage Period, and` (b) any adjustments (whether upward or downward} necessary to be made in the"amount.. of each-Case Reserve previously established pursuant to this Section. In determining the amount of Case Reserves necessary to be established or - adjusted as described above,. the Qualified Claims Auditor shall consider such facts and circumstances occurring during the period covered by such report as it, in its iridepenclent judgment,, deems necessary in accordance with prudent insurance practice. Notwithstanding the foregoing, the Qualified Claims Auditor shall take into account Settlements of Claims in accordance .with the .criteria set forth in this Section, The Provider shall. direct .the Trustee to establish or adjust. Case Reserves in the Claims Payment Fund annually for each"Claim as specified.in the report of the Qualified Claims Auditor described above, and additionally from time to time as recommended by ..the Claims Review Committee of"the Provider in accordance wi.th.prudent.insurance practice": Notwithstanding the foregoing, the Claims Review Committee may not reduce Gase Reserves required by the Qualified Claims Auditor's report except with the consent of the Qualified"Claims Auditor in connection with Settlement of 1.7 Claims.- The annual adjustment to Case Reserves resulting from the Qualified Claims Auditor`s report shall be made on each January 1 upon receipt of such annual report, commencing January 1, 1989. On or prior to June 1 of each year, the Provider -shall retain an .Actuary for the purpose of submitting an annual report on or prior to such date to the Provider and the Trustee setting forth Projected Ultimate Net Losses for each prior Coverage Period. Projected Ultimate Net Losses determined by the Actuary for a given Coverage Period shall equal the sum of Case Reserves then established with respect to such Coverage Period (which amount shall be based upon the report of the Qualified Claims Auditor) and an amount additionally designated to be reserved for incurred but not reported Claims and projected loss development. The Actuary shall be required by the Provider to determine Projected Ultimate-Net. Losses at not less than the expected level. The Provider shall promptly provide copies of the annual reports of the Qualified Claims Auditor and the Actuary to each Providee. The Provider shall additionally direct the Trustee to establish or adjust Loss Reserves in the Claims Payment Fund annually in an amount equal to Projected Ultimate Net Losses as specified in the report of the Actuary. As provided in the following paragraph, in establishing Loss Reserves the Provider shall take into account the amount of Settlements previously. paid. Such annual adjustment shall be made no later than June 30 upon ar following receipt of the Actuary's annual report; commencing June 30, 1989. The parties acknowledge that under certain circumstances it will be necessary to establish Loss Reserves in excess of the amounts then on deposit in the Claims Payment Fund. In such event, such Loss Reserves will nevertheless be established as provided in this Section and funded, through the payment of Risk Premium Adjustments as provided in Section 4.5 hereof. In the event, however, that any such adjustment to Loss Reserves results in the Low Reserves Mode being in effect, the Provider shall provide prompt written notice of such fact to the Providees and the Trustee. -Upon the Settlement of any Claim and the payment- thereof from amounts on deposit in the Claims Payment-Fund such amounts shall be deemed reduced in the following order o£ priority: first, from Case Reserves established to pay such Claim; second, from Loss Reserves other than Case Reserves; third, from Undesignated Reserves; and fourth, from designated Case Reserves established to pay Settlements 18 of other Claims (pro rata among such other Case Reserves on the basis of the respective amounts of such Gase Reserves). investment earnings retained in the Claims Payment Fund shall be credited First to replenish designated Loss Reserves that had previously been. reduced to pay Settlements of other Claims, and then to Undesignated Reserves. Amounts designated as Loss Reserves shall not be increased except as provided in this Section. • ARTICLE IV• TERM OF AGREEMENT; PREMIUM SECTION 4.1 Term of Agreement;. Termination of a Proyidee's Qbligations to pay Participation Premium. The ---- Term of this Agreement shall commence on the date of its execution and shall, subject to the fallowing paragraph,rend on June 30,2017, unless the Trust Agreement shall not have been discharged by its terms by such date, in which case the Term of this Agreement shall be extended until .the Trust Agreement shall be .discharged by its terms, unless terminated prior thereto in accordance with the following' paragraph. Upon the final discharge of the Trust Agreement, the Coverage provided by this Agreement shall terminate unless the parties agree, to extend the Coverage beyond such date. In the event the parties agree to, extend the term of Coverage,-the provisions of this Agreement relating to Coverage after such date may be .amended in an.y mutually agreeable fashion without notice to or consent of any parties other than the parties to this Agreement at that time. Further, upon the final discharge of the Trust Agreement, the Trustee shall transfer any remaining moneys in .the Claims Payment. Fund to the- Provider to be held as a claims payment fund pursuant to Section 5.2. hereof.- The obligations of all Providees to pay Risk Premium Adjustments and the rights to receive Risk Premium Adjustment refunds with respect to Claims within ..the .scope of Coverage prior to discharge of the Trust Agreement shall continue until all Ziability with respect to such claims has been finally determined. The obligation of any Pr.ovidee to pay Participation Premium and, except as provided below, Risk 19 Premium Adjustment under this Agreement wi11 terminate upon the earliest of any of the following events; `(a) the payment by such Providee of all of its Basic Premium payments specified in-Exhibit A hereto,-kits Supplemental Basic Premium, Administrative Premium and of ail Risk Premium required to be paid by such Providee pursuant to Section 4.4 hereof; (b) withdrawal of such Providee from Coverage pursuant to Section 6.2 hereof; and ('c) expulsion of such Providee from Coverag~_ pursuant. to Section 6.3 hereof; provided, however, that none of the foregoing shall .extinguish {i) the obligations of such Providee to pay Risk Premium Adjustments assessed with respect to Coverage Periods of such Pravidee prior to"such payment, wi~h:drawal or expulsion or (ii) the right to receive"the benefits of such Coverage with respect to Coverage Periods of such Providee prior to such payment, withdrawal or expulsion., SECTION 4.2 Budget and ,A,ppropriation of Premium Payments. The Provider'"covenants to calcuiate~and mail notice to each"Providee of the amount of Total Premium to be payable::by such Pravidee on the following Bas"ic Premium Payment .Date dur-ing the Term of this'Agreeiment.' Each Pravidee;cavenarits to-take such action`as maybe necessary to include Total. Premium payments payable hereunder in its annual budget -and to iriake the necessary annual appropriations for all such Total Premium payments. During the :Term of thi s Agreemext, each- Providee will furnz'sli to the Provider and the Trustee prompt written evidence of such budget or~apprapriation`{which may be evidence of .payment of such.amounts)'in-each such Coverage Period no later"tli"an August 1. The covenants on the part"of each Providee herein contained shall be deemed to be and shall be construed to .be duties imposed by law and it-shall be' the duty of each and every public official of each Providee to take such action and do such things as are required°by 1aw in the performance of ".-the official'duty of such officials to enable e"ach Providee to carry out-and perform the covenazits:'and "" agreements in this Agreement agreed to be carried out and performed by--such Providee. = - SECTION 4.3 Obli an on to Pa Premiums. {a) No Withholding. Subject to the provisions of Article VII hereof, notwithstanding any dispute between the 20 Provider and a Providee, including a dispute as to the scope `o r` nature of Coverage px'ova.ded by the Provider or the - availability of amounts in the Claims Payment Fund to pay Claims made against any Providee, or for any other reason (other than the termination of the obligation to pay Participation. Premium pursuant to Section 4.1 hereof) each Providee shall appropriate funds sufficient to pay and shall make all Premium payments when due and shall not withhold; any Premium payments pending the final resolution of such dispute. (b) Rate on Overdue Payments. In the event a Providee fails to make any of the payments required in this Article, the payment in default shall continue as an obligation of the Providee until the amount in default shall have been .fully paid, and in addition to any remedies available with respect to such default, the Providee agrees to pay the: same "-with interest 'thereon, at 12% per annum, but not to exceed the highest rate permitted by law, from the date .such amount was originally payable. (c). Abatement. There shall be no abatement of .Premium payments except as provided in Article VII hereof. (d) Assignment. Each Providee directs the Provider.::: pursuant. to the .Trust Agreement to..assign its right to_.: receive and collect Bas~.c Premium, Supplemental Basic Premium, the components o~ Termination Premium~reiating°~to Basic Premium and Supplemental Basic Premium and prepayments (but not Administrative Premium, Risk Premi.um,__Supplemental Risk Premium :or Risk Premium Adjustment.or any-rights or obligations with respect thereto) thereof to :the Trustee: :in trust .f or the benefit of the Owners of the .Qerti.ficate's. .The Provider. hereby .directs-each Providee, and each Providee Yiereby .agr.ees to pay, to the: Trustee -at the ..Trustee's ... prncspal corporate.trust.office, or. to: the ,Trustee:at::such other place as the Trustee shall.d~xect in writing, all . paymexi.ts payable by :the .Providee. pursuant..to this `Section 4.3(d) and Article. XI hereof. (e) Agency. Each: Providee directs the, Provider to designate the .Trustee as its agent to receive and collect. from the Provider,. from time to time, Risk Premium, Risk-': Premium Adjustment. and any Termination:Premium.determned: witYi respect thereto. The Provider shall immediately pay over to the Trustee all such .amounts received by it within one business day: of ,receipt. 2 ]. SECTION 4.4 Premiums. (a) Participation Premium. The Participation Premium payments due in any Coverage~Period shall be made in consideration for Coverage far such Coverage Period. The entire amount of Participation Premium is due on the Basic Premium Payment Date; provided, that with respect to the first Coverage Period, Participation Premium shall be due on and shall be payable in the respective amounts listed in Exhibit F hereto. (b} Basic Premium. (].) Time and Amount. Subject to the provisions of Article XI hereof (regarding prepayment of Basic Premium and payment of Termination Premium), Section 6.2 hereof (regarding withdrawal), Section 6.3 hereof {regarding expulsion) and Section 7.l hereof {regarding abatement) each Providee agrees to pay to the Provider, its successors and assigns, as a portion of its annual Participation Premium payment far the Coverage, Basic Premium (denominated into components of principal and interest) in the amounts specified in Exhibit A, to be due and payable on the Basic Premium Payment Date, which are sufficient in both time and amount to pay when due the annual principal and interest represented by the portion of the Certificates representing interests in such Providee's Basic Premium. {2) Credits. Notwithstanding the Foregoing, any amount held in a Providee's account of the Basic Premium Payment Fund an any Basic Premium Payment Date (other than amounts required for payment of past due principal ar interest with respect to any Certificates not presented for payment) shall be credited towards the Basic Premium of such Providee then due and payable and no Basic Premium need be paid by a Providee on any Basic Premium Payment Date if the amounts then held in the Providee's account of the Basic Premium Payment Fund are at least equal to the Basic Premium then required to be paid. (3) Effect of Pre a ent. In the event that a Providee prepays or provides for the payment of all of its remaining Basic Premium pursuant to Article XI hereof Such Providee's obligations under this Agreement to pay further Basic Premium shall thereupon cease and terminate. (c) Su lemental Basic Premium. {1) Time and Amount. Subject to the_provisions of Article XI hereof (regarding prepayment of-Basic Premium and 22 payment of Termination Premium), Section 6.2 hereof (regarding withdrawal), Section ~i.3 hereof (regarding expulsion) and Section 7.1 hereof (regarding abatement), each Providee agrees to pay the Provider, its successors and assigns, as a portion of its annual Participation Premium for Coverage, Supplemental Basic Premium, to be. due and payable on the Basic Premium Payment Date. (2) Credits. Notwithstanding the foregoing, no Providee shall be obligated to pay Supplemental Basic Premium in excess of its Allocable Proportion of the amount by which the amount held in the Debt Service .Reserve Fund is less than the Reserve Requirement an the April 15 immediately preceding the Basic Premium Payment Date. (d) Administrative Premium. Each Providee shall pay to the Provider as Administrative Premium such amounts as shall be requi-red for the payment of the Providee's Risk Premium Proportion of all administrative costs of the Provider relating to the Coverage or the Certificates, including without limitation all expenses (including counsel fees), compensation and indemnification of .the Trustee under the Trust Agreement, taxes or fees of any sort whatsoever payable by the Provider as a result of its undertaking of the transactions contemplated herein or in the Trust Agreement, fees of any Actuary, Qualified Claims Auditor, auditors, accountants, insurance. brokers, or attorneys,.: and all.. other necessary administrative costs of the Provider or charges required to be paid by it in order. to administer the self-insurance. program :described in this Agreement, ar to comply with the terms of the Certificates or of the Trust Agreement or to defend the Provider and its members against-any actions or ". suits or.sums in connection herewith:- (e) Risk Premium. Risk Premium shall be calculated irk the following manner. With respect to each Coverage Period commencing on or after July 1, 1.987, the Provider shall retain an Actuary to determine and prepare a report to be delivered to the Provider and the Trustee by the June 1 preceding the beginning of such Coverage Period setting forth the total amount of Total Risk Premium .payable far such Coverage Period. Total Risk Premium shall be that amount which the Actuary estimates is required to be..deposited into the Claims Payment Fund, at a level recommended by the Actuary, but in no event .less than the expected level, to fund sufficient Lass Reserves which the Actuary estimates will 23 ,ultimately be necessary to pay Settlements for all Providees arising dut of events occurring during such Coverage Period. The Actuary shall utilize the general methodology set-forth in Schedule A hereto for calculating Total Risk Premium, using such Actuary's best professional judgment, and shall certify that such methodology was used. The Provider shall_ be obligated to collect the Total Risk Premium determined by the Actuary to maintain the designated confidence level with respect to the Claims Payment Fund. With respect to the Coverage Period commencing July l,. 1987,~and all subsequent Coverage Peridds, the Risk Premium payable by each Providee sha11-be determined by multiplying its Risk Premium Proportion (determined as provided below) by the Total Rxsk Premium. Risk Premium Proportion will be determined by utilizing the formula set forth in Schedule A. Notwithstanding the Foregoing, the Risk Premium Proportion for any Providee determined by application o£ such formula may be changed upwards. or downwards by up to 25% of the Risk Premium Proportion to reflect loss history or any significant changes in risk exposure, upon the direction and approval by a-vote of 2/3 of the Governing Board o£ the- Proyider,.or, with respect to changes of greater than 2S%, with unanimous consent: of the Governing Board. Cornmencing with the Cove-rage Period commencing on July 1,.1987, the determination of Total Risk Premium and Risk Premium .payable in.each`Coverage Period by each Providee shall.be made no later than the May 1 preceding such Coverage Period, commencing May 1, 1987. Absent computational error, the calculation of such Risk Premium shall be final and conclusive of the amounts due and owing under this subsection. Risk Premium shall be paid to the Provider and the Provider agrees to deposit such amounts in the Claims Payment Fund held by the Trustee pursuant to the Trust Agreement.- SECTION 4.5 Risk Premium Ad'ustrnents. Risk Premium Adjustments due zn any Coverage Period shall be made in consideration for continuation of Coverage-for prior Coverage Periods and for continued eligibility to purchase Coverage for the current Coverage Period. On or prior to June 1 each year, commencing June 1, 1989, upon receipt of the annual report of the Actuary pursuant to Section 3.6 hereof, the Provider shall determine, at a level recommended by the Actuary, but in no event at less than the expected level, the amount of Projected Ultimate Net Losses for all prior Coverage Periods as .set forth in the report of the Actuary and shah determine the Risk Premium Adjustment for 24 each Providee, which may be an assessment of additional Risk Premium Adjustments or, at the option of .the Provider's Governing Board, a refund of Risk Premium or-Risk Premium Adjustments paid in prior Coverage Periods, by applying the formula set forth in Schedule B and inserting in such formula the Projected Ultimate Net .Losses for all prior Coverage Periods determined as provided above. The Provider shall give prompt written notice to the Trustee and each"' Providee of the determination of Risk Premium Adjustments. Risk Premium Adjustments shall be paid or refunded on the Basic Premium Payment Date as described in Schedule B hereto next following their date of determination, -except as provided in the following paragraph. Risk Premium Adjustments shall be deposited with, or requisitioned by, the Provider and the Provider agrees to deposit such amounts into or pay them from the Claims Payment Fund, as the case may be. Notwithstanding the foregoing, if on the date of -- determination of Risk Premium Adjustments the Low Reserve Mode is in effect, all amounts otherwise payable by a -: Providee in future years as Risk Premium Adjustments pursuant to the formula set forth in Schedule B shall be payable in full on the next Basic Premium Payment Date.` The obligation of Providee s. to pay Risk Premium Adjustments shall in no event be discharged by prepayment of Basic Premiums. In the event of expulsion or withdrawal from Coverage, the obligation to pay Risk Premium Adjustments with respect ~o Coverage Periods prior to expulsion or withdrawal shall not be discharged. SECTION 4.6 Providees Makin a Cash De osit into trie Claians,Payment Eund. As a condition to eligibility to purchase Coverage hereunder, each of the Providees listed in Exhibit E hereto shall be required to make a cash deposit into the Claims Payment Fund. in the respective amounit shown in Exhibit E on or prior to the Closing Date. Notwithstanding any provision herein to the contrarys" (a) no such Providee shall be obligated to pay Basic Premium or Supplemental Basic Premium; provided that each such Providee shall be obligated to pay-Risk Premium, Administrative Premium and Risk Premium Adjustments: in the,: same manner as other Providees in' order:to purchase Coverage; and (b) such cash deposit shall be deemed to be a prepayment of Basic Premium and shall be deemed to be Certificate proceeds. 25 ARTICLE V RESERVES RELEASED FROM THE PLEDGE OF THE TRUST AGREEMENT SECTION S.1 Recei t of Reserves U on Dischar e of the Trust Agreement. All funds transferred by the Trustee to the Provider upon discharge of the-Trust Agreement pursuant to Section 3.04 of the Trust Agreement will be held by the Provider as a claims payment fund, to be applied to the payment of Settlements of Claims within the scope of .Coverage prior to the termination.o£ the Trust Agreement, pursuant to the te'rms' of this Agreement. Upon termination of all obligations to pay Risk Premium Adjustment and termination of this Agreement, the Provider will distribute {i) all Risk Premium Adjustment refunds to the Providees, {ii) all Undesignated Reserves held by it to the Providees according to. the ratio of (a) with respect to a portion of Undesignated Reserves equal to the amounts of undisbursed Certi£ic-ate proceeds (determined as provided below), .total Basic Premium paid by each Provides (not including any Prepayments in excess of the total of Basic Premium payments which would have been made according to the `Schedule set forth in Exhibit A hereto) to total Basic Premium paid by all Providees then receiving Coverage (not including any Prepayments in excess of the total of Basic Premium payments which would have been made according to the Schedule set forth in Exhibit A hereto}, and (b} with respect to the remaining amount of Undesignated Reserves, total Risk Premium paid by each Providee to total Risk Premium paid by all Providees, and .(iii) the Allocable Share, as defined in Section 5.2 hereof, of each Providee which withdrew from or was expelled from Coverage. which has not been distributed to such Providee pursuant to Section 5.2 hereof. In determining the amount of Basic Premium paid by each Providee for purposes of clause (ii)(a) above, such amount shall include a pro rata share of any amounts in the Claims Payment Fund or Debt Service Reserve Fund applied to pay the Basic Premium of any other defaulting Providee pursuant to Sections 3.02 or 6.04 of the Trust Agreement to the extent such defaulting Providee has not ultimately repaid such amount. In determining the amount on deposit in the Claims 26 Payment Fund which represents Certificate proceeds for purposes of the calculations required pursuant to {ii}(a) above, all payments made from such Fund shall be deemed to be made from Certificate proceeds until the original deposit of Certificate proceeds described in the Trust Agreement shall have been depleted; additional amounts deposited into such Fund shall not be considered to increase the amounts representing Certificate proceeds. SECTION 5.2 Recei t of a Providee's Allocable Share U on Withdrawal or Ex ulsion. In connection with permitting withdrawal of a Providee from Coverage pursuant to Section 6.2 hereof or expelling a Providee pursuant to Section 5.3 hereof,. a portion of Undesignated Reserves shall at such. time be allocated to such Providee in accordance with the ratios set forth in Section 5.1(ii) above. Tn addition, a portion of the Debt Service Reserve Fund shall be allocated to such Providee in accordance with the ratio set forth in Section S.1(ii)(a) above. The sum of such amounts allocated to such Providee shall be applied first to the payment of Termination Premium pursuant to Section 6.2 or Section 6.3 hereof. The Provider shall submit a Requisition pursuant to Section 3.02. of the Trust Agreement for the amount of such portion in .excess o£ such Termination Premium and all other obligations due from such Providee under the terms of this Agreement (its "Allocable Share"). The Provider will hold the Allocable Share of each such Providee and any interest thereon in a segregated account for the benefit of-such Providee, subject only to assessment £or Rask Premium Adjustment assessed against such-Providee. The Provider will transfer to such Providee its Allocable Share, less assessments for Risk Premium Adjustment, on the earliest practicable date when such Providee is no longer subject to assessment for any .obligations under the terms of tha.s Agreement, i.e. when .all Claims within the scope-of Coverage prior to withdrawal ar expulsion of such Providee have been finally determined and/or paid as Settlements. SECTION 5.3 .Receipt of a Providee's Share of Debt Service Reserve Fund U on Pre a ent. Upon any deposit of security or any prepayment by any Providee pursuant to Sections 11.1 or 11.3 of this Agreement, such Providee shall receive its share ,of amounts on deposit in the Debt Service Reserve Fund, determined using the ratio set forth in Section 5.1{ii}(a) above. 27 ARTICLE Vi ADMISSION TO, WITHDRAWAL FROM AND EXPULSION FROM THE POOLED SELF-INSURANCE PROGRAM SECTION 6.1 Conditions to Providin Covera a to a New Providee. Commencing July 1, 1987, the Provider may provide Coverage to a new Providee which is not currently a Providee under this Agreement, subject to the following conditions: (a) such new Providee shall be a political subdivision ~n..the State.and•a.member of CSAC Excess Insurance Authority; {b} not later than the January 1 next preceding the first Coverage Period for which the Provider provides Coverage to such Providee, such new Providee shall have submitted a completed application for admission to the Provider; (c) not later .than the. May 1 next preceding the first Coverage Period for which the Provider provides Coverage to such Providee, such new Providee shall have duly executed an amendment to the Trust Agreement and-this Agreement pursuant to which it shall. become subject to all of the terms of the Trust Agreement and this Agreement as a Providee; (d) Coverage of such new Providee shall be effective an the first .day of the Coverage Period next succeeding the date of execution of the amendments referred to in paragraph {c) above; (e} the Provider's Governing Board by at least two- thirds' vote shall .have consented to the amendment to the Trust Agreement and this Agreement permitting such new Providee to became a Providee; provided that, prior to 1.992, such consent-must be unanimous; (f) the Provider and the Trustee shall have received a report o£ an independent financial consultant that providing such Coverage to such new Providee will not adversely affect the credit or financial position of the pooled self-insurance program due to the financial position or credit standing of such new Providee; (g} the Provider and the Trustee shall have received an opinion of Bond Counsel that the amendments referred to in paragraph (c} above are valid and binding against all of the parties thereto ..and will not adversely affect the 28 tax-exempt status of interest paid with respect to the Certificates; (h} the .Provider and the Trustee shall- have received a Certificate from an Actuary that such admission of such new Providee will not reduce the actuarial soundness of the pooled self-insurance program; anal (~.) the Provider and the Trustee shall have received an opinion of the insurance consultant-broker of record to the Provider and the underwriting committee of the Provider .to.the effect that providing Coverage to--such new Providee will not constitute a hazardous or unacceptable loss exposure to the Provider. The amendments to this Agreement and the Trust Agreement permitting such-a new Providee to become a Providee shall not reduce or diminish the Basic Premium or Supplemental Basic Premium obligations of the existing Providees. Any new Providee will be obligated to pay a mutually agreeable portion. of the total-Administrative Premium and Risk Premium payable on each Basic Premium Payment Date and will be assessed Risk Premium Adjustments as provided in this Agreement, as amended: Any such new- Providee will not be obligated to pay any Basic--Premium or Supplemental Basic Premium, but shall be assessed an annual or one-time surcharge or fee by the Provider to participate in the self-insurance program. The amendment to this Agreement may set £a.rth a method by which. the new Providee shall.. be deemed to have paid Basic Premium for purposes of determining amounts to be allocated or distributed to it pursuant to Article V hereof. SECTION 6.2 Conditions to Permitting .Withdrawal of a' Providee from Coverage. .Commencing July 1, 1992~,~~ the Provider shall~~~permit a Providee to withdraw from Coverage under this Agreement, provided that the following are satisfied: (a) such Providee shall not be in default of any'of its obligations to pay Premium hereunder; (b) not later than .the May 1S next preceding the effective date of such withdrawal, such Providee shall have provided written notice to the Provider of its intent to withdraw: (c} such Providee shall have paid (or there shall have been applied on its behalf certain moneys as described in Section 5.2 hereof) the full amount of Termination Premium 29 pursuant to Section 11.4(a} hereof and all fees and expenses incurred by the Provider as a result of complying with the procedures for withdrawal required herein to the Provider; (d) such withdrawal from Coverage shall be effective on the first day of a Coverage Period; and (e) such withdrawal shall not result in-the number o£ Providees becoming less than-ten. In no event shall withdrawal from Coverage release a Providee from its .obligation to pay damages resulting from default under the terms of this Agreement which is not remedied by payment of Termination Premium or from its obligation to pay Risk Premium Adjustments with respect to Claims within the scope of Coverage prior to such withdrawal. The Provider shall continue to pay Settlements of Claims relating to the withdrawn Providee within the scope of Coverage prior to withdrawal as provided herein and in the Trust Agreement, unless the Providee defaults in the payment of its continuing obligations described in the preceding sentence. Notice to withdraw shall be revocable by the Providee only with the consent of the Provider. Upon the withdrawal of any Providee, the Allocable Proportion of each remaining Providee set forth in Exhibit D hereto shall be automatically increased on a pro rata basis to reflect such withdrawal. SECTION 5.3 Conditions to Permittin Ex ulsion of a Providee from Covera e. The Provider may expel a Providee from Coverage subject to the following conditions: (a) such Providee shall be in default under this Agreement; (b) not later than sixty (60) days next preceding the effective date of such expulsion, the Provider's Governing Board, by at least two-thirds vote, shall have. approved such expulsion by written notice filed with the Trustee and written notice of such action shall have been given to the Providee to be expelled; (c) an amount equal to Termination Premium far such Providee shall-have been deposited in a special account by the Trustee at the direction of the Provider, as provided in Section 5.2 hereof from Undesignated Reserves in the Claims Payment Fund, the Debt Service Reserve Fund or from voluntary premium payments by Providees; and 30 (d) such expulsion shah be effective sixty (60) days after written notice shall have been given to the Providee to be expelled;_provided, however that only ten (10} days' written notice need be given to any Providee in payment default. In no event shall expulsion from Coverage release a Providee of its obligation to pay damages resulting from default under the terms of this Agreement. which is not remedied by payment of Termination Premium or from its obligation to pay Risk Premium Adjustments with respect to Claims within the scope of Goverage~prior to-such expulsion. Upon the expulsion of any Providee,' the Allocable Proportion of each remaining Providee set forth in laxhibit D hereto shall be increased automatically on a pro rata basis to reflect such. expulsion. ARTICLE VII ABATEMENT SECTION 7.1 Abatement of Partici anon Premium i:n the Event of Failure _to P~ Settlements. In the event that the Provider fails, and such i'ailure continues for.:a period of sixty (60) days, to pay a Settlement of a Providee pursuant to.the terms o£ this Agreement, other than by reason of good faith dispute as to the scope of Coverage, the obligations of all Providees to pay Participation Premium and Risk Premium Adjustment hereunder shall automatically be abated in full.- The obligation of a Providee to pay Participation Premium shall otherwise be discharged only as provided in Section 4.1.. This provision shall not be construed to bar any Providee from making voluntary payments of any amounts of any premium following an event of abatement. Qri the occurrence of any event causing abatement, all moneys on hand (i} in the Debt Service Reserve.Fund or Prepayment Fund held by.the Trustee shall be available for use by-the Trustee to make payments ..with respect to principal and' interest represented by the Certificates, (ii) in the Basic Premium Payment Fund held by the Trustee, to the extent of the proportional amount represented by.the portion of the Coverage Period which had occurred prior to the event causing. abatement, shall be used as in (i) hereof, and amounts in excess of such amount shall lee transferred to the Claims Payment. Fund and shall be available to pay Settlements. 31 ARTICLE VIII INDEMNIFICATION AND RELEASE OF PROVIDER, TRUSTEE AND PROVIDEES; DISCLAIMER SECTION 8.l Release and Indemnification Covenants. Each Providee shall and hereby agrees to indemnify and save the Provider, the Trustee and all other Providees and their respective officers harmless from and against all-claims, losses and damages, including legal fees and expenses, arising out of.(i) such Providee's breach or default in the performance of any of:its obligations under this Agreement or {ii) such Providee's act or negligence or that of any. of its agents, contractors, servants, employees or licensees with .respect to the Coverage, but not including Claims. No indemnification is :made under this Section or elsewhere in this Agreement for claims, losses or damages, including legal fees and expenses arising out of the willful misconduct, negligence, or breach of duty under this Agreement by the Provider, Trustee, or any other Providee, or their respective officers, agents, employees, successors or assigns. SECTION 8.2 Disclaimer:: THE PROVIDER AND THE TRUSTEE MAKE ND WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS .TO THE ADEQUACY OF.THE COVERAGE FOR THE NEEDS OF THE PROVIDEES. ARTICLE IX ASSIGNMENT AND AMENDMENT SECTION 9.1 Assi nment b the Provider. Certain of the Provider's rights under this Agreement, including the right to receive and enforce payment of Basic Premium, SupplementaL,Basic Premium and certain Termination Premium to be paid by-each Providee under this Agreement, have been assigned to the Trustee at the direction of the Providees, subject to certain exceptions, pursuant to the Trust Agreement. Except as provided herein and in the Trust Agreement, the Provider will not assign this Agreement, its right to receive Basic Premium from any Providee, or its duties and obligations hereunder to any person, firm or corporation so as to impair or violate the representations,. covenants and warranties contained in Section 2.2; provided, however, that nothing in this Section shall limit the right of the Provider to purchase commercial insurance or reinsurance on behalf of the Providees pursuant to Section 3.5 hereof. The Trustee shall be considered a third 32 party beneficiary under this Agreement in regard to the enforcement of the Trustee's rights hereunder. SECTION 9.2 No Assignment by"the Providees. This Agreement may not be assigned by any~~~Providee. SECTION 9.3 Amendment. Except as provided below, this Agreement may only be amended by a written instrument duly authorized and executed by the Provider and all of the' Providees in accordance with Article X of the Trust Agreement. -This Agreement, including the Exhibits and Schedules hereto",.may be amended, with.the consent of two-thirds of the Providees and two-thirds of the Governing Board of the Provider without notice to or the consent of any of the Owners of the Certificates and without complying with Article X of the Trust Agreement, in connection with (1} any provision of this Agreement after the discharge of the Trust Agreement, (2) any change required or permitted to be made :pursuant to Article VI hereof upon the admission, withdrawal or expulsion of a Providee, except as otherwise provided in Article VI or {3) any provision of this Agreement relating to: (a) ,;the methodology for determination of Total Risk Premium and-the formulae for determining the amount of Risk Premium, Administrative Premium and-Risk Premium Adjustments payable by or to each Providee, including any changes to Schedules A or B hereto; provided that, prior to the Coverage Period commencing July 1, 1992, arty such amendment must be approved by unanimous vote of the Providees; and further provided that no such amendment shall reduce the level for the establishment of Total Risk Premium or Risk Premium Adjustments to less than the expected level; (b) Exhibit B and the scope and extent of Coverage as provided in this A"greement and Exhibit B hereto; provided that, prior to the Coverage Period commencing July 1, 1992; any amendment which materially increases the types of exposures i.nclp.ded in .Coverage must be approved by unanimous vote of he Providees; (c} a Providee's AllocabI.e Share as provided in Section 5.2 hereof; and (d) commercial insurance pursuant to Section '"3 .5 -- hereof. All",amendments hereto other .than amendments to be made following the discharge of the Trust Agreement and amendments authorized by all o£ the Providees-shall be 33 effective. only as of the beginning of a Coverage Period and any such amendment shall be further conditioned on the giving of notice by the Provider of such proposed amendment to all non-consenting Providees not later than the May 1 preceding the effective date of such amendment. All amendments hereto other than amendments to be made following the discharge of the Trust Agreement shall be further conditioned on the receipt by the Provider and the Trustee of (i) an opinion of Bond Counsel to the effect that such amendment does not affect the validity or enforceability of this Agreement and does not adversely affect the tax-exempt status of interest paid with respect to the•Certificates, and (ii) a certificate of an Actuary to the effect that such amendment does not adversely affect the actuarial soundness of the pooled self-insurance program. All costs and expenses incurred in connection with any amendment to this Agreement shall be borne pro rata by the Providees. ARTICLE X EVENTS OE DEFAULT AND REMEDIES SECTION 10.1 Events of Default. The following shall be "events of default" under this Agreement and the terms` "events of default" and "default" shall mean, whenever they are used in this Agreement with respect to a Providee, any one ar more of the fallowing events: (i) failure by such Providee. to pay any Basic Premium or Supplemental Basic Premium.-required to be paid hereunder on the Basic Premium~Payment Date; (ii) failure by such'Providee to observe and perform any covenant, condition`or agreement on its-part to be observed or performed in the Trust Agreement or herein or otherwise with respect hereto, other than as referred to in clause {i) of this Section, for a period of thirty (30} days after written notice specifying such failure and requesting that it be remedied has been given to such Providee by the Provider, the Trustee or the Owners of not less than twenty-five percent {25%) in aggregate principal amount of Certificates Outstanding; provided, however, if the failure stated in the notice cannot be corrected within the applicable period, the Provider, the Trustee ar such Owners, as the case may be, shall not unreasonably withhold their consent to an extension of such time if corrective. action is instituted by the Providee within the applicable period-and diligently pursued until the default is corrected; or 34 (iii) the filing by such Providee of a case in bankruptcy, or the subjection of any right or interest of such Providee under this. Agreement to any execution, garnishment or attachment, or adjudication of such Providee as a bankrupt, or assignment by such Providee for the benefit of creditors, or the entry by such Providee into an agreement of composition with creditors, or the approval by a court of competent jurisdiction of a petition applicable to the Providee in any proceedings instituted under the gravisions of the federal bankruptcy code, as amended, or under any similar act which may hereafter be enacted. Notwithstanding the foregoing, failure by a Providee to comply with the Underwriting and Claims Administration Standards (including the ~,iability Claims Quality Control Guidelines) referred to in. Exhibit B shall be an event of default only after following the procedures described therein. SECTION 10.2 Remedies on.Default. Whenever any-event of default referred to in Section 10.1 hereof shall have happened and be continuing, it shall be lawful for. the Provider to exercise any and all remedies available pursuant to law or granted pursuant to this Agreement. Upan the occurrence of any event of default with respect to the obligation to pay Premiums, the Provider may and, upon an Event of Default described in Section 10.1(1) or upon the written direction of Owners of a majority in aggregate principal amount of Certificates then outstanding, shall cancel all Coverage rights of the defaulting Providee"for the portion of the then-current Coverage Period commencing with the event of default and ending with its cure. Despite the cancellation of Coverage of a defaulting Providee for a. given Coverage Period, the' Providee nonetheless agrees to pay to the Provider a11' costs, losses-and damages howsoever arising ar occurring as a result of such default and cancellation. No such cancellation shall be or become effective by operation of law or otherwise, unless and until the Provider shall have given at least sixty (60) days, or in the case of an Event of Default described in Section 10.1(1), at least term{10)' days'. written notice of such cancellation to the Frovidee; no such cancellation shall be effected by operation of.law ar acts of the parties hereto, except in the manner herein expressly provided; .and na such cancellation shall-terminate the obligation of the cancelled Providee to pay Risk Premium Adjustment relating to Coverage Periods prior to such- cancellation or to pay Premium for subsequent Coverage Periods for which Coverage is made available to such 35 defaulting Providee;~rovided, however, that notwithstanding anything herein or in the Trust Agreement to the contrary, there shall be no right under any circumstances to accelerate -the Basic Premium or otherwise declare any Basic. Premium not then in default to be immediately due and payable. Tn the event that the Provider elects to expel any defaulting Providee, subject to the conditions descr~.bed and in the manner provided in Section 6.3 hereof, the Providee nevertheless agrees to pay to the. Provider all costs, losses or damages howsoever arising or occurring as a result of such default. No such expulsion shall be or become effective by operation of law or otherwise; unless and until the Provider shall have given at least sixty {60) days' written notice, or in the case of an Event of Default described in Section 10.1{.i}, at least ten {l0} days' written notice of such expulsion to the Providee; no such expulsion shall be effected either by operation of law or acts of the parties hereto,. except only in the manner herein expressly provided; and no such expulsion shall terminate the obligation of the expelled Providee to pay Risk Premium Adjustment relating to Coverage Periods prior to such expulsion. SECTION 10.3 No Remedy Exclusive. No remedy conferred herein upon o:r reserved to the Provider is intended to be exclusive and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now .or hereafter existing at law or in equity, including, but not limited-.to the: right of any Owner by mandamus or other suit or proceeding at law or in equity to enforce his rights against the Providee and to compel the Providee to perform and carry out its duties under this Agreement, subject to Section ].3.0$ of the Trust Agreement. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as- often as may be deemed expedient. Tn-order to entitle the Provider to exercise any .remedy reserved to it in this Article it shall not be necessary to give any notice, other than such notice as .may be required in this Article or by law. SECTION 10..4 A reement to Pay Attorneys` Eees an_d Expenses. In the event any party to this Agreement should default under any of the provisions hereof and the nondefaulting parties should employ attorneys or incur other expenses for the collection of moneys ar the enforcement of 36 performance or observance of any obligation or agreement on the part of the defaulting party contained herein, the defaulting party agrees that it will on demand therefor pay to the nondefaulting parties the reasonable fees of such attorneys and such other expenses sa incurred by the nondefaulting parties awarded to the nondefaulting parties by a court of competent jurisdiction. SECTION 10.5 No_Additional Waiver Implied by One Waiver. In the event an a reement contaxne~~ y. g d in this Agreement should be breached by any party and thereafter waived•by the other parties, such waivex 'shall be limited to the particular breach so waived and shall not be a waiver of any other breach hereunder. SECTION 10.6 Trustee and Owners to Exercise Rights. Certain of the rights and remedies: given to the~Provider under this Article X have been assigned by the Provider to the Trustee under the Trust Agreement at the direction of the Providees. Such rights and. remedies shall be exercised by the Trustee and the Owners as provided in the Trust Agreement. ARTICLE XI SECURITY FOR OR PREPAYMENT OF BASTC PREMIUM; TERMTNATION PREMIUM ,SECTION 11.1 Deposit of Security for Basic Premium by a Providee. Notwithstanding:any other provision of this~~ Agreement, any Providee may-on any date secure"the payment of all of its unpaid Basic Premium by an irrevocable deposit by it with the Trustee of (i) an amount of cash which, - together with amounts on deposit in such Providee's Account in the Basic Premium Paymeizt Fund which are not required to satisfy the Rebate: Requirement (as defined in Exhibit C..to the Trust Agreement), is sufficient to pay all its unpaid Basic Premium in accordance with-the Basic Premium payment. schedule set forth in Exhibit A hereto, or by prepayment thereof pursuant to Section 11:3.hereof, as-the Providee shall. instruct at the time of said deposit, ar {ii} Federal` Securities together with cash, if required; in such amount as wi11, in the opinion of an independent certified public accountant, together with interest to accrue thereon, .and money ..then an deposit in such Providee's Account of the Basic;Premium.Payment Fund together-with interest thereon but net of any amounts which may be required to satisfy the Rebate Requirement,.. be £ully.su£ficient to-pay all unpaid Basic Premium on .their respective Basic Premium Payment 37 Dates in accordance. with Schedule A or by prepayment thereof pursuant. to Section 11.3 hereof, as the Providee shall instruct at the time of said deposit. In the event of a deposit pursuant to this Section, all Basic Premium obligations of such Providee under this Agreement, and all security provided by this Agreement for said obligations, shall cease and terminate, excepting only the obligation of such Providee to make, or cause to be made, payments of such Pravidee's Basic Premium from the deposit made by the ,Providee pursuant to this Section. Any.such deposit shall be deemed to be and shall constitute a special fund for the payment of such Providee's Basic Premium in accordance with the provisions of this Agreement. Notwithstanding the foregoing, in the event the Providee deposits cash or Federal Securities sufficient to pay all its unpaid Basic Premium to and including a specified prepayment date pursuant to Section 11.3 hereof, such deposit will not secure the payment of all o£ such Providee's Basic Premium until proper notice of prepayment of Certificates (corresponding in total amount to-the Basic Premium being prepaid) shall have been given in accordance with Article V of the Trust Agreement, except as provided below. In the event the Certificates are=not by their terms subject to prepayment within the next succeeding sixty (60) days, such deposit will not .secure the payment of all such Providee's Basic Premium. until the Providee shall have given the Trustee, in form satisfactory to the Trustee, irrevocable instructions to give, as soon as practicable, in the manner prescribed by Article V of the Trust Agreement, a notice to the owners of such Certifi-cotes that the deposit described above has been made with the Trustee and that the Certificates representing interests in such Providee's Basic Premium are deemed to have been paid in accordance with this Article and stating such maturity ar prepayment date upon which moneys are ta.be. available for the payment of the principal or prepayment price, if applicable, with respect to said Certificates. In making any such deposit, the Providees shall comply with all restrictions and provisions contained in the No-Arbitrage Certificate signed by the Providees relating to the Certificates. SECTION 11.2 DeQasit_of Security for Basic Premium or O tional Pre a ent bb A11 Providees. -The Providees may as a group, by at least two-thirds approval of all members of the Governing Board of the. Provider, secure the payment of 3$ .all remaining unpaid Basic Premium of all Providees in the manner set forth in Section 11. ], hereof. in the event of a deposit pursuant to this Section, all Basic Premium obligations of the Providees under this Agreement, and all security provided by this Agreement for said obligations, shall cease and terminate, excepting only the obligation of the Providees to make, or cause to be made, payments of Basic Premium from the deposit made by the Providees pursuant to this Section. Said deposit shall be deemed to be and shall constitute a special fund for the payment of Basic Premium in accordance with the provisions of this ,Agreement. in making any such deposit, the Providees shall comply with all restrictions and provisions contained in the No-Arbitrage Certificate signed by the Providees relating to the Certificates. The Providees may also, by at least two-thirds` vote of the Governing Board of the Provider, exercise as a group the option to prepay Basic Premium of all Providees pursuant to Section 11.3 hereof in the manner and upon the terms-set forth in such Section. The Providees may use Undesignated Reserves in the Glaims Payment Eund, moneys in the Debt Service Reserve Fund or any other lawfully available moneys to deposit or prepay the amounts described in this .Section. Unless the Providees elect otherwise by vote of at least a majority of the Provides members of the Governing Board. of the Provider:, the pooled self-insurance program shall terminate by virtue. of such. deposit ar prepayment, except for the obligations of,each.Providee to pay-Risk Premium Adjustments, as provided in Section 4.1 hereof. SFCT30N 11.3 0 tional Pre a ent of Certificates. Subject to the terms and conditions of this Section, the Provider hereby grants an. option to each Providee to prepay. in whole, the unpaid principal amount of such Pravidee's Basic Premium, on the dates specified below. Said option shall be exercised by a Provides by giving written notice to the Trustee of the exercise of such option at least forty- five (45) days prior to the date of prepayment. 'Such option shall be exercised by depositing with said notice cash in an amount equal to the outstanding principal to be paid with respect to the portion of the Certificates representing interests in such Providee's Basic Premium, plus-accrued interest on the principal amount to-be prepaid to the date of prepayment, together with any Basic Premium then due but 39 unpaid, and said cash deposit shall be accompanied by an amount equal to the, following amount expressed as a percentage of the principal amount prepaid constituting a prepayment premium. Pre a ent Date Pre a ent Premium 1 and 1, 1 and 1, 1 and 1, 1 and 1, 1,. and. thereafter. SECTION 11.4 Termination Premium. (a) A Providee may withdraw from Coverage pursuant to Section 6.2 hereof or be expelled from Coverage pursuant to Section ~i.3 hereof when the full amount of Termination Premium shall have been deemed to have been paid to the Provider, The Termination Premium for a Providee shall be determined by the Provider in an amount equal to the..-sum of the following at the time of such expulsion or withdrawal: (i) the amount that would be required to {3.) secure the payment of such Providee's Basic Premium pursuant to Section 11.1 hereof or (2} prepay such Providee's Basic Premium pursuant to Section 3.1.3 hereof on the next date an which such prepayment may be made, as the case may be, (ii) an amount equal to such Providee's Allocable Proportion of the amount, if any, by which the amount in the Debt Service Reserve Fund is less than the Reserve Requirement, and (iii) the total amount of Risk Premium Adjustments previously determined in accordance with Section 4.5 hereof that would be assessed against such Providee in subsequent Coverage Periods if such Providee were to continue to participate in Coverage. Termination Premium may be paid from: (x) such Providee's allocated share of .the Debt Service Reserve. Fund determined using the ratio set forth: in Section 5.3.(ii)(a) hereof, and its allocated share of~Undesignated Reserves in the Claims Payment Fund determined using-the ratios set forth in Section 5.1(ii) hereof and (y) in the event of withdrawal, from voluntary, premium payments by the withdrawing Providee and, in the event of expulsion, from voluntary premium payments by all remaining Providees. (b) The Provider, at the direction of the Governing Board of the Provider by majority vote, will direct the Trustee by written instruction to use the components of Termination Premium described in clause (i) of the preceding paragraph to either (i} make an irrevocable deposit pursuant to Section 11.1 hereof or (ii) prepay the portion of Certificates representing interests in the withdrawing or 40 expelled Providee's Basic Premium. The portion of Termination Premium not required for such deposit or prepayment will be deposited in the Debt Service Reserve Fund or the Claims Payment Fund, as the case may be. SECTION 11.5 Continuing Premium Obligations. In the event of irrevocable deposit by a Providee pursuant to Section 11.1 hereof or prepayment (except in connection with voluntary withdrawal ar expulsion) pursuant~to Section 11.3, such Providee shall remain liable in each Coverage Period to pay Supplemental Basic Premium, Administrative Premium, Risk Premium and Risk Premium Adjustment. In`.the event. that an irrevocable deposit or prepayment by all~Providees pursuant~'~ to Section 11.2 hereof is made and the Providees elect to continue the pooled self-insurance programs,-each Providee shall remain liable in each Coverage Period to pay Administrative Premium, Risk Premium and Risk Premium Adjustment. In the event of payment of Termination Premium by,ar on behalf of a Providee pursuant to Section 11.4 hereof, such Providee shall remain liable to pay Risk Premium Adjustment assessed with respect to Coverage'Periods prior to withdrawal or expulsion, as provided in this Agreement. ARTICLE XIL MISCELLANEOUS .SECTION 12.1 Notices. A11 notices, certificates or other communications hereunder shall be sufficiently given and shall be deemed to have been-received five business days after deposit in the United States mail in certified form`- postage prepaid, to the Providees, the Provider or the Trustee at the addresses set forth in Exhibit G hereto. The Provider ,and the Providees, by notice given hereunder,-may designate. different addresses to which subsequent notices, certificates or other communications will be sent. SECTION 12.2 Bindin Effect. This Agreement shall ' inure to he benefit of and shall be"binding upon the Provider and the Providees and their respective successors and assigns. SECTION 12.3 Seyerability. In the event any provisa,on of this Agreement shall be .held invalid or"unenforceable by. a court of competent jurisdiction, such ho3.ding shall not invalidate or render unenforceable any other provision hereof . 41 SECTION 12.4 Further Assurances and Corrective Instruments. The Provider and the Providees agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto and such further instruments as may reasonably be required for correcting any inadequate ar incorrect description of the Coverage hereby provided or intended so to be or for carrying out the expressed intention of this Agreement. SECTION 12.5 Execution in Counter arts. This Agreement._.may:~be ~ execu'ted .in .any number of counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 12.6 A licable Law. This Agreement shall be governed by and construed in accordance with the laws o£ the State. IN WITNESS WHEREOF, the Provider has caused this Agreement to be executed in its name by its duly authorized officers; and the Providees have caused this Agreement to be executed in their respective names by their respective duly authorized officers, as of the date first above written, and such Agreement shall be effective from the date of execution shown below. Execution Date: , 1987 CSAC EXCESS INSURANCE AUTHORITY as Provider By: __ COUNTY OF ALPINE as Provides By 42 43 COUNTY OF HUMBOLDT as Providee By COUNTY OF IMPERIAL - as Pravidee BY COUNTY OF INYO as Provides By COUNTY OF KINGS as Pravidee By COUNTY OF LAKE as Provides By COUNTY OF LASSEN as Pravidee By COUNTY OF MADERA as Providee By 44 COUNTY OF MARIPOSA as Providee By COUNTY OF MENDOCINO as Providee By COUNTY OF MERGED as Providee By COUNTY OF MODOC as Providee By COUNTY OF, MONO as Providee By COUNTY OF NEVADA as Providee By COUNTY OF PLACER as Providee By 45 COUNTY OF PLUMAS as Providee By COUNTY OF SAN LUTS OBTSPO as Providee BY COUNTY OE SANTA BARBARA as Providee By COUNTY OF SANTA CRUZ as Providee By COUNTY OE SHASTA as Providee By COUNTY OF STERRA as Providee By COUNTY OF STSKTYOU as Providee By 46 COUNTY OF SOLANO as Provides BY COUNTY OF SONOMA as Provides By COUNTY OF STANTSLAUS as Providee By COUNTY OF SUTTER as Providee By COUNTY OF TEHAMA as Providee By COUNTY OF TRINITY as Providee By COUNTY OF TUOLUMNE as Providee By 47 COUNTY OF YUBA as Providee By 48 E:~ Ei I B Z T ii ,, ~~ ~: CSAC ExCESS INSURANCE AU'~~HURIT~' _ , Herein silted the Authority 9310 Tech Center Drive, Suite 290. Sacramento, GA 95826 ~IEMORANDIIM OF LIABILITY COVERAGE FOR PUBLIC ENTITIES N o: DECLARATIONS Named Insured: Address Poll Period: from To 12:01 A.M.. Local Time at the Address of the Hamad Insured as stated herein. Limits ef__lliair~liN-: Insureds Retained Limit: item 1. 5 ultimate net lass as the result of any one occurrence because of personal injury or property damage, or public officials errors & omissions, or any combination thereof. Autharity~s liability: item 2. S ultimate net lass as the result of any one occurrence because of personal injury or properly damage, or public officials errors & omissions, or any combination thereof. Bern 28. S ultimate net loss as the result of all occurrences during eacy policy year arising out of the Completed otrerat~ons hazard, ar out of public officials errors & omissions. Self insured Claims Servicing Organization Risk Premium: Endorsemenu attached to memorandum at inception: Countersigned by Authorized Representative EIA [Dec. Pagel id;8fi $^ ~ MEMORANDUM OF COVERAGE FOR THE COUNTY SUPERVISOR5AS50CIATiON OF CALIFORNIA EXCESS INSURANCE AUTHORITY IN CONSIDERATION OF THE PAYMENT OF THE PREMIUM, IN RELIANCE UPON THE STATEMENTS IN THE DECLARATIONS MADE A PART HEREOF ANp' SUBJECT TQ ALL OF THE TERMS OF THI5 MEMORANDUM THE AUTHORITY AGREES WITH THE NAMED INSURED AS FOLLOWS: INSURING AGREEMENT THE AUTHORITY WILL PAY ON BEHALF OF THE INSURED FOR ULTIMATE NET LOSS IN EXCESS OF THE. RETAINED LIMIT HEREINAFTER STATED WHICH THE INSUREQ SHALL BECOME LEGALLY OBLIGATED TO PAY AS DAMAGES BY REASON OF LIABILITY IMPOSED BY LAW OR LIABILITY ASSUMED BY CONTRACT BECAUSE OF: COVERAGE A. PERSONAL INJURY OR COVERAGE B. PROPERTY DAMAGE OR COVERAGE C. PUBLIC OF~ICiALS ERRORS ANI] OMISSIONS LIABILITY TO WHICH THIS MEMORANDUM APPLIES, CAUSED BY AN OCCURRENCE. DEFENSE C05TS AFTER THE AMOUNT DF THE INSUREDS RETr~INED LIMIT WAS BEEN EXHAUSTED BY PAYMENT OF JUDGMENTS, SETTLEMENTS AND DEFENSE COSTS, ,THE AUTHORITY WILL REIMBURSE THE INSURED FOR EXCESS DEFENSE.COSTS INCURRED 8Y THE INSURED, HOWEVER EXCESS DEFENSE C05TSARE SUBJECTTO, AND NOT IN ADDITION TD, THE LIMIT OF THE ALITHORiTY~S LIABILITY. THE AUTHORITY, AT ITS OWN EXPENSE, SHALL HAVE THE RIGHT TO ASSOCIATE ITSELF-WITH THE INSURED IN THE CONTROL, INVESTIGATION, DEFENSE OR APPEAL OF ANY CLAIM OR PROCEEDING WHICH, iN THE OPINION OF THE AUTHORITY, IS OR MAY BE COVERED 8Y TH15 MEMORANDUM. THE INSURED SHALL FULLY COOPERATE IN ALL MATTERS PERTAINING TO SUCH CLAIM OR PROCEEDING. NO CLAM SHALL BE SETTLED FOR AN AMOUNT IN EXCESS OF THE INSUREDS RETAINED LIMIT WITHOUT THE PRIOR WRITTEN CONSENT OF THE AUTHORITY. EIA I-$7 L~2 RETAINED LIMIT • THE AUTHORITY'S LIMIT OF LIABILITY REGARDLESS OF THE NUMBER OF {i 1 INSUREDS UNDER THIS MEMORANDUM, {2} PERSONS OR ORGANIZATIONS WHO SUSTAIN 1NJURY OR DAMAGE. OR {$} CLAIMS MADE OR SUITS BROUGHT ON ACGOUNT OF PERSONAL INJURY OR PROPERTY DAMAGE, THE AUTHORITY~S LIABILITY IS LIMITED AS FOLLOWS: WITH RESPECT TO PERSONAL INJURY, PROPERTY DAMAGE, PUBLIC OFFICIALS ERRORS AND OMISSIONS, OR ANY COMBINATION THEREOF, THE AUTHORITY'S LIABILITY SHALL BE ONLY FOR THE ULTIMATE NET LOSS IN EXCESS OF THE INSUREDS RETAINED LIMIT A5 SPECIFIED IN ITEM 1. OF THE LIMITS OF LIABILITY SECTION OF THE DECLARATIONS AS THE RESULT OF ANY ONE OCCURRENCE, AND THEN FOR AN AMOUNT NOT EKCEEDING THE AMOUNT SPECIFIED IN ITEM 2 A OF THE LIMITS OF LIABILITY SECTION OF THE DECLARATIONS AS THE RESULT OF ANY ONE OCCURRENCE. THERE IS NO LIMIT TO THE NUMBER OF OCCURRENCES DURING 7HE MEMORANDUM PERIOD FOR WHICH " CLAIMS MAY 8E MADE, EXCEPT THAT THE LIABILITY OF THE AUTHORITY ARISING OUT OF COMPLETED OPERATIONS HAZARD OR OU7 OF PUBLIC OFFICIALS ERRORS AND OMISSIONS, BECAUSE OF ALL 000UR- RENCES DURING EACH MEMORANDUM PERIOD SHALL NAT EXCEED THE AMOUNT SPECIFIED IN ITEM 2 B OF THE LIMIT OF LIABILITY SECTION OF THE DECLARATIONS. FOR THE PURPOSE OF DETERMINING THE L1MIT OF THE AUTHORITY'S LIA81LiTY, ALL DAMAGES ARISING OUT OF CONTINUOUS OR REPEATED EXPOSURE TO SUBSTANTIALLY THE SAME GENERAL CONDITIONS SHALL BE CONSIDERED AS ARISING OUT OF ONE OCCURRENCE. " PUBLIC OFFICIALS ERRORS AND OMISSIONS TAKING PLAGE OVER MORE THAN ONE MEMORANDUM PERIOD SHALL BE DEEMED TO HAVE TAKEN PLACE DURING THE LAST MEMORANDUM PERIOD AND ONLY THAT LIMIT SHALL APPLY. MEMORANDUM PERIOD; TERRITORY TH15 MEMORANDUM APPLIES TO .PERSONAL INJURY, PROPERTY DAMAGE, OR PUBLIC OFFICIALS ERRORS AND OMiSS10N5 WHICH OCCURS ANYWHERE IN THE WORLD DURING THE MEMORANDUM PERIOD. THE CLAIM pR LEGAL ACTION MUST BE MADE WITHEN THE JURISDICTION OF A UNITED STATES STATE OR FEDERAL CDU RT. PERSONS OR ENTITIES INSURED IA} THE NAMED INSURED; (B} THOSE INDIVEDUALS WHO WERE OR ARE NOW ELECTED OR APPOINTED. OFFICIALS OF THE NAMED INSURED, WHETi~ER OR NOT COMPENSATED [INCLUDING VOLUNTEERS). INCLUDING MEMBERS OF ITS GOVERNING BODY OR ANY OTHER COMMITTEES, BOARDS, COMMISSIONS OR SPECIAL DISTRICTS OF THE NAM>=D INSURED, WHILE ACTING FOR OR "ON BEHALF OF THE u ' NAMED INSURED; (C} ALL SPECIAL.DISTRICTS GOVERNED DIRECTLY BY THE BOARD OF SUPERVISORS AND OTHER DISTRICTS OR AGENCfES WHICH ARE NAMED ON THE MEMORANDUM. {D} PAST pR PRESENT EMPLOYEES OF THE NAMED INSURED, WHETHER OR NOT COMPENSATED, • {INCLUDING VOLUNTEERS}, WHILE ACTING FOR OR ON BEHALF OF THE NAMED INSURED. EIa i-87 a-3 _ „. THIS MEMORANDUM DOES NOT APPLY: (A) TO ANY OBLIGATION FOR WHIGH THE INSURED OR ANY OTHER CARRIER AS HIS INSURER MAY BE HELD LIABLE UNDER ANY WORKERS COMPENSATION, UNEMPLOYMENT COMPENSATION DR D[SABILITY BENEFITS LAW, OR UNDER ANY SIMILAR LAW; {B} TO BODILY INJURY TO ANY EMPLOYEE OF THE INSURED ARISING OUT OF AND IN THE COURSE OF' .HIS/HER EMPLOYMENT BY THE INSURED: 8UT :THIS .EXCLUSION Q~ES NOT APPLY TO LIABILITY ASSUMED BY THE. INSURED UNDER ANY WRITTEN CONTRACT; (Ir} TO INJURY TO OR DESTRUCTION OF. (1) PROPERTY OWNED BY THE INSURED, OR .[2) PROPERTY RENTED TO DR LEAST=D TO THE INSURED WHERE THE fNSCJRED HAS ASSUMED LIABILITY FOR -'DAMAGE TO'O.R: OE&TRUCT~ON OF;.SUCH PROPERTY UNLE55,THE NAMED INSURE^ WOULD HAVE BEEN LIABLE IN THE ABSENCE DF SUCH ASSEJMPTION.OF LIA6,1L1TY, OR l3) AIRCRAFT OR WATERCRAFT !N THE CARE, CUSTODY OR CONTROL OF ANY INSURED: ., {D} : AS RESPtcCTS.i,iABll..ITY ASSUMED BY THE INSURED UNDER ANY CONTRACT: ..: .:{i}. TO ANY CLAIM; .IUDGEMENT OR AGREEMENT FROM ANY.AR8ITRATION .PROCEEDING WHEREIN THE AUTHORITY lS. NOT.,ENTItLEC1 TO EXERCISE .WITH" THE INSURED, THE INSl1RED{S RIGHTS IN THE CHOICE OF ARBITRATORS, AND 3N THE CONDUCT OF SUCH PROCEEDINGS. ' (Z}, T0, ANY .OBLIGATION :FOR -.THE- RENDERING ,OR .FAILU~tE TO RENDE{i` PROFESSIONAL SERVICES FOR THEJNSURED ARISING OUTDF~ „„ (I} THE PREPARATION OR APPROVAL OF CONTRACTS. MAPS, PLAINS, `DRAWINGS. OPINIONS. REPORTS, TESTS, . SURVEYS,. CHANGE. ORpERS,.,. ©ESIGNS OR ,. SPECIFICATIONS OR: .. . {Il) THE GIVING OR THE FAILURE TO GIVE D1F~ECTI0NS DR INSTRUCTIONS BY THE INSURED, HIS AGENTS DR EMPLOYEES. PROVIpED .SUCH GIVING ~R FAILURE . TO GIVE IS THE PRIMARY.CAUSE.OF P~RS.QNAL INJURY DR PROPERTY DAMAGE. tE) LIABILITY ARISING OUT OF THE OWNERSHIP, MAINTEI~lANCE, LOADING ~R UNLOADING, OR OPERATIONS OF ANY: {1} AIRCRAFT. OTHER THAN NON-OWNED AIRCRAFT; (3} RUNWAYS: (4} HANGARS: (5} OR OTHER PROPERTIES IN CONNECTION WITH AVIATION ACTIVITIES. .B-~ EIA 10186 iF} PERSONAL INJURY OR PROPERTY DAMAGE ARISING OUT OF OR !N CONNECTION WITH THE OPERATION OF ANY HOSPITAL. CLINIC, OR ESTABLISHED HEALTH CARE FACILITIES OWNED OR OPERATED BY THE NAMED INSURED DUE TO: (1) THE,RENDERING OF OR FAILURE, TO RENDER {!} MEDICAL, SURGIGAL, DENTAL; X•RAY OR NURSING SERVICE OR TREATMENT, OR THE FURNISHING OF FOOD OR BEVERAGES IN CONNECTION THEREWITH: (EI} -ANY S>=RVICE OR TREATMENT CONDUCIVE TO HEALTH OR OF A PROFESSiONAt+ NATURE OR:.. . ,. [I11} ANY"COSMETIC OR `~OIVSORiAL SERVICE OR TREATMENT; '[2} THE FURNISHIaVG OP OR DISPENSING' DF DRUGS OR MEDICAL, DENTAL OR SURGICAL SUPPLIES .O.R APPLIANCES. THIS EXCLUSION:SHALL. NOT AP?LY,,HOWEVER. TD ANY PROFESSIONAL ACTIVITIES AR151NG OUT OF THE PERFORMANCE OF OCCUPATIONAL PHYSICAL EXAMINATIONS, PARAMEDICS; EMERGENCY .FIRST. AID,. ALCOHOLISM .TREATMENT CENTERS. DRUG ABUSE TREATMENT CENTER„ CHILD HEALTH. CARE: OR 'CRIPPLED CHILDREN TREATMENT CENTERS, VENEREAL DISEASE CLINICS, T.S. CLINICS, AND FAMILY P{.ANNING CLINKS. [G} TO CLAIMS FOR LOSS OR DAMAGE OR ANY LIABILITY ARiSING.OUT~DF OR IN CONNECTION -WITH THE PRINCIPLES OF EMINENT DOMAIN,C.ONDEMNATIDN PROCEEDINGS OR INVERSE CONDEMNATION BY WHATEVER NAME:. ~IEGAFi[3LESS'OF WWETHER SUCH CLAIMS ARE MADE DIRECTLY AGAINST TWE INSURED BY VIRTUE OF-ANY AGREEMENT ENTERED -INTO BY OR ON BEHALF OF:THE INSUREl7... . THIS EXCLUSION SHALL NOT APPLY TD"PROPERTY DAMAGE CAUSED BY THE NEGLIGENCE OR OTHER FAULT OF THE INSURED EVEN THOUGH A LEGAL THEORY UPON WHICH A CLAIMANT SEEKS RECOVERY ISTHE PRINCIPAL. OF INVERSE CONDEMNATION. [H) TO LIABILITY ARISING :OUT.OF THE FAILURE TO SUPPLY OR PROVIDE AN ADEQUATE SUPPLY OF GAS QR WAfEFt OR ELECTRICITY WHEN SUCH FAILURE°IS A Rt~SULT OF THE INADEQUACY OF THE lN5URED'S, FACILITIES .TO. ,SUPPLY OR PRODUCE SUFFICIENT GAS OR WATER DR ;. ELECTRICITY TO MEET THE DEMALVD: [I} TO PROPERTY DAMAGE ARISING OIJT,OF SUBSIDENCE. [J} TD ULTIMATE NET LOSS ARISING DUT OF ANY TRANSIT AUTHORITY, TRANSIT SYSTEM OR PUBLIC TRANSPORTATION SYSTEM OWNED DR OPERATED BY ANY INSUREb; THIS EXCLUSION SHALL NOT APPLY TO TRANSIT OR PUBLIC TRANSPORTATION SYSTEMS OPERATING OVER NON-FIXED ROUTES SUCH AS DIAL-A-RIDE, SENIOR CITIZEN TRANSPORTATION, OR HANDICAPPED PERSONS TRANSPORTATION. [K} TO PERSONAL.INJURY OR PROPERTY:I7AMAGE,ARISING,OUT DF THE HAZARDOUSPROPERTIES OF NUCLEAR MATERrAL. B-`j EIA 10186 (L} TO PERSONAL INJURY OR PROPERTY DAMAGE OR PUBLIC OFFICIALS ERRORS AND OMISSIONS ARISING OUT OF THE CONTAMINATION OF THE ENVIRONMENT BY POLLUTANTS INTRODUCED. AT ANYTIME INTO OR UPON LAN©, THE ATMOSPHERE OR ANY WATERCOURSE OR BODY OF WATER OR AQUIFER. THIS EXCLUSION APPLIES WHETHER OR NOT THE CONTAMINATION 15 INTRODUCED INTO THE ENVIRONMENT INTENTIONALLY OR ACCIDENTALLY OR GRADUALLY OR SUDDENLY AND WHETHER OR NOT THE INSURED OR ANY OTHER PERSDN OR ORGANIZA- TION IS RESPONSIBLE FOR THE CONTAMINATION. CONTAMINATION INCLUDES ANY UNCLEAN, UNSAFE. OR UNHEALTHFUL CONDITION EITHER ACTUAL OR POTENTIAL, WHICH ARISES OUT OF THE PRESENCE IN THE ENVIRONMENT OF ANY POLLUTANT, WHETHER PERMANENT OR TRANSIENT. ENVIRONMENT INCLUDES LAND, BODIES OF WATER, UNDERGROUND WATER OR WATER TABLE OR AQUIFER. THE ATMOSPHERE AND ANY OTHER NATURAL FEATURE OF THE EARTH. WHETHER OR NOT ALTERED, DEVELPED OR CULTIVATED. POLLUTANTS INCLUDE SMOKE, VAPORS, SOOT, FUMES. ACIDS, ALKALIS, CHEMICALS, LIQUIDS OR GASES, THERMAL POLLUTANTS AND ALL OTHER IRRITANTS OR CONTAMINANTS. THIS EXCLUSION DOES NOT APPLY TO PERSONAL INJURY.OR PROPERTY DAMAGE CAUSED BY HEAT, SMOKE OR FUMES FROM A HOSTILE FIRE. AS USED IN THIS EXCLUSION, A HOSTILE FIRE MEANS ONE WHICH BECOMES UNCONTROLLABLE OR BREAKS OUT WHERE iT WAS NOT INTENDED TO BE. [M} AS RESPECTS LIABILITY IMPOSED UPON AN INSURED [OR WHICH IS IMPUTED TO AN INSURED} UNDER THE "EMPLOYMENT RETIREMENT- INCOME SECURITY ACT OF 1974" AND ANY LAW AMENDATORY THEREOF. [N} TO LIABILITY ARISING OUT OF THE RUPTURE. BURSTING, ETC. OF ANY DAM{S}. {0} TO ANY LIABILITY FOR PAST. PRESENT, OR FUTURE CLAIMS ARISING IN WHOLE OR IN PART. EITHER DIRECTLY OR .INDIRECTLY, OUT DF THE MANEIFACTURE. DISTRIBUTION. SALE, RESALE, REBRANDING, INSTALLATION, REPAIR, REMOVAL, ENCAPSULATION, ABATEMENT, REPLACEMENT OR HANDLING OF, OR EXPOSURE TO, ASBESTOS OR PRODUCTS CONTAINING ASBESTOS WHETHER OR NOT THE ASBESTOS IS OR WAS AT ANY TIME AIRBORNE AS A FIBER OR PARTICLE, CONTAINED 1N A PRODUCT, CARRIED ON .CLOTHING, INHALED, TRANSMITTED IN ANY FASHION, OR FOUND IN ANY FORM WHATSOEVER. THIS MEMORANDUM WILL NOT BECOME EXCESS DF ANY REDUCED OR EXHAUSTED UNDERLYING AGGREGATE LIMIT OF LIABILITY OR AGGREGATE INSURED'S RETAINED LIMIT TO THE EXTENT SUCH REDUCTION OR EXHAUSTION,iS THl; RESULT.DF CLAIMS, DAMAGE OR LOSS EKCLUDED BY THIS PROVISION. {p}~ TO PERSONAL INJURY OR PROPERTY DAMAGE ARISING DUT OF {1} THE OWNERSHIP, MAINTENANCE, OPERATION, USE, LOADING OR UNLOADING OF ANY MOBILE EQUIPMENT OR VEHICLE WHILE BEING USED IN ANY PREARRANGED OR ORGANIZED RACING, SPEED OR DEMOLITION CONTEST OR !N ANY STUNTING ACTIVITY OR IN PRACTICE IN PREPARATION FOR ANY SUCH CONTEST DR ACTIVITY OR L2) THE OPERATION OR USE OF ANY SNOWMOBILE OR TRAILER DESIGNED FOR USE THEREWITH WH1rN USED FDR RECREATIONAL, STUNTING, OR RACING ACTIVITIES. [Ql TO LIABILITY ARISING OUT OF THE OPERATION OR USE OF ANY OFF HIGHWAY VEHICLE PARK OR AREA. [R) TO ANY CLAIMS FOR LOSS OR DAMAGE OR ANY LIABILITY ARISING OUT OF OR IN CON- NECTION WITH THOSE CAUSES OF ACTION OR COUNTS IN ANY SUIT WHICH DO NOT CONTAIN DEMANDS OR PRAYERS FOR MONETARY DAMAGE. EIA 10/8B ~6 {5} UNDI=R COVERAGE C TO: {t ~ PER50NAL INJURY OR PROPERTY DAMAGE AS DEFINED IN THE POLICY; {2} PAST SALARY OR WAGES DUE BECAUSE OF WRONGFUL TERMINATION OF ANY EMPLOYEE OR OFFICIAL OF THE LNSURED; {3} BENEFITS PAYABLE UNDER AN EMPLOYEE BENEFIT PLAN {WHETHER THE PLAN iS VOLUNTARILY ESTABLISHED BY THE INSURED OR MANDATED BY STATUTE} BECAUSE OF UNLAWFUL DISCRIMINATION; • {Q} PASTSALARY OR WAGES BECAUSE OF,UNLAWFUL DISCRIMINATION; {5} REFUND OF TAXES, FEES OR ASSESSME[~FTS; {6} {I} LIABILITY OF AN INSURED AR151NG 1N WHOLE OR 1N PART, OUT OF ANY INSURED 08TAINING REMUNERATION OR FINANCIAL GAIN TO -WHICH THE INSURED WAS NOT LEGALLY ENTITLED; {II! LIABILITY ARISING OUT OF THE WILLFUL VIOLATION OF A PENAL CODE OR ORDINANCE COMMITTED BY OR WITH THE KNDWLEDGE OR CONSENT OF ANY • INSURED; EXCEPT THAT ANY ACT PERTAINING TO ANY OTHER INSURED SHALL NOT BE IMPUTED TO ANY OTHER INSURED FOR THE PURPOSE OF DETERMINING APPLLGATION DF THESE EXCLUSIONS {S 6 I AND S 6 I I}; {'!} LIABILITY OF ANY INSURED ARISING OUT OF ESTIMATES OF PROBABLE CDSTSOR C05T ESTIMATES BEING EXCEEDED OR FOR FAULTY PREPARATION OF BID SPECIFICATIONS OR PLANS OR FAILURE TO AWARD CONTRACTS IN ACCORDANCE WlTH.STATUTE OR ORDINANCE WHICH UNDER LAW MUST 8E SUBMITTED FOR BIDS; {8) INJURY Y0, . DESTRUCTION- OR DISAPPEARANCE OF ANY TANGIBLE PROPERTY (INCLUDING MONEY} OR THE LOSS OF tJSE THCsREDF; {9} FAILURE TO PERFORM OR BREACH OF, A CONTRACTUAL OBLIGATION; NOTHING CONTAINED IN THIS EXCLUSION SHALL UMITTHE IIVSURED'S RIGHTSDF RECOVERY. WHERE APPLICABLE, UNDER COVERAGES A AND B OF THIS MEMORANDUM. • EIA 10186 DEFINITIONS WHEN USED IN THIS MEMORANDUM {INCLUDING ENDORSEMENTS FORMING A PART HEREOF}; "AIRCRAFT" MEANS A VEHICLE DESIGNED FOR THE TRANSPORT OF PERSONS OR PROPERTY PRINCIPALLY . IN THE AIR. "COMPLETED OPERATIONS HAZARD INCLUDES PERSONAL INJURY AND PROPERTY dAMAGE ARISING OUT OF OPERATIONS OR RELIANCE UPON A REPRESENTATION OR WARRANTY MADE AT ANY TIME WITH RESPECT THERETO, BUT -ONLY IF THE PERSONAL INJURY OR PROPERTY DAMAGE OCCURS AFTER SUCH OPERATIONS HAVE BEEN COMPLETED OR ABANDONED AND OCCURS AWAY FROM PREMISES OWNED BY OR RENTER TO THE INSURED. "OPERATIONST' INCLUDE MATERIALS, PARTS OR EOUIPMENT FiJRNISHED IN CONNECTION THEREWITH. OPERATIONS .SHALL BE DEEMED GOMPLETED A7 THE EARLIEST OF TH1= FOLLOWING T[MES: (A} WHEN ALL OPERATIONS TO BE PERFORMED eY OR ON BEHALF OF THE INSURED UNDER-THE CONTRACT HAVE BEEN. COMPLETED; OR . {B} WHEN ALL OPERATIONS TO BE. PERFORMED -BY OR ON BEHALF OF THE INSURED AT THE SITE OF THE OPERATIONS HAVE BEEN-COMPLETED, OR {C} WHEN THE PORTION OF TWE WORK OUT OF WHICH THE INJURY DR DAMAGE ARISES HAS BEEN PUT TD ITS INTENDED USE BY ANY PERSON OR ORGANIZATION OTHER THAN ANOTHER CONTRACTOR OR SUBCONTRACTOR ENGAGED IN PERFORMING OPERATIONS FOR A PRINCIPAL AS A PART OF THE SAME PROJECT. OPERATIONS WHICH MAY REQUIRE FURTHER SERVICE OR MAINTENANCE WORK, OR CORRECTION, REPAIR OR REPLACEMENT BECAUSE OF ANY DEFECT Oft DEFICIENCY, BUT WHICH ARE OTHERWISE COMPLETE SHALL BE DEEMED COMPLETED. - THE COMPLETED OPERATIONS HAZARD DOES NOT INCLUDE PERSONAL INJURY OR PROPERTY DAMAGE. ARISING OUT OF: (1} OPERATIONS IN CONNECTION WITH THE, TRANSPORTAfiION OF PROPERTY UNLESS. THE: PERSONAL INJURY OR PROPERTY DAMAGE ARISES OUT OF A CONDlT10N IN OR ON A VEHICLE CREATED BY THE LOADING OR UNLOADING 7hEEREOF, (2} THE EXISTENCE OF TOOLS, UNiNSTALLED EQUIPMENT OR ABANDONED OR UNUSED MATERIALS. "DAM" y4NY ARTIFICIAL BARRIER TOGETHER WITH APPURTENANT WORKS WHICH: t. IS OR WILL BE 25 FEET OR MORE IN HEIGHT FROM NATURAL BED OF STREAM 0R WATERCOURSE; 2. HA5 OR WILL HAVE EMPOUNDING CAPACITY OF 50 ACRE FEET OR MORE. "DAMAGES" INCLUDES DAMAGES FOR DEATH AI']D FOR CARE AND LOSS OF SERVICES RESULTING FROM PERSONAL INJURY AND DAMAGES FOR LOSS OF USE OF PROPERTY RESULTTING FROM PROFERTY DAMAGE, AND DAMAGES RESULTING FROM PUBLIC OFFICIALS ERRORS AND OMISSIONS. ~~ DEFENSE COSTS MEANS REASONABLE FEES CHARGED BY AN ATTORNEY, INCLUDING EXPENSES QF A CLAIMS SE-RVICING ORGANIZATION THE iNSUf;ED .HAS ENGAGED, AND ALL OTHER REASONABLE F1:ES, COSTS AND EXPENSES ATTRIBUTABLE TO THE INVESTIGATION, DEFENSE OR APPEAL OF A CLAIM WITHIN THE SCOPE OF COVERAGE AFFORDED BY THIS MEMORANDUM EXCEPT SALARIES OF EMPLOYEES OF THE INSURED AND THE OFFICE EXPENSES OF THE INSURED. EIA 1-87 B-8 "EXCESS DEFENSE COSTS . MEANS DEFENSE COSTS INCURRED BY THE INSURED WITH THE WRITTEN CONSENT OF THE AUTHORITY AFTER THE.SEIF•IN5URE0 RETENTION HA5 BEEN EXHAUSTED 8Y PAYMENT OF JUDGEMENTS, SET'TLEMi_NTS AND DEFENSE CO5T5. "GOVERNED DIRECTLY" MEANS THE COUNTY BOARD OF SUPERV150R5 SIT5 A5 THE GOVERNING BDARD. "INSURED" MEANS ANY PERSON OR ORGANIZATION QUALIFYING AS AN INSURED: UNDER THE PERSONS OR ENTITIE5 INSURED SECTION OF THIS MEMORANDUM. THE COVERAGE AFFORDED APPLIES SEPARATELY TO EACH INSURED AGAINST WHOM CLAIM tS MADE OR SUIT 15 BROUGHT, EXCEPT WITH RESPECT TO THE LIMITS OF THE AUTHORITY'S LIABILITY. NUCLEAR MATERIAL" MEANS 50URCE MATERIAL, SPECIAL NUCLEAR MATERIAL, OR BYPRODUCT ~~ „ ,MATERIAL; SOURCE MATERIAL , SPECIAL NUCLEAR MATERIAL". AND "BYPRODUCT MATERIAL`S HAVE THE~MEANINGS GIVEN THEM IN THE ATOMIC ENERGY ACT OF 1954 OR 1N ANY LAW AMENDATORY THEREOF. "OCCURRENCE" MEANS AN ACCIDENT OR EVENT, INCLUDING INJURIOUS EXPOSURE TO CONDITIONS, WHICH , RESULTS, DURING THE MEMORANDUM PERIOD, IN PERSONAL INJURY, PROPERTY DAMAGE, OR PUBLIC OFFICIALS ERRORS AND DM15510NS NEITHER EXPECTED NOR INTENDED FROM THE STANDPOINT OF THE INSURED. AS RESPEGTS COVERAGES A, B AND C, "OCCURRENCE" SHALL APPLY- SEPARATELY TO EACH MEMBER COUNTY OF THE AUTHORITY NAMED IN THIS MEMORANDUM. "OFF HIGHWAY VEHICLE PARK OR AREA MEANS ANY OFF HIGHWAY PARK OR AREA 'SPECIFICALLY DESIGNATED FOR THE RECREATIONAL OR SPORT ACTIVITIES OF OFF ROAD VEHICLES. RECREATIONAL OR SPORT ACTIVITY IS NOT MEANT TD INCLUDE ACCESS OR EGRESS TO PARK AREAS. "PERSONAL INJURY" MEANS [A} BODILY INJURY, DEATH, SICKNESS, DISEASE, DISABILITY, SHOCK, MENTAL At~IGU1SH AND MENTAL INJURY RESULTING FROM BODILY INJURY; [B} FALSE ARREST, DETENTION DR IMPRISONMENT OR MALICIOUS PRDSEGUTION; [C] THE PUBLICATION OR UTTERANCE OF A LIBEL OR SLANDER, INCLUDING DISPARAGING STATEMENTS CONCERNING THE CONDITION. VALUE, QUALITY OR U5E OF REAL OR PER50NAL PROPERTY, OR A PUBLICATION OR UTTERANCE IN VIOLATION OF RIGHTS OF PRIVACY; [D} WRONGFUL ENTRY OR EVICTION, OR OTHER INVASION OF THE RIGHT OF PRIVATE OCCUPANCY; [E} ASSAULT :AND BATTERY, NOT COMMITTED BY, AT. THE DIRECTION OF OR WITH THE CONSENT OF THE ENSURED, UNLESS COMMITTED OR DIRECTED FOR THE PURPOSE OF PROTECTING PERSONS OR PROPERTY FROM INJURY OR DEATH; [F} D15CRIMINATION BASED UPON RACE, RELIGION, NATIONALITY, NATIONAL ORIGIN, COLOR, CREED, SEX, SEXUAL PREFERENCE, AGE OR EMPLOYMENT. "PROPERTY DAMAGE" MEANS {1 }PHYSICAL INJURY TO OR DESTRUCTION OF TANGIBLE PROPERTY WHICH OCCURS DURING THE MEMORANDUM PERIOD, INCLUDING THE LOSS OF USE THEREOF AT ANY TIME RESULTING THEREFROM; OR [2y L05S OF USE OF TANGIBLE PROPERTY WHICH HAS NOT BEEN PHYSICALLY INJURED OR DESTROYED PROVIDED SUCH LOSS OF U5E IS CAUSED BY AN OCGURRENCE DURING THE MEMORANDUM PERIOD. "PUBLIC OFFICIALS" MEAN ALL PERSONS OR ENTITIES DEFINED UNDER "PERSONS OR ENTITIES INSURED" SEGTION OF THIS MEMORANDUM. "PUBLIC OFFICtr4LS ERRORS AND OMISSEONS" SHALL MEAN ANY ACTUAL OR ALLEGED ERROR OR MIS- STATEMENT OR ACT OF OMISSION OR NEGLECT OR BFtEAGH OF DUTY INCLUDING MESFEASANGE, MALFEASANCE DR NONFEASANCE BY THE INSUREDS IN THE. DISCHARGE OF THEIR DUTIES WITH THE PUBLIC ENTITY INDIVIDUALLY OR COLLECTIVELY, OR ANY MATTER GLAEMED AGAINST THEM SOLELY BY REASON OF THE=IR BEING OR HAVING BEEN INSUREDS. ~~ TI ULTIMATE NET LOSS MEANS THE SUMS, INGLUDING EXCESS DEFENSE COSTS. FOR WHICH THE INSURED IS LEGALLY LIABLE AS DAMAGES BY REASON OF A JUDGMENT OR A SETTL1rMENT MADE WITH THE WRITTEN CONSENT OF THE CLAIMANT, THE INSURED AND THE AUTHORITY. "WATERCRAFT" MEANS A VEHICLE DESIGNED FOR THE TRANSPORT OF PERSONS OR PROPERTY PRINGIPAI.LY ON WATER. EIA 1a/6s &-9 CONDITIDNS 1. PREMIUM THE PREMIUM DESIGNATED IN THE DECLARATIONS AS "RISK PREMIUM" 15 A DEPOSi7 PREMIUM ONLY, AND SHALL BE ADJUSTED ANNUALLY IN ACCORDANCE WITH THE PROVISIONS FOR "RISK PREMIUM ADJUSTMENTS" AS ADOPTED BY THE BOARD OF DIRECTORS OF THE AUTHORITY. 2. INSPECTION . THE AUTHORITY SHALL BE PERMITTED BUT HOT OBLIGATED 30 INSPECT THE INStIRED'S PROPERTY AND OPERATIONS AT ANY TIME. NEITHER THE AUTHORITY'S RIGHT TO MAKE INSPECTIONS NOR THE MAKING THEREOF NOR ANY REPORT THEREON SHALL CONSTITUTE AN UNDERTAKING, ON BEHALF DF OR FOR THE BENEFIT OF THE INSURED" OR OTHERS, TO DETERMINE. OR WARRANT THAT SUCH PROPERTY OR OPERATIONS ARE SAFE::THE AUTHORITY MAY EXAMINE THE INSUREDS BOOKS AND RECORDS AT ANY TIME DURING THE MEMORANDUM PERIOD AND.. EXTENSIONS THEREOF AND WITHIN THREE YEARS AFTER THE FINAL TERMINATION: OF TH15 MEMORANDUM, A5 FAR AS THEY RELATE TD THE SUBJECT MASTER OF THIS INSURANCE. 3. INSURED'S DUTIES IN THE EVENT OF OCCURRENCE, CLAIM OR SUIT (A} IN THE EVENT OF •AN OCCURRENCE REASONABLY LIKELY- TO INVOLVE THE AUTHORITY, WRITTEN- NOTICE CONTAINING PARTICULARS SUFFICIENT. TO IDENTIFY THE INSURED -AND ALSO REASONABLY OBTAINABLE INFORMATION,. WITH RESPECT TO THE- TIME, PLACE AND CIRCUMSTANCES THEREOF, AND THE NAMES AND ADDRESSES OF THE INJURED AND OF AVAILABLE WITNESSES, SHALL BE GIVEN BY OR FOR THt* INSURED 'TO THE AUTHORITY OR " ANY OF ITS AUTHORIZED 'AGENTS AS" 500N AS PRACTICABLE, AFTER THE INDIVIDUAL RESPONSIBLE FOR THE "INSURANCE AT THE INSURED COUNTY, OR HISIHER DESIGNEE, HAS KNOWLEDGE OF THE OCCURRENCE.. . SB} IF CLAIM .IS MADE OR SUIT l5 BROUGHT AGAINST THE INSURED WHICH APPEARS LIKELY TO INVOLVE THE- AUTHORITY, THE INSURED SHALL .FORWARD TD THE AUTHORITY EVERY DEMAND, NOTICE, SUMMONS OR OTHER PROCESS RECEIVED BY HIM/HER OR H!S/HER REPRESENTATIVE, IMMEDIATELY OR WITHIN A REASONABLE AMOUNT OF TIME AFTER THE INDIVIDUAL RESPONSIBLE FOR INSURANCE A3 TWE INSURED COUNTY DR HISIHER DESIGNEE HAS KNOWLEDGE OF THE CLAIM OR SUIT. (C} THE INSURED SHALL COOPERATE WITH THE AUTHORITY-AND UPON ITS.;REQUEST, ASSIST IN MAKING SETTLEMENTS, IN THE CONDUCT OF SUITS AND IN ENFORCING ANY RIGHT TO CONTRIBUTION DR INDEMNITY. AGAINST ANY PERSON OR ORGANIZATION WHO MAY B~ LIABLE TO"~THE INSURED BECAUSE OF PERSONAL INJURY OR PROPERTY DAMAGE WITH RESPECT TO WHICH INSURANCE IS AFFORDED" UNDER THIS- MEMORANDUM, AND THE- INSURED SHALL ATTEND HEARINGS AND TRIALS AND ASSIST IN SECURING AND GIVING EVIDENCE AND OBTAINING THE ATTENDANCE OF WITNESSES. THE INSURED SHALL NOT, EXCEPT AT HIS OWN COSTS, VOLUNTARILY MAKE ANY PAYMENT, ASSUME ANY 08LIGATION OR INCUR ANY EXPENSE; HOWEVER, IN THE EVENT .THAT THE AMOUNT OF ULTIMATE NET LOSS BECOMES CERTAIN EITHER THROUGH TRIAL COURT JUDGMENT OR AGREEMENT-AMONG THE INSURED, THE CLAIMANT AND THE AUTHORITY THEN.. THE .INSURED MAY PAY -THE AMOUNT OF ULTIMATE NET LOSS TD THE CLAIMANT TO EFFECT SETTLEMENT-AND, UPON SUBMISSION OF DUE PROOF THEREOF. THE AUTHORITY SHALL INDEMNIFY THE INSURED FOR THAT PART OF SUCH PAYMENT WWICH tS IN EXCESS OF THE RETAINED LIMIT. OR WILL, UPON REQUEST OF THE INSURED, MAKE SUCH PAYMENT TO THE CLAIMANT:ON BEHALF DF THE INSURED. EIA iDB6 B-10 (p~ THE AUTHORITY, AT ITS OPTION, SHALL HAVE THE RIGHT AT ITS OWN EXPENSE TD {NVESTiGATE ANY CLAIM ANDIOR NEGOTIATE THE SETTLEMENT THEREOF. AS IT DEEMS EXPEDIENT. BUT THE AUTHORITY SHALL NOT COMMIT THE INSURED TO ANY SETTLEMENT WITHOUT THE INSURER'S CONSENT. IN ADDITION, THE CLAIMANT' OR PLAINTIFF, AS THE CASE MIGH3 BE, MAY TENDER A BONA•FIDE, GOOD FAITH, SETTLEMENT DEMAND 1N EXCESS OF THE INSURER'S RETENTION, THE PAYMENT OF WHICH WOULD RESULT !N THE FULL AND FINAL DISPOSITION OF SAID CLAIM OR SUIT. iF A SETTLEMENT DEMAND IS ACCEPTABLE TO EITHER (]) THE INSURED, OR (x) THE AUTHORITY (BUT NOT 80TH), THEN WITH REGARD TO THAT CLAIM OR 5U1T: (7) IF SUCH SETTLEMENT DEMAND i5 NOT ACCEPTABLE TO THE AUTHORITY AND THE • INSURED TENDERS TO THE AUTHORITY AN AMOUNT EQUAL TO THE INSURER'S RETENTION, THE AUTHORITY 5HALL THEN PAY ON BEHALF OF THE INSURED ALL SUMS WHICH THE INSURED SHALL BE LEGALLY OBLIGATED TO PAY A5 DAMAGES, INCLUDING WITHOUT LIMITATION, THE INSURER'S RETENTION, INVESTIGATION, ADJU5TTUIENT APPRAISAL, APPEAL. POST-JUDGMENT INTE=REST AND DEFENSE COSTS; SUCH INVESTIGATION. ADJUSTMENT, APPRAISAL. APPEAL, POST JUDGMENT INTEREST AND DEFENSE COSTS SHALL BE PAID BY THE AUTHORITY iN ADDITION TO THE APPLICABLE, MAXIMUM LIMIT OF LIABILITY UNDER THIS MEMORANDUM. HOWEVER, IN NO EVENT ~. SHALL THE AUTHORITY'S AGREEMENT TO PAY ON BEHALF OF THE .INSURED EXCEED THE LIMIT OF LIABILITY AS STATED IN THE DECLARATIONS IN ADDITION TO SUCH INVESTIGATION. ADJUSTMENT, APPRAISAL, APPEAL, POST-JUDGMENT INTEREST AND DEFENSE COSTS. SHOULD THE FULL AND FINAL DISPOSITION OF THE CLAIM. INCLUDEEVG JUDGMENTS, SETTLEMENTS, INVESTIGATION, ADJUSTMENT, APPRAISAL, APPEAL, POST JUDGMENT INTEREST AND DEFENSE COSTS BE LESS THAN THE AMOUNT TENDERED BY THE INSURED, THE: UNAPPLIED PORTION OF THE TENDERED AMOUNT SHALL EE RETUF3NED TO THE INSURED BY THE AUTHORITY. (2) IF SUCH SETTLEMENT DEMAND IS NOT ACCEPTABLE TO THE, INSURED AND THE "AUTHORITY TENDERS TO THE INSURED AN AMOUNT EQUAL TO THE DIFFERENCE BETWEEN THE INSURER'S RETENTION AND SAID SETTLEMENT DEMAND, OR THE APPLICABLE AMOUNT SPECIFIED iN THE LIMITS OF ~ LIABILITY 5ECTION DF THE DECLARAT10N5, WHICHEVER IS LESS, THEN THE AUTHORITY'S AGREEMENT TO PAY ON _ :BEHALF OF THE INSURED FOR THE ULTIMATE NET LOSS HEREUNDER 5HALL BI" DISCHARGED AND TERMINATED AND THE AUTHORITY SHALL HAVE NO FURTHER OBLIGATIONS WITH RESPECTTHERETD. 4. APPEALS WHEN A LAWSUIT HAS PROCEEDED TO TRIAL COURT JUDGMENT AND NEITHER THE INSURED NOR THE AUTHORITY HAVE INVOKED THE PROV151ONS OF CONDITION 3. 0 (1} OR {2} ABOVE AND THE' INSURED ELECTS NOT TO APPEAL AJUt}GMENT IN EXCESS DF THE RETAINED LIMIT, THE AUTHORITY MAY ELECT TO DD SO AT ITS OWN EXPEN5E, BUT IN NO EVENT SHALL THE tIABILITY OF THE AUTHORITY FOR ULTIMATE NET LOSS EXCEED THE APPLICABLE AMOUNT SPECIFIED IN THE LIMITS OF LIABILITY SECTION OF THE DECLARATIONS PLUS ALL DEFENSE C05T5 NECE55ARY AND INCIDENT TO-SUCH APPEAL. 5. ACTION AGAINST THE AUTHORITY NO ACTION SHALL LIE AGAINST THE AUTHORITY WITH RESPECT TO ANY ONE OCCURRENCE UNLESS. AS A CONDITION PRECEDENT THERETO, THE INSURED SHALL HAVE FULLY COMPLIED WITH ALL THE TERMS OF THIS MEMORANDUM, NOR UNTIL THE AMOUNT OF THE IN5URED'S OBLIGATION TO PAY AN AMOUNT OF ULTIMATE NET LOSS iN EXCESS OF THE RETAINED LIMIT SHALL HAVE BEEN FINALLY DE~'ERMINED EITHER BY JUDGMENT AGAINST THE INSURE^ AFTER ACTUAL TRIAL OR BY WRITTEN AGREEMENT OF THE INSURED, THE CLAIMANT AND THE AUTHORITY. ANY PERSON OR ORGANIZATION DR THE LEGAL REPRESENTATIVE THEREOF WHO HAS SECURED SUCH JUDGMENT s~i~ ~~~ ~~~ OR WRITTEN AGREEMENT SHALL THEREAFTER BE ENTITLED TO RECOVER UNDER THIS MEMO- RANDUM THE EXTENT OF THE INSURANCE AFFORDED BY THIS MEMORANDUM. NOTHING CONTAINED IN TH15 MEMORANDUM SHALL GIVE ANY PERSON OR ORGANIZATION ANY RIGHT TO JOIN THE AUTHORITY AS A CO-DEFENDANT IN ANY ACTION AGAINST THE INSURED TO DETERMINE THi INSUREDS LIABILITY. BANKRUPTCY OR INSOLVENCY OF THE INSURED SHALL NOT RELtEVI THE AUTHORITY .OF ANY OF ITS OBLIGATIONS HEREUNDER. , B. OTHER INSURANCE lF COLLECTBLE INSURANCE WITH ANY OTHER INSURER IS AVAILABLE TO THE INSURED,COVER[NG A LOSS ALSO COVERED HEREUNDER'{WHETHER ON A PRIMARY, EXCESS OR CONTINGENT BASISI, THE INSURANCE HEREUNDER SHALL BE IN EXCESS OF, AND SHALL NOT CONTRIBUTE WITH, SUCH OTHER INSURANCE; PROVIDED "THAT THIS`CLAUSE DOES NOT APPLY WITH RESPECT TO EXCESS INSURANCE PURCHASED 5PECIFICALLY TO BE IN EXCESS OF THIS MEMORANDUM,. OR TO OTHER INSURANCE OR REINSURANCE WHICH iS INTENDED 70 PROVIDE;THE REMAINDER OF TWE LIMIT OF LIABILITY STATED IN THE DECLARATIONS OF THIS MEMORANDUM-WHEN THE INSURANCE AFFORDED UNDER TH15 MEMORANDUM PROVIDES LESS THAN 100 PERCENT OF THE LIMIT SET .FORTH IN THE DECLARATIONS. ' SUBROGATION THE AUTHORITY SHALL 8E SUBROGATED TO THE EXTENT OF ANY PAYMENT HEREUNDER TO ALL TWE INSUREDS RIGHTS OF RECOVERY THEREFOR: AND' THE INSURED SHALL b0 NOTHING-AFTER LOSS TO PRE.IUDICE SUCH RIGHTS AND SHALL- DO EVERYTHING NECESSARY TO SECURE SUCH RIGHTS. ANY AMOUNT SO RECOVERED SHALL BE APPORTIONED AS FOLLOWS: ANY INTEREST.{INCLUDING THE ~NSURED'S} HAVING PAID AN AMOUNT IN IrXCESS OF THE' RETAINED LIMIT PLUS THE LIMIT OF LIABILITY H>~RF=UNDER SHALL 8E REIMBURSED FIRST TO?HE EXTENT OF ACTUAL RAYMENT. THE AUTHORITY SHALL BE REIMBURSED NEXT Tb THE EXTEIVTDF ITS ACl'UAL PAYMENT HEREUNDER. IF ANY BALANCE THEN REMAINS UNPAID, IT SHALL - BE .APPLIED TO REIMBURSE THE INSURED. THE EXPEIV51=5 OF -ALL SUCH RECOVERY PROCEEDINGS 6HAL.L BE APPORTIONED IN THE RATIO OF RESPECTIVE RECOVERIES. IF THERE 15 N0 RECOVERY iN PROCEEDINGS CONDUCTED 50LI=LY BY THE AUTHORITY, lT SHALL BEAR THE EXPENSES THEREOF. B. CHANGES NOTICE "1'O ANY AGENT OR KNOWLEDGE, POSSESSED BY ANY AGENT.OR BY ANY: ATHER PERSON SHALL NOT EFFECT A WAIVER OR CHANGE IN ANY PART OF THIS MEMORANDUM OR STOP THE AUTHORITY FROM ASSERTING ANY RIGHT UNDER THE TERMS-OF THIS MEMORANDUM, NOR SHALL THE TERMS OF TH15 MEMORANDUM BE WAIVED OR CHANGED, EXCEPT BY ENDORSEMENT ISSUED TO. FORM A PART OF THIS MEMORANDUM. 9. ASSIGNMENT ASSIGNMENT OF INTEREST UNDER THIS MEMORANDUM SHALL NOT 81ND THE AUTHORITY UNTIL ITS CONSENT IS ENDORSED' HEREON; IF, HOWEVER, THE IVEIMED INSURED SHALL DIE, SUCH INSURANCE AS IS AFFORDED BY-THIS MEMORANDUM SHALL APPLY (A} TO THE INSUREDS LEGAL REPRESENTATIVE, AS THE NAMED INSCIRED, BUT ONLY WHILE ACTING WITHIN THE SCOPiw OF HIS DUTIES AS-SUCH, AND ($~ WITH RESPECT TO THE PROPERTY OF THE NAMED INSURED, TO THE P1=RSON HAVING PROPER TEMPORARY CUSTODY THEREOF, AS INSURED, BUT ONLY UNTIL THE APPOINTMENT AND DUAUFlCATION OF THE LEGAL REPRESENTATIVE. EIA 90186 B-12 10. -FUNDING OF INSUREDS RETAINED LIMIT THE ENSURED AGREES TO MAINTAIN A 1055 FUND IN AN AMOUNT TO SE DETERMINED BY MUTUAL AGREEMENT AMONG THE INSURED. THE SERVICING ORGANIZA'T'ION DESIGNATED IN THE ~11EM0• AANDUM DECLARATIONS. AND THE AUTHORITY FOR THE PAYMENT OF ALL CLAIMS AND EXPENSES FALLING WITHIN THE INSUREDS RETAINED LIMIT. THIS FUND SHALL BE REIMBURSED AS NECESSARY TO MAINTAIN A BALANCE IN ACCORDANCE WITH THE TERMS OF THE SERVICING AGREEMENT BETWEEN THE INSURED AND THE SERVICING ORGANIZATION. ' ~ IN THE EVENT OF CANC>lLLAT10N, EXPIRATION' OR REVISION OF THE CONY--RACY 3ETWE_N T!-E INSURED AND -THE SERV#CING ORGANIZATION, THE INSURED SHALL NOTIFY THE AUTHORITY .THEREOF WiTHiN THIRTY DAYS OF THE EFFECTIVE DATE OF SUCH CANCELLATION. EXPIAATIGV OR REVISION; BIJT FAILURE TO NOTIFY THE AUTHORITY SHALL NOT INVALIDATE THE INSURANC:.. i 1. CANCELLATION THIS MEMORANDUM MAY BE CANCELLED $Y THE AUTHORITY IN ACCORDANCE WITH SECTION i3.2 . REMEDIES ON DEFAULT OF THE LIABILITY RISK COVERAGE AGREEMENT. 12 FIRST NAMED WSURED THE INSURED FIRST NAMED AS NAMED INSURED IN TWE DECLARATIONS 15 AUTHORIZED TO ACT O:v BEHALF OF~ALL NAMED INSUREDS AND OTHER 1~~15UAEDS WITH RESPECT TO THE GIVING AND RECEIVING'OF NOTICE OF CANCE_LATION AND TO RECEIVING ANY.fiETURN PRE=MIUM THAT MAY BECOME PAYABLE UNDER THIS MEMORANDUM. THE INSURED FIRST .NAMED IN ITEM 1 IN THE DECLARATIOIVS.IS RESPONSIBLE FOR THE PAYMENT OF ALL PREMIUMS 6UT THE OTHER,NAMED INSUREDS .IOINTLY AND SEVERALLY AGREE TO MAKE SUCH PREMIUM PAYMENTS IN FULL EF THE FIRST NAMED INSURED IN ITEM 1 FAILS TO PAY THE AMOUNT DUE W{THIN THIRTY DAYS AFTER THE AUTHORITY. GIVES A WRITTEN DEMAND FOR PAYMENT TO THE INSURED FIRST NAMED iN ITEM ?. 13. SEVERABILITY OF iNTEAE5T5 THE TERM °THE iNSURED~~ iS USED SEVERALLY AND NOT COLLECTIVELY, SUT THE INCLL1510N HEREIN OR MORE THAN ONE INSURED SHALL N07 OPERATE TO INCREASE THE LIMITS OF T:~: AUTHORITY'S LIABILITY. 14; HON-RENEWAL IN THE EVENT OF NON•RENEWAL BY THE AUTHORITY, NOTICE SHALL BE GIVEN i0 THE NAMED INSURED NOT LESS THAN 51XTY DAYS PRIOR TO EXPIRATION. B-13 EIA CDP 10~8s DAM LIA81LlTY ENDORSEMENT 1T IS UNDER5TOOD AND AGREED THAT THt: M>=MORANDUM OF COVERAGE l5 AMENDED TO AOD THE FOLLOWING: EXCLUSION (IV} IS DELETED. COVERAGE IS PROVIDED FQR DAMAGES OF 80t).1LY INJURY OR PROPERTY DAMAGE ARISING OUT OF THE PARTIAL OR COMPLETE STRUCTURAL FAILURE OF ANY DAM .SCHEDULED HEREUNDER. NAME~OFDAMtS} tzXCLU510NS: THIS COVERAGE DOES NOT APPLY: TO OCCURRENCE5 ARTS}NG OUT OF OVERTOPPING. ACCIDENTAL DISCHARGE. OR ANY SUDDEN >=SCAPE OF WATER, UNLESS PARTIAL OR COMPLiTE FAILURE OF THE CAVERED DAM~Si ENSUES, OR UNLESS CAU51=0 BY PARTIAL OR CDMPLETI+ FAILURE OF THE COVERED DAMISI. IT IS FURTHER UNDERSTOOD AIdD AGREED '_"H.a.'= Tl3E AL'THORI':'Y' c iI1+32Li':~' ITE.*'F 2 A:~D IT£:K 2B .AS SY'_OW:J ON TF?y DECLARATIONS IS RE~.r-ISED 'i'D: Item 2. $ Item 2B. S BUT 0i!1LY AS RESPECTS '~'I?IS DAM LIA3ILITY E:"sDORSE3IENT. FRE.*+tIUM: It is furthtr agrees! that nothing herein shall act to increase the Authority~s Limit of Liability. This endorsement is part of. the Memorandum of Coverage and takes effect on ,the effective date of the Memorandum of Coverage uNess another.affective date is shown below. All other-terms and conditions remain unchanged. Effective Date Certificate No. Iswed to COUNTY OF Authorized Representative MARSH & McLENNAN, INCORPORATED S-l~ CSAC -EXCESS INSURANCE AUTHORITY PER50NS €NSUitED EN©DRSEMENT IT~ IS UNDERSTOOD AND AGREED THAT .THE PERSONS O!~ ENTITIES INSURED CLAUSE SHALL BE AMENDED TO €NCLUDE THE FOLLOW€NG: [E) LOCAL AREA FORMATION COMMISSION It is further agreed that nothing herein shall act to increase the Authority~s Limit of Liability. This endorsement is part of the Memorandum of Coverage and takes effect en the effective date of the Memorandum of Coverage unless another effective date 'a shown below. All other terms and conditions remain unchanged. Effective Date Certificate No. Iswed to At.L COUNTIE i Authorized Re rese ive ~1~ MARSH & Mc EN N, INCOR RAT ENDORSEMENT NO. CSAC • EXCESS INSURANCE AUTHORITY EXCESS LIABILITY ADDITIONAL INSURED It is agreed that the ~~Persons Insured~~ provision is amended to include the person or organization named below, but only with respect to Liability arising out of operations performed for such Insured by or on behalf of the Named insured for such Person or Organization so designated. Additional Insured: As Respects: It is further agreed that nothing herein shat) act to increase the Autharity~s Limit of Liability. This endorsement is part of the Memorandum. of Coverage and takes effect an the effective date of the Memorandum of Coverage unless another effective date is shown below. All ether terms and conditions remain unchanged. Effective Date Certificate No. issued to COUNTY 01= Authorized Representative MARSH 8c MtLENNAN, INCDRPORATED X16 ENDORSEMENT N0. CSAC • EXCESS INSURANCE AUTHORITY It is further agreed that nothing herein shall act to increase the Authority's Limit of Liability. . This endorsement .is part o! the Memorandum of Goverage and takes effect on the effective date o! the Memorandum of Coverage unless another effective date is shown txEow. Afl other terms and Conditions remain unchanged. Effective Gate Certificate No. Issued to COUNTY OF Authorized Representative MARSH b McLEHNAN, INCORPORAI`ED X1,7 U[~IVERSAl. ENDORSEMENT NO. ~_3 CSAC - i:XCESS INSURANCE AUTFiORiTY EXCES5 LIA8ILI'I'Y HOSPITAL EXCLUSION It is agreed that the following exclusion is added: ISIS MEMORANDUM DOES NOT APPLY: ... (T) To any liability arising out of or in connection with the operation of any hospital. In consideration of the above, it is further agreed that Exclusion (F) does not apply to hospitals. 1i is further agreed that nothing herein shat! act to increase the Authority~s Limit of Liability. This endorsement is part of the Memorandum of Coverage and takes effect en ihr effective date of the Memorandum of Coverage unless another effective date is shown below. All other terms and conditions remain unchanged. Effective mate 7 / i / $ 6 Cenif~cata No, Issued to ALL COUNTIES Authorized Representative MAl35H ~ MtLENNAN. INC4RP0 O B-1$ UNDERWRITING AND CLAIMS ADMINISTRATION STANDARDS AND LIABILITY CLAIMS QUALITY CONTROL GUIDELINES The Underwriting and Claims Administration Standards and Liability Claims Quality Control Guidelines of the Provider in effect as of the date of execution of this Agreement are incorporated by reference herein. EXHTBIT C FORM OF REQUISITTON SEATTLE-FIRST NATIONAL BANK 1001 FOURTH AVENUE - 9TH FLOOR SEATTLE, WASHINGTON 98154 RE: Disbursement from the Claims Payment Fund pursuant to Section 3.02 of the Trust Agreement, dated as of June 1,.1987 (the "Agreement"), by and among SEATTLE-FIRST NATTONAL BANK, as Trustee (the "Trustee"), CSAC EKCESS INSURANCE AUTHORITY (the "Provider"} and the COUNTTES OF ALPINE, AMADOR, BUTTE, CALAVERAS, COLUSA, DEL NORTE, FRESNO, GLENN,- HUMBOLDT; IMPERIAL, TNYO, KINGS, LAKE, LASSEN, MADERA, MARIPOSA, MENDOCINO, MERGED, MODOC, MONO, NEVADA, PLACER, PLUMAS, SAN LUIS OBISPO, SANTA BARBARA, SANTA CRUZ, SHASTA, SIERRA, SISKIYOU, SOLANO, SONOMA, STANISLAUS, BUTTER, TEHAMA, TRINITY, TUOLUMNE AND YUBA, (each, a "Providee"} REQUISITION N0. You are hereby instructed to pay to the undersigned Provider, or to at $ as a Settlement (Risk Premium Adjustment Refunds from the Claims Payment Fund as provided in Section 3.4 of the Liability Risk Coverage Agreement dated as of June 1, 19$7, among the Providees and the Provider (the "Coverage Agreement"}. This amount has been incurred within the scope of Coverage as defined in the Coverage Agreement, has been settled or finally adjudicated in accordance with the terms of the Coverage Agreement and the Memorandum of Coverage appended thereto [is due as a Risk Premium Adjustment Refund calculated in accordance with the terms of the Coverage Agreement], and has not been the basis of any previous disbursements. Attached hereto is a certified copy of the [settlement/judgment] and itemized list of costs and expenses in connection with the Settlement. [Delete the foregoing sentence in case of Risk Premium Adjustment Refund.] [In the case of withdrawal or expulsion, the following form shall be used: You are hereby instructed to pay to the undersigned Provider the Allocable Share of as Providee, as determined in accordance with C-1 Section 5.2 of the Coverage Agreement for safekeeping in a segregated account by the Provider on behalf of the Providee, until the earliest practicable date when it can be returned to the Providee, all as described in such Agreement.] -Very truly yours, By . Provider Representative RECEIPT ACKNOWLEDGED: as Trustee C-2 EXHIBTT D ALLOCABLE PROPORTION FOR EACH PROVIDEE COUNTY OF ALPINE COUNTY OF AMADOR COUNTY OF BUTTE COUNTY OF CALAVERAS COUNTY OF COLUSA COUNTY OF DEL NORTE COUNTY OF FRESNO COUNTY OF GLENN COUNTY OF HUMBOLDT COUNTY OF IMPERIAL COUNTY OF TNYO COUNTY OF KLNGS COUNTY OF LAKE COUNTY OF LASSEN COUNTY OF MADERA COUNTY OF MARIPOSA COUNTY OF MENDOCINO COUNTY OF MERGED COUNTY OF MODOC COUNTY OF MONO COUNTY OF NEVADA COUNTY OF PLACER COUNTY OF PLUMAS COUNTY OF SAN LUTS~OBISPO COUNTY OF SANTA BARBARA COUNTY OF SANTA CRUZ COUNTY OF SHASTA COUNTY OF SIERRA COUNTY OF SISKIYOU COUNTY OF SOLANO COUNTY OF SONOMA COUNTY OF STANTSLAUS COUNTY OF BUTTER COUNTY OF TEHAMA COUNTY OF TRINITY COUNTY OF TUOLUMNE COUNTY OF YUBA 0 D-1 EXHIBIT E PROVTDEES MAKING A CASH DEPOSIT INTO THE CLAIMS PAYMENT FUND E-1 EXHIBIT F INITIAL PARTICIPATION PREMIUM COUNTY coUNTY COUNTY COUNTY COUNTY COUNTY COUNTY coUNTY COUNTY COUNTY COUNTY COUNTY COUNTY COUNTY COUNTY COUNTY COUNTY COUNTY COUNTY COUNTY COUNTY COUNTY COUNTY COUNTY COUNTY COUNTY coUNTY COUNTY COUNTY COUNTY couNTY COUNTY COUNTY COUNTY COUNTY COUNTY COUNTY OF OF OF OF OF OF OF OF OF OF OF OF OF OF OF OF OF OF OF OF OF OF OF OF OF OF OF OF of OF of OF OF OF OF OF OF ALPINE AMADOR BUTTE CALAVERAS COLUSA DEL NORTE FRESNO GLENN HUMBOLDT IMPERIAL INYO KINGS LAKE LASSEN MADERA MARIPOSA MENDOCINO MERGED MODOC MONO NEVADA PLACER PLUMAS SAN LUIS OBISPO SANTA BARBARA SANTA CRUZ SHASTA SIERRA SISKTYOU soLANo soNOMA STANISLAUS BUTTER TEHAMA TRINITY TUOLUMNE YUBA F-1 EXHTBTT G NOTICE ADDRESSES T f to the Provider: CSAC Excess Insurance Authority 9310 Tech Genter Drive, Suite 290 Sacramento, California 95825 Attenti crn : Tf to the Providees: County of Alpine County of Amador County of Butte County of Calaveras County of Colusa County of Del Norte County of Eresna County of Glenn G-1 County of Humboldt County of Imperial County of inyo County of Kings County of Lake County of Lassen County of Madera County o£ Mariposa County o£ Mendocino County of Merced G-2 County o£ Modoc County o£ Mono. County of Nevada County of Placer County of P].umas County of San Luis Obispo County of Santa Barbara County of Santa Cxuz '~ County of Shasta. _ County of Sierra G-3 County of Siskiyou County of Solano County of Sonoma County of Stanislaus County of Sutter County of Tehama County of Trinity County o£ Tuolumne County of Yuba G-~ SCHEDULE A METHODOLOGY FOR CALCULATING TOTAL RISK PREMIUM AND FORMULA FOR CALCULATING RISK PREMIUM PROPORTION I. METHODOLOGY FOR CALCULATING TOTAL RISK PREMIUM Ultimate Primary Limits Losses for prior years should be determined using the actual historical experience of the. counties participating in the CSAC-ETA pooled self-insurance program. For example, in the 1986 CSAC-EIA premium study conducted by Coopers & Lybrand dated March, 1986 (the "1986 Study"), analyses were performed with loss and ALAE were limited to $50,000 and $100,000. Other loss limits should be acceptable (e. g. $25,000, $75,000 or $150,000). Ultimate Primary Limits Losses were determined in the 1986 Study by averaging the estimates obtained from an incurred loss development projection and a paid loss development projection. Other acceptable actuarial techniques include: Frequency times Severity projections; and Exposure times Pure Premium projections. Additional tests and procedures may be required if changes in reserve strength and Payout Patterns appear in future evaluations. Trended Ultimate Losses shall be determined by adjusting Ultimate Primary Limits Losses to current levels to reflect Frequency, Severity and exposure inflation trends. All such trend rates should be developed from a large body of insurance data for risks similar to those of the participating counties. The Trended Ultimate Losses should be converted to an expected risk premium rate by relating the losses to a selected exposure base. The 1986 Study used payroll as the exposure base; other acceptable exposure bases would include budget or a composite base made up of several components such as payroll, budget, population, vehicles, police officers, etc. The expected risk Pure Premium rate for losses falling in the pooled layer should be calculated by fitting a theoretical claim size distribution to actual claims data. It would be appropriate to use a body of data significantly larger than that comprised by the participating counties for this calculation. The resulting distribution can be used to project excess losses as a percentage of primary losses. A SA-1 modified, shifted pareto distribution was used in the 1986 Study. Future tests may indicate that alternate distributions produce a better fit of the data. The undiscounted Total Risk Premium will equal the exposure base times the Pure Premium rate. The selected claim size distribution, the claim count distribution and the expected claim count are used to estimate the probability that the actual losses will exceed a specified level. Several levels of confidence are evaluated and the minimum aggregate risk premium is set at the expected level of ultimate losses or at such other level which the actuary states is the minimum acceptable level given the current status of the program. The present value of the Total Risk Premium is calculated using an expected Payout Pattern and an assumed interest rate. An interest rate of 8°/, was used in the 1986 Study. Other actuarial methods may be used to supplement the methods set forth herein. ' Defined Terms: ALAE - (Allocated Loss Adjustment Expense} - means-the allocated legal costs and expenses per claim. Frequency means the number of claims divided by the exposure base. ISO means Insurance Services Office, a national ratemaking and advisory organization. Payout Pattern means the expected rate~at which ultimate losses are to be paid out. Pure Premium means the average loss per unit of exposure. Severity means the average claim size. SIR means self-insured retention; in the Memorandum SIR is referred to as Insured's Retained Limit. Trended Ultimate Losses means projected ultimate losses for the proposed period-of coverage. Ultimate Primary Limits Losses means the ultimate undiscounted cost of liability claims, capped at a specified amount, arising out of occurrences that take place in a specified period of time. SA-2 II. FORMULA.FOR CALCULATING RISK PREMIUM PROPORTTON TSO FORMULA A-iso = Net expenditures for each county for year prior to coverage year. Net expenditures = {total estimated expenditures) - (capital expenditures ~ publ~.c assistance). B-iso = DSO rate determined in accordance with. the following schedule: Count Po ulatiari ISO Rate under 30,000 14.787 10,001-25,000 9.626 25,001-50,000 g,513 _ 50,001-100,000 8.803 100,001--250,000 8.626. over 250,000 6.9008 C-iso = Base premium = (A-iso/1000 for eac h county) X (B-iso for each county}. D-iso =Roads charge = (number of miles of county owned/maintained roads} X $85.30..- E-iso = Base premium including roads = {C- iso + D-iso for. each county). F-isn = Adjustment for 100,000 SIR base -- {E-iso X 40% for. each county).. G-iso -- SIR discount factors for 100,000 - $1 million layer as determined by.independent actuary. The se factors subject to change annually, The 1986-87 factors a re: SIR _ SIR Factor SI'R STR Factor 100,00D 1.000 450,000 .326 150,000 .812 500,000 .282,. 200,000 .681 600,000 - .206 250,000 .581 700,000 .143 300,000 .501 800,000 .08g 350,0.00 - .433 900,000 . .042 400,000 .376 1;000,000 .000' SA-3 H-iso =Premium charge-for each county for SIR to $1 million layer = (F-iso X G-iso) I=iso = SIR discount factors £or $1-5 million layer as determined by independent actuary and subject to annual revision. The 1986-87 factors are: ~' SIR SIR Factor SIR SIR Factor 1,000,000 1.000 3,000,000 .300 ].,500,000 .733 4,000,000 .129 2,000,000 .549 5,000,000 .000 J-iso = Premium charge £or each county for $1-5 million layer =[{E-iso X 10%) + (65% X 10% X E-iso)] X I-iso. K-iso = Premium charge far each county for $5-ZO million layer = [(J-iso / I-iso) X 65%], L-iso = Premium charge for each county for SIR - $10 million _ (H-iso + J-iso + K-iso). ISO ALLOCATION PERCENTAGES M-iso =Percent participation from SiR to $1 million [{H-iso for each county / sum of all H-iso} X 100], Sum of all M-iso = 100%. N-iso = Percent participation $1-5 million = [(J-iso £or each county / sum of all J-iso) X 100]. Sum of all N-iso -- 100°/, . 0-iso = Percent participation-from $5-10 million = [(K-iso for each county / sum of all K-iso} X 100], Sum of all O-iso = 1.00%. P-iso = Percent participation from 5IR to $10 million = [{L-iso for each county / sum of all L-iso) X 100], Sum of all P-iso = 100%. MATRIX FORMULA A-mrx = Total payroll for each county for covered operations (excludes hospital, transit,-and airport) for year prior to coverage year less sheriff department payroll. 5A-4 B-mrx = Sheriff department payroll for each county for year prior to coverage year. C-mrx = Base premium charge for first $100,000 limits for each county = [(2.S% X A-mrx)..+ (3.5% X B-mrx)]. D-mrx = Base premium charge for $100,000 to $1 million layer for each county = (40% X C-mrx) + (30% X [{40% X C-mrx) + C-mrx ]) . E-mrx = Base premium. charge for SIR to $1 million layer for each county = (D-mrx X G-iso}. F-mrx = Base premium charge for $1-5 million layer for each county = j10% X (C-mrx + D-mrx)] + (65% X [10% X {C-mrx + D-mrx}]) G-mrx =Base.prernium charge for $1-5 million layer adjusted far SIR for each county = (F-mrx X I-iso). H-mrx = Basa.premium charge for $5-10 million layer for-each county = 65% X (F-mrx - [10% X (C-mrx + D-mrx)]}. I-mrx = Total base premium from SIR to $10 million for each county = (E--mrx + G-mrx + H-mrx). J-mrx = Ratio of street mileage to population for each county = (number of miles. of county.. owned/maintained roads / county population). ADJUSTMENTS TO BASE PREMIUM K-mrx = Roads surcharge = If J-mrx is greater than or equal to .003, then K-mrx = (10% X I-mrx). Tf J-mrx is less than' .003, then K-mrx 0. L-mrx = Waterfront surcharge = If county has exposure of county owned/maintaine.d,waterfront property {i.e., beaches,. river, lake, etc.), then.L-mrx = {25% X I-mrx}'. Tf county has no waterfront property, then L-mrx ~ 0. M-mrx = Credit for no large cities = if county has no cities over 200,000 in population, then.M-mrx = (15% X T-mrx). If county has one or more cities over 200,000 in population, then M-mrx = 0. N-mrx W Loss-prevention credit = Percent of time a county staff person spends on loss.prevention/safety is determined SA-5 {i.e. full-time loss specialist = 100%}. N-mrx = (percent of time X 10% X I-mrx). O-mrx = Risk management credit = Percent of time a county staff person spends on risk management zs determined (i.e. full-time risk manager = 100%). 0-mrx = (percent of time X 10% X I-mrx). P-mrx = Size credit = Determined by population of each county in accordance with the following schedule. Po~u_lation Size Credit under 10,000 0 10,001-25,000 5% 25,001-50,000 10% 50,001-100,000 15% .loo,ool-2so,ooo 20% over 250,000 25% P-mrx ~ {size credit X I-mrx). -mrx = Total adjustments to base premium = [K-mrx + L-mrx - {M-mrx + N-mrx + O-mrx + P-mrx)]. ADJUSTED PREMIUM CHARGES R-mrx = Premium charges for each county for the SIR to $1 million layer = [E-mrx + {E-mrx / I-mrx X Q-mrx)]. S-mrx = Premium charges far each county for the $1-5 million layer = [G-mrx + {G-mrx / I-mrx X Q-mrx)]. T-mrx = Premium charges for each county for the $5-10 million layer W [H-mrx ~ (H-mrx / I-mrx X Q-mrx)]. U-mrx = Total premium. charges for each county for limits SIR to $10 million = {R-mrx + S-mrx + T-mrx). MATRIX ALLOCATION PERCENTAGES V-mrx = Percent participation from SIR to $7. million = [{R-mrx for each county / sum of all R-mrx) X 1.00]. Sum of ali V-mrx = 100%. W-mrx = Percent participation $1-5 million = [S-mrx for each county / sum of all S-mrx) X 7.00]. Sum of all W-mrx = 100%. SA-5 X-mrx = Percent participation $5-10 million = [T-mrx for each county / sum of all T-mrx) X 100]. .Sum of all X-mrx loo%. Y-mrx = Percent participation SIR to $10 million = [U-mrx for each county / sum of all U-mrx) X 100]. Sum of ail Y-mrx = 100%. ACTUARY'S FORMULA A-act.= Total payroll for each county for covered operations (excludes hospital, transit, and airport) for year prior to coverage year. B-act = Rate per-$100 of payroll for layer $100,000 to $1 million as determined by an independent actuary. C-act = Rate per $100 of payroll for layer $1-5 million as determined by an independent actuary. D-act =Rate per $100 of payroll for layer $5-10 million as determined by an independent actuary.. E-act = Initial premium charge for each county for layer SIR to $1 million = [(A-act / 100) X B-act X G-iso]. F-act = Initial premium charge for each county £or layer $1-5 million = [(A-act / 100) X C-act ?X I-iso]. G-act = Initial premium charge for each county fnr layer $5-10 million: _ [(A-act / 100) X D-act]. ACTUARY'S ALLOCATION PERCENTAGES H-act = Percent participation from SIR to $1 million = [(E-act for each county / sum of all E-act) X 100]. Sum of all H-act = 100%. I-act = Percent participation of $1-5 million - [(F-act for each county / sum of all F-act) X 100]. Sum of all I-act = 100%. J-act = Percent participation $5-10 million = [(G--act for each county / sum of alI G-act} X 100]. Sum of all J-act l00%. SA-7 COMP05ITE PREMIUMS K-act = Composite premium for each [M-iso X (sum of all E-act / 3)] E-act / 3)] + [H-act X (sum of all L-act = Composite premium for each [N-iso X (sum of all F-act / 3)] + F-act / 3}] + [I-act X (sum of all M-act = Composite premium for each [0-iso X (sum of all G-act / 3)]. + G-act / 3)] + jJ-act X (sum of all caunty SIR to $1 million + jV-mrx X (sum of all E-act / 3)]. county $l-5 million = [W-mrx X (sum of all F-act / 3)]. county $5-10 million = [X-mrx X (sum of all G-act / 3)]. X-MOD CALCULATION A-xmd W Total of all total incurred losses between $0 and $50,000 for each county for the most recent S fiscal years ending with the fiscal year 2 years prior to the coverage year. B-xmd W Total of all incurred losses between $50,000 and $1 million for each county £or the most recent 5 fiscal years ending with the fiscal yearn years prior to the coverage year. C-xmd = Total of all total incurred losses between $D and $1 million = (A-xmd + B-xmd). D-xmd ~ Tatal payroll for each county for covered operations for the most recent s fiscal years ending with the fiscal year 2 years prior to the coverage year. E-xmd = Primary rate = [{sum of all A-xmd) / (sum of all D-xmd}] F-xmd = Excess rate = [(sum of all B-xmd) / (sum of all D-xmd)].. G-xmd Overall rate = [{sum of all C-xmd) / (sum of all D-xmd). H-xmd =Expected losses for each county = (D-xmd X G-xmd). I-xmd = Expected primary losses for each county = (D-xmd X E-xmd}. J-xmd = Expected excess losses for each county = (D-xmd X F-xmd}. SA-8 K-xmd = "W" value based upon 10% of expected losses (10% X H-xmd) taken. from the California Experience Rating Plan--1951 using the most recent~~~available ~~ate pages, L-xmd = "B" value based .upon 10% of expected lasses (10% X H-xmd) taken from the California Ex erience Ratin Plan--1951 using the most recent available rate pages. M-xmd = "1-w" value T (1 - K-xmd). N-xmd = Rated excess losses = (K-xmd X B-xmd). O-xmd = Rated expected excess losses = (M-xmd X J-xmd). P-xmd =Ratable losses = (A-xmd + N-xmd + O-xmd + L-xmd). -xmd = Expected losses plus "B" _ (H-xmd + L-xmd). R-xmd = Experience. modification = (P-xmd / Q-xmd)': FINAL PREMIUM CALCULATIONS N-act =..Experience modification fox layers $1-10 million in accordance with the following schedule: R-xmd N-act R-xmd N-act .00-.50 90 :;1:51-1.70 1.03 .51-.60 .92 1.71-1.90 _1.04 .61-.70 .94 1:..9:1-2.10 1.05 .71-.80 .96 X2:11-2.30 - 1.06 .81-.90 .98 2.31-2.50 1.07 .91-1.1.0 1.00 2.51-2.70 1.08 1.11-1.30 1.A1.' 2.,71-2,'90 1.09 1.31-1.50 1.02 2.90 1;10 O-act = Modified premium far each county SIR to $1 millzora limits = (K-act X RMxmd). P-act = Modified premium for each county $1-5 million limits _ (L-act X N-act). 0-.act = Modified premium for each county $5-10 million limits = (M-act X N-act). R-act = Final premium charge for each county SIR to $1 million limits ([(sum of all E-act)'/ (sum of all O-act)] X O-act}. SA-9 S-act =Final premium charge for each county $1-5 million limits = ([(sum of all F-act} / (sum of all P-act)] X P-act}. T-act = Final premium charge for each county $5-10 million limits = ([(sum of all G-act) / (sum of all Q-act)] X Q-act). U-act = Total final annual risk prema.um for each county {R-act + S-act f T-act). FINAL•RISK PREMIUM PROPORTIONS V-act = Final percent participation from SIR to $1 million = [{R-act for each county / sum of all R-act) X 100]. Sum of all V-act = 100%. W-act = Final percent participation from $1 - 5 million = [(S-act far each county / sum of all S--act) X 100]. Sum of all W-act = 100%. X-act = Final percent participation from $S - 1D million = [(T-act for each county / sum of all T-act} X 100]. Sum of all X-act = 100%. Y-act ~ Final percent participation from SIR to $10 million = [{U-act far each count y / sum of all U-act) X 100]. Sum of all Y-act = 3.00%. SA-10 SCHEDULE B FORMULA FOR CALCULATING RISK PREMIUM ADJUSTMENT STEP 1 - DEVELOP DATA INPUTS Axp = Projected ultimate net losses and total paid losses to date (as calculated in Section ~.5 in this agreement) for a given coverage year {x) for a given pool {p). Bxyp = Risk Premium for a given Providee (y) far a given coverage year {x) far a given pool (p). Ixyp = Risk Premium Proportion for a given County (y) for a given coverage year {x) for a given pool (p). Zyp = Risk Premium Adjustments already collected and/or scheduled to be collected in the future for a given .Providee (y}-for a given pool (p). C = Total investment income for all prior coverage years on the Claims Payment Fund not transferred to the Basic. Premium Payment Fund. Cy = C{the sum of By divided by the sum of B) , x = a given coverage year y = a given Providee p = a given risk sharing pool (e.g. SIR to $1,000,000; $1,000,000 to $5,000,000; $5,000,000 to SI0,000,000). STEP 2 Determine Incremental Increase in .Amount of Risk Premium Adjustment Required for a Given Providee {y}. Qsyp = Incremental increase to Risk Premium Adjustment for current coverage year {s) for a given pool {p) for a given Providee {y). Dxyp = Axp {Ixyp) s = current coverage year Eyp = The sum o£ Dyp for all coverage years - (the sum of Byp for all coverage years ~ Zyp + Cy). SB-1 TEST 1 If Eyp is greater than or equal to 0 then Qsyp = Eyp/5 for next five succeeding coverage years. TEST 2 If Eyp is less than or equal to 0, then Qsyp = 0. STEP 3 Calculate Risk Premium Adjustment for Current Coverage Year (s). Rsyp = Risk Premium Adjustment for current coverage year (s) for a given pool (p), for a given County (y). This equals the sum of Qyp for last four coverage years + Qsyp. Rsy - Total Risk Premium Adjustment to be levied and collected for a given County in current coverage year, or Rysp for all pools for a given coverage year for a given County. STEP 4 Calculate Maximum Refund for current Coverage Year Mp = Maximum refund for a given pool If the sum of Eyp for all Counties is greater than or equal to 0, then Mp = 0. If the sum of Eyp for all Counties is less than or equal to 0, then Mp W the sum of Ep. SB~-2 :t ~ } f • ,i ~. DRAFT #31 BROWN & WOOD 1,/25/87 TRUST AGREEMENT Dated as of June 1, 1987 by and among SEATTLE-FIRST NATIONAL BANK, as Trustee and CSAC EXCESS INSURANCE AUTHORITY, as Provider and THE COUNTY OF ALPINE, COUNTY OF AMADOR, COUNTY OF BUTTE, COUNTY OF CALAVERAS, COUNTY OF COLUSA, COUNTY OF DEL NORTE, COUNTY OF FRESNO, COUNTY OF. GLENN, COUNTY OF HUMBOLDT, COUNTY OF IMPERIAL, COUNTY OF INYO, COUNTY OF KINGS, COUNTY OF LAKE, COUNTY OF LASSEN, COUNTY OF MADERA, COUNTY OF MARIPOSA, COUNTY OF MENDOCINO, COUNTY OF MERGED, COUNTY OF MODOC, COUNTY OF MONO, COUNTY OF NEVADA, COUNTY OF PLACER, COUNTY OF PLUMAS, COUNTY OF SAN LUIS OBISPO, COUNTY OF SANTA BARBARA, COUNTY OF SANTA CRUZ, COUNTY OF SHASTA, COUNTY OF SIERRA, COUNTY OF SISKIYOU, COUNTY OF SOLANO, COUNTY OF SONOMA, COUNTY OF STANISLAUS, COUNTY OF BUTTER, COUNTY OF TEHAMA, COUNTY OF TRINITY, COUNTY OF TUOLUMNE AND COUNTY OF YUBA TABLE OF CONTENTS ARTICLE I DEFINITIONS P awe SECTION 1.01 Definitions and Rules of Construction .... 2 SECTION x..02 Authorization ............................ 11 ARTICLE II THE CERTIFICATES OF PARTICIPATION SECTION 2.01 Authorization ............................ 12 SECTION 2.02 Date . .................................... 12 SECTION 2.03 Maturity; Interest Rates; Proportionate Amount of each Provides"s Payments ..... 12 SECTION 2.04 Registration; Interest ................... 14 SECTION 2.05 Farm of Certificate ...................... 15 SECTION 2.06 Execution ................................ 15 SECTION 2.07 Application of Proceeds .................. 15 SECTION 2.OS Transfer and Exchange .................... 16 SECTION 2.09 Certificates Mutilated, Lost, Destroyed or Stolen .............................. 16 SECTION 2.10 Payment .................................. 17 SECTION 2.11 Execution of Documents and Proof of Ownership ......................•....... 1S SECTION 2.12 Certificate Register ..................... 19 ARTICLE III CLAIMS PAYMENT FUND SECTION 3.01 Establishment of the Claims Payment Fund ................................... 19 SECTION 3.02 Deposit of Moneys; Payment of Settlements; Application to Pay Basic Premium or for Prepayment of Certificates or for Risk Premium Adjustments ............... 19 SECTION 3.03 Investment of Moneys ..................... 20 SECTION 3.D4 Transfers of Unexpended Funds ............ 21 SECTION 3.05 Lass Reserves ............................ 21 i 1 r '' ~ ARTICLE IV DELIVERY COSTS FUND SECTION 4.01 Establishment of Delivery Costs Fund ..... 21 SECTION 4.02 Deposit of Moneys; Payment of Delivery Costs ........... .............. 22 SECTION 4.03 Transfer of Surplus ...................... 22 ARTICLE V PREPAYMENT OF GERTTFTCATES SECTION 5.01 Establishment of Prepayment Fund .....,... 22 SEGTION 5.02 Optional Prepayment ...................... 23 SEGTION 5.03 Notice of Prepayment ..................... 24 SECTION 5.04 Partial Prepayment of Certificates ,...... 24 SECTION 5.05 Effect of Notice of Prepayment .........,, 25 SECTION 5.06 Surplus .................................. 25 ARTICLE VI DEBT SERVICE RESERVE FUND SECTION 6.01 Establishment of Debt Service Reserve Fund ................................... 26 SECTION 6.02 Deposits ................ ................. 26 SECTION 6.D3 Transfers of Excess ..... ................. 25 SECTION 6.04 Application of Debt Servi ce Reserve Fund in Event of Deficiency in Basic Premium Payment Eund ............ 26 SECTION 6.OS Transfer to Pay All Basic Premium ........ 27 SECTION 6.06 Transfer to Prepay Basic Premium ......... 27 ARTICLE VIZ SECURITY PROVISIONS; BASIC PREMIUM; BASIC PREMIUM PAYMENT FUND SECTION 7.01 Security Provisions ...................... 28 SECTION 7.02 Establishment of Basic Premium Payment Fund ................................... 3D SECTION 7.03 Deposits ................................. 30 SECTION 7.04 Application of Moneys .................... 30 SECTION 7.05 Transfers of Investment Earnings ......... 31 SECTION 7.D6 Surplus .................................. 31 ii 7 ARTICLE VIII MONEYS IN FUNDS; INVESTMENT; REBATE FUND SECTION 8.01 Held in Trust ............................ 31 SECTION 8.02 Investments Authorized .......,........... 32 SECTION 8.03 Disposition of Investments ............... 32 SECTION 8.04 Accounting ............................... 33 SECTION 8.05 Valuation and Disposition of Investments ............................ 33 SECTION 8.06 Deposit and Investment of Moneys in Funds .................................. 33 SECTION 8.07 Rebate Fund .............................. 33 SECTION 8.08 Arbitrage Covenants ...................... 35 ARTICLE IX THE TRUSTEE SECTION 9.01 Appointment of Trustee ................... 36 SECTION 9.02 Liability of Trustee ..................... 37 SECTION 9,03 Merger or Consolidation .................. 37 SECTION 9.04 Protection and Rights of the Trustee ..... 37 SECTION 9.05 Compensation of the Trustee .............. 39 SECTION 9.05 Indemnification of Trustee ............... 40 ARTICLE X MODIFICATION OR AMENDMENT OF AGREEMENTS SECTION 10.0]. Amendments Permitted ..................... 43. SECTION 10.02 Procedure far Amendment with Written Consent of Certificate Owners .......... 41 SECTION 3.0.03_ Disqualified Certificates ................ 42 SECTION 3.0.04 Effect of Supplemental Agreement ......,.. 43 SECTION 10.05 Endorsement or Replacement of Certificates Delivered After Amendments .............................. 43 SECTION 10.06 Amendatory Endorsement of Certificates ........................... 44 iii '~~ ARTICLE XI COVENANTS; NOTICES SECTION 11.01 Compliance With and Enforcement of this Trust Agreement ................... 44 SECTION 11.02 Observance of Laws and Regulations ,.,.... 44 SECTION 11.03 Defense of Suits ......................... 44 SECTION 11.04 Providees' Budgets ... .................... 45 SECTION 11.05 Further Assurances ....................... 45 SECTION 21.06 General Tax Covenants .................... 45 SECTION 11.07 Reports Available to Owners .............. 46 ARTICLE XII LIMITATION OF LIABILITY SECTION 12.01 Limited Liability of each Providee ....... 46 SECTION 3.2.02 No Liability of any Providee or Provider for Trustee Performance ................ 46 SECTION 12.03 Limited Liability of Trustee ............. 46 SECTION 12.04 Limited Liability of Provider ............ 47 SECTION 12.05 Opinion o£ Counsel ....................... 47 SECTION 12.06 Limitation of Rights to Parties and Owners ................................. 47 ARTICLE XIII EVENTS OF DEFAULT AND REMEDIES OF CERTIFICATE OWNERS SECTION 13.01 Assignment of Rights ..................... 47 SECTION 13.02 Remedies ................................. 48 SECTION 13.03 Application of Funds ..................... 48 SECTION 13.x4 Institution of Legal Proceedings ......... 49 SECTION 13.05 Nan-waiver ............................... 50 SECTION 13.06 Remedies Not Exclusive ................... SO SECTION 13.07 Power of Trustee to Control Proceedings .................. ......... 50 SECTION 13.08 Limitation on Certificate Owners' Right to Sue ........................... 50 SECTION 13.03 Agreement to Pay Attorneys' Fees and Expenses ............................... 51 iv ARTICLE XIV MISCELLANEOUS SECTION 14.01 SECTION 14.02 SECTION 14.03 SECTION 14.04 SECTION 14.05 SECTION 14.06 SECTION 14.07 SECTION 14.08 SECTION 14.09 SECTION 14.10 SECTION 14.11 SECTION 14.12 Defeasance ............................... 52 Non-Presentment of Certificates .......... 53 Records .................................. 54 Notices .................................. 54 Governing Law ............................ 54 Binding Effect.; Successors ............... 54 Execution in Counterparts ................ S4 Destruction of Cancelled Certificates .... S4 Actions Required on Non-Business Days .... 55 Headings ................................ 55 Waiver of.Notice ......................... 55 Separability of Invalid Provisions ....... 55 Exhibit A - Form of Certificate of Participation ........ A-1 Exhibit B - Form of Written Requisition ................. B-1 Exhibit C - Form of Letter of Instructions to the Trustee ................................... C-1 Exhibit D - Notice Addresses ............................ D-1 Exhibit E - Schedule of Trustee Fees .................... E-1 v TRUST AGREEMENT THIS TRUST AGREEMENT, made and entered into as of this first day of June, 1987, by and among SEATTLE-FIRST NATIONAL BANK, a national banking association duly organized under the laws of the United States, as trustee (the "Trustee'), the CSAC EXCESS INSURANCE AUTHORTTY, a joint exercise of powers authority duly organized and existing under the laws of the State of California, as Provider under the Liability Risk Coverage Agreement hereinafter referred to (the "Provider"}, and the COUNTY OF ALPINE, COUNTY OF AMADOR, COUNTY OF BUTTE, COUNTY OF CALAVERAS, COUNTY OF COLUSA, COUNTY OF DEL NORTE, COUNTY OE FRESNO, COUNTY OF GLENN, COUNTY OF HUMBOLDT, COUNTY OF IMPERIAL, COUNTY OF INYO, COUNTY OF KINGS, COUNTY OF LAKE, COUNTY OF LASSEN, COUNTY OF MADERA, COUNTY OF MARIPOSA, COUNTY OF MENDOCINO, COUNTY OF MERGED, COUNTY OF MODOC, COUNTY OF MONO, COUNTY OF NEVADA, COUNTY OF PLACER, COUNTY OF PLUMAS, COUNTY OF SAN LUIS OBISPO, COUNTY OF SANTA BARBARA, COUNTY OF SANTA CRUZ, COUNTY OF SHASTA, COUNTY OF SIERRA, COUNTY OF SISKIYOU, COUNTY OF SOLANO, COUNTY OF SONOMA, COUNTY OE STANISLAUS, COUNTY OF SUTTER, COUNTY OF TEHAMA, COUNTY OF TRINITY, COUNTY OF TUOLUMNE and COUNTY OF YUBA, each of which is a political subdivision duly organized and existing under the Constitution and laws of said State of California, as Providees under said Liability Risk Coverage Agreement {collectively, the "Providees"); W I T N E S S E T H WHEREAS, the Providees and the Provider have entered into a Liability Risk Coverage Agreement, dated as of the date hereof (the "Agreement"), whereby the Provider has agreed to provide certain levels of liability insurance coverage (the "Coverage"), to each Providee and each Providee has agreed to pay a Participation Premium (including Basic Premium) for the Coverage to the Provider; and WHEREAS, the Providees and the Provider wish to authorize the sale of Certificates hereunder in order to finance the establishment of funds to defend against and/or pay insured-against claims awarded against or settled by the Providees; and WHEREAS, the proceeds of the sale of the Certificates will be deposited with the Trustee under this Trust Agreement and used by the Providees to pay such claims; and WHEREAS, each Providee will pay Basic Premium under the Agreement for the Coverage, and Certificates as described herein will be sold representing proportional ownership interests in such Basic Premium; and WHEREAS, the Provider will assign the rights to receive such Basic Premium to the Trustee, and the Provider and Providees will grant a security interest in alt moneys held by the Trustee hereunder to the Trustee far the benefit of the Owners as security therefor; WHEREAS, the Trustee has agreed at the direction of the Providees to execute and deliver Certificates, each evidencing the proportionate interests in the Basic Premium payments and prepayments to be made by the Providees under the Agreement, to provide the moneys required to be deposited herein; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereto hereby agree as•follows: ARTICLE I DEFINITIONS SECTION 1.01 Definitions and Rules of Construction. Unless the context otherwise requires, the terms defined in this Section shat]., for all purposes of this Trust Agreement, have the meanings herein specified. Unless the context otherwise indicates, words importing the singular number shall include the pturat number and vice versa. The terms "hereby", "hereof", "hereto", "herein", "hereunder" and any similar terms, as used in this Trust.-Agreement, refer to this Trust Agreement as a whole. "Administrative Premium" means, with respect to each Providee, such Providee's Allocable Proportion a£ att administrative costs of the Provider relating to the Coverage or the Certificates, as Further set forth in Section 4.4(d) of the Agreement. "Allocable Pro onion" means the percentages set forth in Exhibit D of the Agreement.. "Agreeme_nt" means the Liability Risk Coverage Agreement, dated the date hereof, by and among the Providees and the Provider, and any duty authorized and executed amendments thereto.. 2 "Basic Premium" means, with respect to each Providee, the payments set forth in Exhibit A to the Agreement representing principal and interest to be paid with respect to such Providee's portion of the Certificates, as set forth in Section 4.4{b) of the Agreement. "Basic Premium Payment Date" means August 1 of each year during the period in which Certificates are Outstanding, provided, however, that with respect to the first Coverage Period, the Basic Premium Payment Date shall be the Closing Date. °Basic Premium Payment Fund" means the fund by that name established and held by the Trustee pursuant to Article VII hereof and which contains an Account for each of the Providees to be designated by the respective names of each such County. "Bond Counsel" means an attorney or firm of attorneys of nationally recognized standing in matters pertaining to the tax-exempt status of interest on obligations issued by states and their political subdivisions and acceptable to the Provider and the Trustee. "Business Day" means any day of the year on which banks in New York,~~~New York or in California or in Washington are not authorized or obligated by law to remain closed and on which the New York Stock Exchange is not closed. "Case Reserves" means amounts in the Claims Payment Eund required to be designated as reserves for payment of Settlements pursuant to Section 3.6 of the Agreement, in accordance with prudent insurance practice and in accordance with the recommendations of the Claims Review Committee of the Provider and the annual report of the Qualified Claims Auditor. Case Reserves will be determined by the Qualified Claims Auditor annually, on or prior to January 1 of each year, and by the Claims Review Committee of the Provider quarterly. Case Reserves will be adjusted to reflect changed circumstances subsequent to the year any Claim is filed and to reflect the amount by which a Settlement exceeds reserves established for any Claim; provided, however, that there shah, be no Case Reserves established for a Claim or any portion thereof within.a Providee's Retained Limit, as described in Exhibit B to the Agreement,. or pursuant to Section 3.5 of the Agreement. "Certificates" means the aggregate principal amount of Certificates of Participation (CSAC-EIA) to be executed and delivered pursuant hereto. 3 "Claim" means a demand against a Providee to recover for losses or damages within or alleged to be within the scope of the Memorandum. "Claims Payment Eund" means the fund by that name established and held by the Trustee pursuant to Section 3.01 of this Trust Agreement. "Closing Date" means the day on which the Certificates, duly executed. by the Trustee, are delivered to the Original Purchaser thereof. "Code" means the Internal Revenue Code of 1986. "Coverage" means the insurance provided pursuant to and in accordance with and an the terms set forth in the Agreement and in the Memorandum attached in Exhibit B thereto, including, but not limzted to, rights to payment of Settlements from funds on deposit in the Claims Payment Fund under the terms of the Agreement. "Coverage Period" means each Fiscal Year £or which a Providee pays Participation Premium; provided, however, that the first Coverage Period shall be the period of 12:01 a.m. on the day next succeeding the Closing Date through July 1, 1987 at 12:01 a.m. California time. "Debt Service Reserve Fund" means the fund by that name established and held by the Trustee pursuant to Section 6.01 hereof. "Deliver Costs" means all items of expense directly or indirectly payable by or reimbursable to the Providees or the Provider relating to the funding of the Coverage from the-proceeds of the Certificates, including but not limited to printing costs, reproduction and binding costs, initial fees and charges of the Trustee, Certificate insurance premiums, legal fees and charges, financing and other professional consultant fees, costs of rating agencies or credit ratings, fees for execution, transportation and safekeeping of the Certificates and charges and fees in connection with the foregoing. "Event of Default" means an (i) event of default under the Agreement, as defined in Section 10.1 thereof ar (ii) failure by the Provider to observe and perform any covenant, condition or agreement on its part to be observed or performed in the Agreement or herein or otherwise with respect hereto, for a period of thirty (30) days after written notice specifying such failure and requesting that 4 it be remedied has been given to the Provider by the Trustee or the Owners of not less than twenty-five percent (25%} in aggregate principal amount of Certificates Outstanding; provided, however, if the failure stated in the notice cannot be corrected within the applicable period, the Trustee or such owners, as the case may be, shall not unreasonably withhold their consent to an extension of such time i£ corrective action is instituted by the Provider within the applicable period and diligently pursued until. the default xs corrected. "Federal Securities" means any of the following which are noncallable {solely for purpose of Section 14.01 hereof) and which at the time of investment are legal investments under the laws of the State for the moneys proposed to be invested therein: {a} direct obligations of the United States of America (including obligations issued or held in }cook-entry form on the books of the Department of the Treasury of the United States of America), or obligations the principal of and interest on which are guaranteed by the United States of America; (b} bonds or notes interest on which is exempt from federal income taxes and for the payment of which cash ar obligations described .in clause (a) of this definition in an amount sufficient to pay the principal of, premium, if any, and interest on such bonds or notes when due have been irrevocably deposited with a trustee or other fiscal depositary; and (c) bands, debentures or notes issued by any o£ the following: Banks for Cooperatives, Federal Intermediate Credit Banks, Federal Home Loan Bank System or Federal Land Banks. "Fiscal Year" means the fiscal year of each Providee commencing July 1 and ending June 30 of each year. "Governing Board" means the members of the Board of Directors of the Provider; provided that only members representing Frovidees shall be entitled to vote on any action with respect to the pooled self-insurance program. "Inde endent Counsel" means an attorney duly admitted to the practice of law before the highest court of the state in which such attorney maintains an office and who is not an employee of the Provider, the Trustee or any of the Providees. 5 "Loss Reserves" means amounts in the Claims Payment Fund required to be designated as reserves for payment of Settlements pursuant to Section 3.6 of the Agreement in accordance with the annual report of the Actuary. Loss Reserves shall include Case Reserves and amounts designated by the Actuary as required to be reserved for incurred but not reported Claims and projected loss development. "Memorandum" means the Memorandum of Liability Coverage set forth in Exhibit B to the Agreement. "Opinion" means a written opinion of counsel (who may be counsel for the Provider) selected by the Provider and acceptable to the Trustee. "Original Purchaser" means , as original purchaser of the Certificates. "Outstandin ", when used as of any particular time with respect to Certificates, means {subject to the provisions of Section 10.08 hereof) all Certificates theretofore executed and delivered by the Trustee under this Trust Agreement except - (1) Certificates theretofore cancelled by the Trustee or surrendered to the Trustee for cancellation; (2) Certificates for the payment or prepayment of which funds or Federal Securities in the necessary amount shall have theretofore been deposited with the Trustee (whether upon or prior to the maturity or prepayment date of such Certificates), provided that, if such Certificates are to be prepaid prior to maturity, notice of such prepayment shall. have been given as provided in Section 5.04 hereof or provision satisfactory to the Trustee shall have-been made for the giving of such notice; and {3) Certificates in lieu of or in exchange for which other Certificates shall have been executed and delivered by the Trustee pursuant to Section 2.08 hereof and 2.09 hereof. "Owner" or "Certificate Owner" or Certificate", or any similar term, a Certificate means the person in Certificate is registered. when whose "Owner of a used with respect to name such "Participation Premium" means with respect to each Providee, Administrative Premium, Basic Premium, 6 t } Supplemental Basic Premium and Risk Premium payable by such Providee on each Basic Premium Payment Date. "Payment Date" means 1 and 1 of each year commencing 1, 1987 with respect to the interest payments represented by the Certificates and 1 of each year commencing in with respect to principal payments represented by the Certificates. "Permitted Tnvestments" means any investments which at the time of investment are legal investments under the laws of the State for the moneys proposed to be invested therein, including but not limited to the following: (a) Federal Securities; {b} bonds, issued by any Providee including bonds payable solely out of the revenues from a revenue- producing property owned, controlled, or operated by it or by a department, board, agency, or authority thereof; (c} registered State warrants or treasury notes or bonds of the State, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the State or by a department, board, agency or authority thereof; {d) bands, notes, warrants, or other evidences of indebtedness of any local agency within the State, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the local agency, or by a department, board, agency, or authority thereof; (e) bills of exchange or time drafts drawn on and accepted by a commercial bank rated "A" or better by Standard and Poor's Corporation, otherwise known as bankers acceptances, which are eligible for purchase by the Federal Reserve System; provided that purchases of bankers acceptances may not exceed maturity of 270 days; {f) commercial paper of "prime" quality of the• highest ranking or of the highest letter and numerical rating as provided for by Moody's Tnvestors Service or Standard and Foor's Corporation; provided that such --- paper is further limited to issuing corporations that are organized and operating within the United States and having total assets in excess of five hundred 7 million dollars {$500,D00,000} and having an "A" or higher rating for the issuer's debt, other than commercial paper, if any, as provided for by Moody's Investors Service or Standard and Poor's Corporation; and provided, further, that purchases of such commercial paper may nest exceed 180 days' maturity nor represent more than 10% of the outstanding paper of an issuing corporation; (g} negotiable certificates o£ deposit or the following investments fully insured by the Federal Deposit Insurance Corporation, or the Federal Savings and Loan Tnsurance Corporation: (i) savings accounts, {ii) certificates of deposit or (~.ii) deposit accounts of banks {including, without limitation, the Trustee) rated "A" or better by Standard & Poor's Corporation and Moody's Investors Services, savings and Loan associations, and mutual savings banks; (h) investments in repurchase agreements or reverse repurchase agreements of any securities authorized above, where "repurchase agreement" means a purchase of securities by the Trustee on behalf of the Providees pursuant to an agreement by which the seller will repurchase such securities on or before a specified date, or on demand of either party, and for a specified amount, and where such securities, for purpose of repurchase under this subdivision, shall mean securities of the same issuer, description, issue, date, and maturity; and where the term "reverse repurchase agreement" means a sale of securities by the Trustee on behalf of the Providees pursuant to an agreement by which the Trustee on behalf of the Providees will repurchase such securities on or before a specified date and for a specified amount; provided, however, that the obligations described in paragraphs {b), {c} and (d) must be rated "A" or better by Standard and Poor's Corporation and Maody's Investors Service; and provided that the commercial bank certificates of deposit described in paragraph {g} must be issued by commercial banks rated "A" or better by Standard & Poor's Corporation and Moody's Investors Service; and provided that the repurchase agreements and reverse repurchase agreements described in paragraph {h) must be with commercial banks or dealers qualified by the National Association of Securities Dealers of Federal Securities, or of any securities authorized hereunder with financial. institutions insured by the Federal Deposit Insurance Corporation; and provided (i) such repurchase agreements are collateralized with securities having a market value at least equal. to the principal amount of the repurchase agreement plus accrued interest, (ii) such repurchase agreements are for a term of one year or less, (iii) the Trustee ar a third party acting solely as agent for the Trustee has possession of the underlying securities, {iv) the collateral is free and clear of third party liens; and {v} reverse repurchase agreements proceeds may be invested solely to supplement the income normally received from these securities. "Pre a ent" means any payment made by a Providee pursuant to Article XI of the Agreement as a prepayment of the Basic Premium. "Prepayment Fund" means the fund by that name established and held by the Trustee pursuant to Article V hereof, and which contains an Account for each of the Providees to be designated by the respective names of each Providee. "Providee" means each County which is a party to the Agreement, as such Agreement may be amended from time to time. "Providee Representative" means, with respect to each Providee, the person authorized by the Providee's governing board to act on behalf of the Providee or with respect to this Trust Agreement. "Provider" means the CSAC Excess Insurance Authority, a joint exercise of powers authority duly organized and existing under the Constitution and laws of the State. "Provider Representative" means the General Manager of the Provider, or~ariy person authorized to act on behalf of 9 r r .: the Provider as evidenced by a written order of the General Manager. "Rebate Fund" means the fund by that name established and held by the Trustee pursuant to Section 8.07 hereof. "Record Date" means the close of business on the fifteenth day of the-month preceding each Payment Date, whether or not such fifteenth day is a Business Day. "Requisition" means the form of written requisition substantially in the form attached as Exhibit C to the Agreement used by the Provider to withdraw moneys from the Claims Payment Fund. °Reserve Requirement" means the least of (i) 3.25% of average annual principal and interest payable with respect to the Certificates, tii) 10% of the amount of the proceeds of the Certificates originally received by the Provider and (iii) maximum principal and interest to be paid with respect to the Certificates in any future year. "Risk Premium" means, with respect to each Providee, an amount equal to such Providee's Risk Premium Proportion of the total amount necessary to fund estimated Loss Reserves to be established to pay Settlements of all Providees for a Coverage Period as determined according to the methodology set forth in Section 4.4(e) of the Agreement. "Risk Premium Adjustment" means, with respect to each Providee, an amount payable by such Providee or refundable to such Providee, based on the Projected Ultimate Net Losses set forth in the annual report of the Actuary described in Section 3.5 of the Agreement reflecting events in the Coverage Period preceding such report relating to Claims with respect to all preceedinq Coverage Periods, as set forth in Section 4.5 of the Agreement and as determined according to-the formula set forth in Schedule B to the Agreement. "Settlement'.' means the settlement by the Provider or Providee, zn accordance with the Memorandum, of a Claim against such Providee, or the adjudication of such Claim without further right of appeal. The amount of any settlement may include any costs or expenses deemed appropriate by the Provzder in connection therewith, including Defense Costs as described in the. Memorandum. "State" means the. State of California. ZO "Supplemental Basic Premium" means with respect to each Providee, i0% of the scheduled amount of Basic Premium set forth in Exhibit A to the Agreement payable by such Providee on any Basic Premium Payment Date (before any credit to Basic Premium has been made pursuant to Section 4.4(b){2) of the Agreement}. "Termination Premium" means the amount required to be paid by a Providee to voluntarily terminate Coverage for a Coverage Period and all future Coverage Periods, as set forth in Sections 6.2 and 11.4 0£ the Agreement, or the amount required to be paid to expel a Providee, as set forth in Sections 6.3 and 11.4 thereof. "Terrr~_of the _Agreements` means the time during which the Agreement is in effect, as provided in Section 4.1 of the Agreement. "Total Premium" or "Premiums' means, with respect to each Providee, the sum of the Participation Premium and the Risk Premium Adjustment payable by such Providee in any Coverage Period. 'TTotal Risk Premium" means the total amount o£ Risk Premium payable by all Provzdees in any Coverage Period determined as provided in Section 4.4{e) of the Agreement. "Trustee" means Seattle-First National Bank, a national banking association, at its principal corporate trust office in Seattle, Washington, or any bank or trust company which may be substituted in its place as provided in Section 9.01 hereof. "Trust Agreement" means this Trust Agreement, together with any amendments hereof or supplements hereto permitted to be made hereunder. "Undesignated Reserves" means the amount in the Claims Payment Fund in excess of the total amount that has been designated by the Provider as Loss Reserves pursuant to Section 3.6 of the Agreement. SECTION 7..02 Authorization. Each of the parties hereby represents and warrants that it has full legal authority and is duly empowered to enter into this Trust Agreement, and has taken all actions necessary to authorize the execution o£ this Trust Agreement by the officers and persons signing it. 11 - - ARTICLE II THE CERTIFICATES OF PARTICIPATION SECTION 2.01 Authorization. The Trustee is hereby authorized and directed by the Providees to prepare, execute and deliver, to the Original Purchaser, all in accordance with the terms and conditions set forth herein, Certificates in an aggregate principal amount of $ evidencing proportionate ownership interests in the Basic Premium payments and prepayments to be made by the Providees. The. total principal and interest due with respect to all Certificates shall equal the total Basic Premium due under the Agreement. SECTION 2.02 Date. Each Certificate shall be dated as of 1, 1987 and interest with respect thereto shall be payable from the Payment Date next preceding the date of execution thereof, unless {i) it is executed as of a Payment Date, in which event interest. with respect thereto shall be payable from the date thereof; or {ii) it is executed after a Record Date and before the following Payment Date, in which event interest with respect thereto shall be payable from such following Payment Date, or {iii} it is executed prior, to , 1987, in which event interest with respect thereto shall be payable from- 1, 1987; provided, however, that if, as of the date of any Certificate, interest is in default with respect to any Outstanding Certificates, interest with respect to such Certificate shall be payable from the Payment Date to which interest has previously been paid ar made available for payment with respect to the Outstanding Certificates. SECTION 2.03 Maturity,; ,Interest Rates; Proportionate Amount of each Proydee's Payments. The Certificates shall. mature on 1 of the following years and shall - evidence interest at the following rates: 12 Maturity Principal Interest f 1) Amount Rate The total amount of each payment o£ made to the Owners is comprised of Premium from each of the Providees, forth below: principal or interest interests in Basic in percentages as set 13 Providee County County County County County County County County County County County County County County County County County County County County County County County County County County County County County County County County County County County County Gounty Alpine Amador Butte Calaveras Colusa Del Norte Fresno Glenn Humboldt Imperial Ingo Kings Lake Lassen Madera Mariposa Mendocino Merced Modoc. Mono Nevada Placer Plumas San Luis Obispo Santa Barbara Santa Cruz Shasta Sierra Siskiyou Solano Sonoma Stanislaus Sutter Tehama Trinity Tuolumne Yuba of of of of of of of of of of of of of of of of of of of of of of of of of of of of of of of of of of of of of Percentage SECTION 2.04 Registration; Interest. The Certificates shall be delivered in the form of fully registered Certificates without coupons in the denomination of $S,ooo or any integral multiple thereof. The Certificates shall be numbered from "~." upwards in consecutive numerical order. Subsequent to a prepayment pursuant to Article V of this 14 Trust Agreement with respect to all or a portion of the Certificate, the Owner of any Certificate which has been prepaid in part may be issued one or more Certificates not in an integral multiple of $5,000 (an "Irregular Denomination"}. Interest with respect to the Certificates shall be payable semiannually on ~. and ~. of each year, commencing 1, 1987, to and including the date of maturity or prepayment, whichever is earlier. Each such payment of interest shall represent one-half the portion of the Basic Premium designated as interest and coming due during such Coverage Period. The proportionate share of the portion of Basic Premium designated as interest with respect to any Certificate shall be computed by multiplying the portion of Basic Premium designated as principal with respect to such Certificate by the rate of interest applicable to such Certificate. SECTTON 2.05 Form of Certificate. The Certificates and the assignment to appear thereon shall be substantially in the respective forms set forth in Exhibit A attached hereto and by this reference incorporated herein. Pending the preparation of definitive .Certificates, at the request of the Original Purchaser, the Certificates may be delivered in temporary form exchangeable far definitive Certificates when ready for delivery. If the Trustee delivers temporary Certificates, it shall execute and deliver definitive Certificates in an equal aggregate principal amount, when available, without additional charge, and thereupon the temporary Certificates shall be surrendered to the Trustee at its principal corporate trust office. Until so exchanged, the temporary Certificates sha~.l be entitled to the same benefits under this Trust Agreement as definitive Certificates. SECTION 2.D6 Execution. The Certificates shall be executed by and in the name of the Trustee by the manual signature of any authorized officer of the Trustee. The Trustee shall insert the date of execution of each Certificate in the place provided thereon. SECTION 2.07 Application of.Proceeds. The proceeds received by the Trustee from~the sale of the Certificates shall forthwith be set aside by the Trustee in the following respective funds and accounts and in the following order of priority: (1) The Trustee shall deposit in the Claims Payment Fund the amount of $ 1S (2) The Trustee shall deposit in the Delivery Costs Fund the amount of $ to pay Delivery Costs. (3) The Trustee shall deposit all accrued interest into the Basic Premium Payment Eund. (4} The Trustee shall deposit an amount equal to the Reserve Requirement into the Debt Service Reserve Eund. SECTION 2.08 Transfer and Exchange. (a) Transfer of Certificates. Any Certificate may, in accordance with its terms, be transferred only upon the books required to be kept pursuant to the provisions of Section 2.12 by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Certificate far cancellation at the principal corporate trust office of the Trustee, accompanied by delivery of a written instrument of transfer in a farm approved by the~Trustee, duly executed. Whenever any Certificate or Certificates shall be surrendered for transfer, the Trustee shall execute and deliver a new Certificate or Certificates of the same maturity and interest rate, for like aggregate principal amount (unless there has occurred a partial prepayment of such Certificate, in which case the principal amount of the new Certificate.. shall be equal to the unprepaid portion of the Certificate submitted far transfer). (b} E_x_c_hange_of Certificates. Certificates may be exchanged at the principal corporate trust office of the Trustee,-for a like aggregate principal amount of Certificates of other authorized denominations of the- same maturity and interest rate. The cost of any printing of any new Certificate and any other expenses incurred by the Trustee in connection with any exchange or transfer provided for in this Section shall be paid by the Provider. The Trustee may require the payment by the Certificate Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange. All Certificates surrendered pursuant to the provisions of this Section 2.08 shall, be cancelled by the Trustee and shall not be redelivered. SECTION 2.09 Certificates Mutilated, Lost, Destroyed -~ -- or Stolen. If any Certificate shall become mutilated, the Trustee, at the expense of the Owner of said Certificate, shall execute and deliver a new Certificate of like tenor, maturity and number in exchange and substitution for the 15 Certificate so mutilated, but~only upon surrender to the Trustee of the Certificate so mutilated. Every mutilated Certificate so surrendered to the Trustee shall be cancelled by it and redelivered to, or upon the order of, the Providees. If any Certificate shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee, and, if such evidence is satisfactory to the Trustee and, if an indemnity satisfactory to the Trustee sha11 be given, the Trustee, at the expense of the Certificate Owner, shall execute and deliver a new Certificate of like tenor and maturity and numbered as the Trustee sha11 determine in lieu of and in substitution for the Certificate so lost, destroyed or stolen. The Trustee may require payment of an appropriate fee for each new Certificate delivered under this Section 2.09 and of the expenses which may be incurred by the Trustee in carrying out the duties under this Section 2.09.. Any Certificate executed under the provisions of this Section 2.09 in lieu of any Certificate alleged to be lost, destroyed or stolen shall be equally and proportionately entitled to the benefits of this Trust Agreement with all other Certificates secured by this Trust Agreement. The Trustee shall not be required to treat both the original Certificate and any duplicate Certificate as being Outstanding for the purpose of determining the principal amount of Certificates which may be executed and delivered hereunder or for the purpose of determining any percentage of Certificates Outstanding hereunder, but bath the original and duplicate Certificate shall be treated as one and the same. Notwithstanding any other provision of this Section 2.09, in lieu of delivering a new Certificate which has been mutilated, lost, destroyed or stolen, and which has matured, the Trustee may make payment with respect to such Certificate. SECTION 2.10 Payment. Payment of interest with respect to any Certificate on any Payment Date shall be made to the person appearing on the registration books of the Trustee as the Owner thereof as of the Record Date immediately preceding such Payment Date, such interest to be paid by check mailed to such Owner at his address as it appears on such registration books or at such other address as he may have filed with the Trustee for that purpose. Interest with respect to any Certificate may, at the option of any Owner in an aggregate principal amount of $1,000,000 or more evidenced by the written request of such Owner to the Trustee, be paid to such Owner by wire transfer to the bank and account number on file with the Trustee as of the Record Date. The principal payable upon maturity or prepayment and any prepayment premium with respect to the I7 Certificates shall be payable upon surrender at the principal corporate trust office of the Trustee. Said- amounts shall be payable in lawful money of the United. States of America. SECTION 2.11 Execution of Documents and Proof of Ownership. Any request, direction, consent, revocation of consent, or other instrument in writing required ar permitted by this Trust Agreement to be signed or executed. by Owners may be in any number of concurrent instruments of similar tenor, and may be signed or executed by such Owners. in person ar by their attorneys or agents appointed by an instrument in writing far that purpose, or by any bank, trust company ar other depositary for such Certificates. Proof of the execution of any such instrument, or of any instrument appointing any such attorney or agent, and of the ownership of Certificates shall be sufficient for any purpose of this Trust Agreement (except as otherwise herein provided), i£ made in the following manner: ~a} The fact and date of the execution by any Owner or his attorney or agent of any such instrument and of any instrument appointing any such attorney or agent, may be proved by a certificate, which need not be acknowledged or verified, of an officer of any bank ar trust company located within the United States of America, or of any notary public, or other officer authorized to take acknowledgements of deeds to be recorded in such jurisdictions, that the persons signing such instruments acknowledged before him the execution thereof. Where any such instrument is executed by an officer of a corporation or association or a member of a partnership on behalf of such corporation, association or partnership, such certificate shall also constitute sufficient proof of his authority. (b) The fact of the ownership of Certificates by any person, the amount and numbers of such Certificates and the date of execution shall be proved by the registration . books maintained pursuant to Section 2.12. Nothing contained in this Article II shall be construed as limiting the Trustee to such proof, it being intended that the Trustee may accept any other evidence of the matters herein stated which the Trustee may deem sufficient. Any request or consent of the Owner of any Certificate shall bind every future Owner of the same Certificate in respect of anything done or suffered to be done by the Trustee in pursuance of such request or consent. 18 SECTION 2.12 Certificate Re ister. The Trustee will keep or cause to be kept, at its principal corporate trust affice, sufficient books for the registration and transfer of the Certificates which shall at all times be apen to _ inspection by each Providee and the Provider; and, upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on said books, Certificates as.hereinbefore provided. Each Providee, the Provider and the Trustee shall be entitled to treat the registered owner of a Certificate as the absolute owner thereof far all purposes, whether or not presentation of a Certificate shall be overdue, and each Providee, the Provider and the Trustee shall not be affected by any notice to the contrary.. ARTICLE III CLAIMS PAYMENT FUND SECTION 3.01 Establishment of_the Claims Payment Fund. The Trustee shall establish a special fund desgnated~~as the "CSAC-EIA Claims Payment Fund" (herein referred to as the "Claims Payment Fund"); shall keep such fund separate and apart from all other funds and moneys held by it and shall administer such fund as herein provided. SECTION 3.02 Deposit of Moneys; Payment of Settlements; Application to P~ Basic Premium or for Prepayment of Certificates or for Risk Fremium_ _Adjustments. There shall be credited to the~Claims Payment E'und the proceeds of sale of the Certificates required to be deposited therein pursuant to Section 2.07 hereof, and any other funds from time to time deposited with the Trustee for such purposes. Moneys in the Claims Payment Fund shall be disbursed by the Trustee for (i) the payment of Settlements constituting amounts owed by the Provider to a Providee, or to a plaintiff or third party designated pursuant to the terms of such Settlement, pursuant to the Agreement, or (ii) the payment of certain amounts to the Provider on behalf of a withdrawing or expelled Providee pursuant to the terms of Section 5.2 of the Agreement, or (iii) the payment or Prepayment of Basic Fremium as provided hereinafter, or (iv) the payment of Risk Premium Adjustment refunds as described hereinafter or (v) the purchase of commercial insurance or reinsurance as provided in Section 3.5 of the Agreement. Such Settlements and other disbursements (other than transfers to the Basic Premium Payment Fund) shall be paid by the Trustee only upon receipt of Requisitions, in 19 r ~ , substantially the form included as Exhibit B hereto, signed by the Provider Representative, except that in the case of an expelled Providee only the Provider Representative need sign such Requisition., Upon receipt of a properly signed Requisition, the Trustee is authorized to act thereon without further inquiry. If one day immediately preceding any Fayment Date the moneys available in the Basic Premium Payment Fund and i.n the Debt Service Reserve Fund do not equal the amount of the principal and interest with respect to the Certificates then corning due and payable, the Trustee shal3 apply moneys in the Claims Payment Fund, first from Undesignated Reserves to the extent available, to pay delinquent Basic Premium on behalf of the Providee whose Basic Premium is delinquent by transferring the amount necessary for this purpose to the Basic Premium Payment Fund. Upon receipt of any delinquent Basic Premium with respect to which moneys have previously been paid from the Claims Payment Fund, such Basic Premium shall be deposited by the Trustee in the Claims Payment Fund . In the event the Providees shall exercise their option under Section 5.02(a) hereof, any Providee shall exercise its option under Section 5.02(c) hereof or the Provider shall exercise its option under Section 5.02(d) hereof, each of which results in a prepayment of Certificates, the Provider shall direct the Trustee to transfer .sufficient amounts from the Claims Payment Fund to the Prepayment Fund for use as provided in such Sections 5.02(a}, 5.02(c) and 5.O2(d) and in the, Agreement. Risk Premium Adjustment refunds pursuant to Section 4.5 of the Agreement shall be paid from the Claims Payment Fund, as provided in such Section, upon receipt of properly completed Requisitions submitted to the Trustee by the Provider. SECTION 3.03 Investment of Mone s. Subject to the provisions of Sections 8.07 and 8.08 hereof and Exhibit C hereto, amounts in the Claims Payment Fund in excess of the then Outstanding principal amount o£ Certificates shall be invested by the Trustee in Permitted investments to the maximum extent practicable having the highest yield reasonably obtainable consistent with the conduct of a prudent person in the conduct of his affairs, provided that the Provider may at any time direct the investment of such amounts in any Permitted Investments. Subject to the 20 provisions of Sections 8.07 and 8.08 hereof and Exhibit C hereto, amounts in the Claims Payment Fund to the extent not in excess of the Outstanding principal amount of Certificates shall in accordance with the No-Arbitrage Certificate discussed below not be invested at a yield materially higher than the yield on the Certificates, except as provided in the No-Arbitrage Certificate executed by the Providees and delivered to the Trustee on the Closing Date. Subject to the provisions of Sections 8.07 and 8.08 hereof and Exhibit C hereto, investment earnings on the amounts in the Claims Payment Fund equal to 75% of the Basic Premium payments to be made on the following Basic Premium Payment Date, shall, to the extent available, be transferred by the Trustee annually, not later than one day prior to the Basic Premium Payment Date, and credited to the Basic Premium Payment Fund pro rata among each Basic Premium Payment Account according to the regularly scheduled amount of Basic Premium then due and payable by each Providee. Any remaining investment earnings shall be retained in the Claims Payment Fund. The Provider shall not be liable for any losses incurred in such investment. SECTION 3.04 Transfers of Unexpended Funds. Upon the payment and discharge of all Outstanding Certificates in full pursuant to Section 14.01 hereof, the Trustee shall withdraw all remaining moneys in the Claims Payment Fund (other than investment earnings required to be transferred to the Rebate Fund pursuant to Sections 8.07 and 8.08 and Exhibit C hereto) and transfer such moneys to the Provider for use or disbursement in accordance with the Agreement. SECTION 3.05 Loss Reserves. The Trustee agrees to designate an aggregate amount in the Claims Payment Fund as Loss Reserves for payment of Settlements as provided in Section 3.6 of the Agreement. ARTICLE IV DELIVERY COSTS FUND SECTION 4.01 Establishment of Delivery Costs Fund. The Trustee shall establish a special fund designated as the "CSAC-EIA Delivery Costs Fund"; shall keep such fund separate and apart fram all other funds and moneys held by it and shall administer such fund as hereinafter provided. Moneys in the Delivery Costs Fund shall be expended for 21 Delivery Costs upon receipt of a requisition from the Provider submitted to the Trustee directing payment from the Delivery Costs Fund. SECTION 4.02 De osit of Mone s; Pa ent of Deliver Costs. There shall be credited to the Delivery Costs Fund the proceeds of the sale of the Certificates required to be deposited therein pursuant to Section 2.07 hereof, a~.l investment earnings on moneys held in the Delivery Casts Fund, subject to the requirement that certain investment earnings be transferred to the Rebate Fund as provided in Section $.07 and 8.08 and Exhibit C hereto, and any other funds from time to time deposited with the Trustee for such purpose. Upon receipt of a properly signed requisition, the Trustee. is authorized to act thereon without further inquiry. •- SECTION 4.03 Transfer of Surplus. Any moneys. remaining in the Delivery Costs Fund on 1, 1987 shall be transferred to the Claims Payment Fund, except for any moneys which are needed by the Trustee to pay Delivery Costs for which a proper requisition has been submitted and except for any investment earnings required to be transferred to the Rebate Fund pursuant to Sections 8.07 and 8.08 hereof and Exhibit C hereto. ARTICLE V PREPAYMENT OF CERTIFICATES SECTION 5.01 Establishment of Prepayment_Fund. The fish a special fund designated as the Trustee shall estab~~ "CSAC-ETA Prepayment Fund" and shall establish a separate account therein for each Providee designated as the "County of Account" and the "County of Account', etc., respectively; shall keep such fund and accounts separate and apart from all other funds and moneys held by it; and shall administer such fund as herein provided. Moneys to be used for the prepayment of the portion of the Certificates representing interests in such Providees Basic Premium shall be deposited into the respective Providee's account in the Prepayment Fund and used solely for the purpose of prepaying the Certificates in advance of their maturity on the date designated for prepayment and upon presentation and surrender of such Certificates. 22 SECTION 5.02 Optional_P_r_~payment. The Certificates maturing on or after I, are subject to prepayment prior to maturity on any Payment Date on or after 1, as Follows: (a) in whole, at the option of all Providees exercising their option under Section 11.2 of the Agreement to prepay the principal component of the Basic Premium from amounts in the Claims Payment Fund and other lawfully available moneys; (b} in part, at the option of any Providee exercising its option under Section 11.3 of the Agreement to prepay its principal components of Basic Premium; {c) in part, at the option of any Providee exercising its option under Section 6.2 of the Agreement to withdraw from Coverage by providing for the payment of a Termination Premium, a component of which will be in an amount equal to the amount that would be required to prepay such Providee's principal components of Basic Premium plus its interest component to the date of prepayment.; and (d} in part, at the, option of the Provider exercising its option under Section 6.3 of the Agreement to expel any Providee from Coverage by providing for the payment of a Termination Premium in an amount equal to the amount that would be required to prepay such Providee's principal components of Basic Premium plus its interest component to the date. of prepayment. In every such case, prepayment of such Certificates shall be made in an integral multiple of $5,000 but not in an amount of less than $20,000, at the prepayment prices, expressed as percentages of the principal amount represented by such Certificates to be prepaid, set forth in the following table, .together with accrued interest to the prepayment date: Prepayment Date Pre a ent Price 1 and 1, 1 and 1, 1 and 1, 1 and 1, 0 1, and thereafter Tn the event of any Prepayment in part pursuant to subparagraphs (b), (c) ar (d} above, the Trustee shall prepay Certificates, held by each owner, in an amount sufficient to pay the portion of each such Certificate representing interests in the Basic Premium of the Providee or Providees on behalf of which Prepayment is being made. In the event any Providee or the Provider gives notice to the Trustee of the intention to exercise such option, but fails to deposit with the Trustee on or prior to the 23 prepayment date an amount equal to the prepayment price or Termination Premium, or to direct the Trustee to make a transfer from the Claims Payment Fund as described in Section 3.02 hereof, as applicable, the Providee will continue to pay the Basic Premium as if no such notice were given. In such event the Trustee shall promptly notify each Owner of the cancellation of such prepayment in the same manner as provided in Section 5.04. SECTION 5.03 Notice of Prepayment. When prepayment is authorized or required pursuant to Section 5.02 hereof, the Trustee shall give notice of the prepayment of the Certificates at the expense of the Providee causing such prepayment. Such notice shall specify: (a) that the Certificates or a designated portion thereof are to be prepaid, (b} the numbers of the Certificates to be prepaid, (c) the date of prepayment and (d) the place or places where the prepayment will be made. Such notice shall further state that on the specified date there shall become due and payable upon each Certificate to be prepaid, the portion of the principal amount of such Certificate to be prepaid, together with interest accrued to said date, and premium, if any, and that from and after such date interest with respect thereto shall cease to accrue and be payable. Notice of such prepayment shall be mailed, postage prepaid, to the Original Purchaser of the Certificates, or if the Original Purchaser is a syndicate, to the managing member of such syndicate, and to the Providee whose Basic Premium is being prepaid and the respective Owners of any registered Certificates designated for prepayment at their addresses appearing on the Certificate registration books, at least 30 days, but not mare than 60 days, prior to the prepayment date; provided that neither failure to receive such notice nor any defect in any notice so mailed shall affect the sufficiency of .the proceedings for the prepayment of such Certificates. SECTION 5.04 Partial Prepayment of Certificates. Upon surrender by the Owner of a Certificate for a partial prepayment, payment of such partial prepayment of the principal amount a£ a Certificate will be made by check mailed to the Owner at his address as it appears on the registration books of the Trustee. Upon surrender of any Certificate prepaid in part only, the Trustee shall execute and deliver to the registered Owner thereof, at the expense of the Providee causing such prepayment, a new Certificate or Certificates which shall be of authorized denominations equal in aggregate principal amount to the unprepaid portion of the Certificate surrendered and of the same interest rate 24 and the same maturity (one of which may be in an Irregular Denomination). Such partial prepayment shall be valid upon payment of the amount thereby required to be paid to such Owner, and each Providee, the Provider and the Trustee shall be released and discharged from all liability to the extent of such payment, irrespective of whether such endorsement shall or shall not have been made upan the reverse of such Certificate by such Owner and irrespective of any error ar omission in such execution. If prepayment results in any change in the proportionate interest in the total principal and interest payments to be made an such Certificate or Certificates which is related to each Providee, the Trustee shall endorse the new Certificate or Certificates in such manner as will reflect such change thereon. - SECTION 5.05 Effect of Notice of Prepayment. Notice having been given as aforesaid, and~the moneys for the prepayment (including the interest to the applicable date of prepayment), having been set aside in the Prepayment Fund, the Certificates shall become due and payable on said date of prepayment, and, upon presentation and surrender thereof at the office or offices specified in said notice, said Certificates shall be paid at the unpaid principal amount with respect thereto, plus interest accrued and unpaid to said date of prepayment plus premium, if any. If, on said date of prepayment, moneys for the prepayment of all the Certificates to be prepaid, together with interest to said date of prepayment and prepayment premium, if any, shall be held by the Trustee so as to be available therefor on such date of prepayment, and, if notice of prepayment thereof shall have been given as aforesaid, then, from and after said date of prepayment, interest with respect to the Certificates shall cease to accrue and become payable. All moneys held by or on behalf of the Trustee for the prepayment of Certificates shall be held in trust for the account of the Owners of the Certificates so to be prepaid. All Certificates paid at maturity ar prepaid prior to maturity pursuant to the provisions of this Article shall be cancelled upon surrender thereof and delivered to or upan the order of the Providee causing such prepayment. SECTION 5.06 Surplus. Any funds remaining in the Prepayment Fund after prepayment and payment of all Certificates Outstanding, or provision made therefor satisfactory to the Trustee, including accrued interest and payment of any applicable fees to the Trustee and provision far any amounts required to be transferred to the Rebate 25 Fund pursuant to Sections 8.07 and 8.08 hereof and Exhibit C hereto, shall be transferred by the Trustee to the Claims Payment Fund. ARTICLE VI DEBT SERVICE RESERVE FUND SECTION 6.03 Establishment of Debt Service Reserve Fund. The Trustee shall establish a special fund designated as the "CSAC~EIA Debt Service Reserve Fund't. ,All moneys at any time on deposit in the Debt Service Reserve Fund shall be held by the Trustee in trust for the benefit of the Providees and far the benefit of the Owners of the Certificates, except as otherwise provided in Sections 8.07, 8.08 and Exhibit C hereof, and applied solely as provided herein. ,_ SECTION 6.02 Deposits. On the Closing Date, there shall be deposited in the Debt Service Reserve Fund the amount equal to the Reserve Requirement, in accordance with Section 2.07 hereof. Such moneys shall be held in trust as a reserve for the payment when due of all the Basic Premium and Prepayments to be paid pursuant to the Agreement .and of all payments with respect to the Certificates. SECTION 6.03 Transfers of Excess. The Trustee shall, at least annually not later than each June 1, transfer any moneys on hand in the Debt Service Reserve Fund in excess of the Reserve Requirement to the Basic Premium Payment Fund pro rata among each Providee's Account in such Fund on the. basis of the ratio of Basic Premium to be paid on the next. Basic Premium Payment Date by each Providee then receiving Coverage to Basic Premium to be paid on the next Basic Premium Payment Date by all Providees then receiving Coverage, to be applied to the next Basic Premium due from the Providees, subject to the requirement that certain investment earnings be transferred to the Rebate Fund as provided in Sections 8.07 and 8.08 hereof and Exhibit C hereto. SECTION 6.04 Application of Debt Service Reserve__Fund in Event of Deficiencv in Basic Premium Pavment Fund. If one day immediately preceding any Payment Date the moneys available in the Basic Premium Payment Fund do not equal the amount of the principal and interest with respect to the Certificates then coming due and payable, the Trustee first shall apply the moneys available in the Debt Service Reserve Fund to pay delinquent Basic Premium on behalf of the 26 Providee whose Basic Premium is delinquent by transferring the amount necessary for this purpose to such Providee's Account in the Basic Premium Payment Fund. Upon receipt of any delinquent Basic Premium with respect to which moneys have previously been paid from the Debt Service Reserve Fund, such Basic Premium shall be deposited in the Debt Service Reserve Fund. Tf on the April 15 preceding any Basic Premium Payment Date the moneys available in the Debt Service Reserve Fund do not equal or exceed the Reserve Requirement, each Providee is required under the Agreement to pay a Supplemental Basic Premium on such Basic Premium Payment Date in an amount equal to its Allocable Proportion of the Debt Service Reserve Fund deficit but in no event more than 10% of Basic Premium (as determined prior to any credit pursuant to Section 4.4(b)(2} of the Agreement). The Trustee shall notify the Provider not less than ten days prior to the May 1 preceding such Basic Premium Payment Date of the amounts of Supplemental Basic Premium to be payable on that date. Supplemental Basic Premium .shall be deposited into the Debt Service Reserve Fund. SECTION 6.05 Transfer To Pa All Basic Premium. If on any Payment Date the moneys an deposit in the Debt Service Reserve Fund, the Basic Premium Payment Fund (excluding amounts required for payment of past due principal or interest with respect to Certificates not presented for payment) and the Prepayment Fund are sufficient to pay all Outstanding Certificates, including all principal, interest and prepayment premiums (if any}, the Trustee shall, upon the written direction or oral direction confirmed in writing of the Provider, transfer all amounts then on hand in the Debt Service Reserve Fund to the Basic Premium Payment Fund or the Prepayment Fund, as the case may be, to be applied to the payment of the Basic Premium or Prepayments on behalf of the Providees, and such moneys shall be distributed to the Owners of Certificates in accordance with Article IT of this Trust Agreement. Any amounts remaining in the Debt Service Reserve Fund upon payment in full of all Outstanding Certificates, or upon provision for such payments provided in Section 14.01, sha11 be withdrawn by the Trustee and paid to the Claims Payment Fund. SECTION 6.06 Transfer to Pre a Basic Premium. In the event Basic Premium of any Providee ar of all Providees is prepaid in full or a deposit to secure Basic Premium is made pursuant to Article XI of the Agreement, the Trustee shall transfer amounts from the Debt Service Reserve Fund to the Prepayment Fund or irrevocable trust account as provided in said Article and as pravided in Article V. 27 ARTICLE VII SECURITY PROVISIONS; BASIC PREMIUM; BASIC PREMIUM PAYMENT FUND SECTION 7.pI Security Provisions. (a) Assignment of Rights in_Agreement. In consideration of the premises and mutual agreements and covenants contained herein, and other valuable considera- tion, the Provider, at the direction of the Providees, hereby assigns, transfers and sets over to the Trustee, far. the benefit of the Owners of the Certificates, certain of its rights in the Agreement, which shall include (i) all of the Provider's rights to receive and collect all of the- Basic Premium, the Supplemental Basic Premium, the Prepayments, the portions of the. Termination Premium determined with respect to the foregoing (i.e. Basic Premium, Supplemental Basic Premium and Prepayments thereof) and all other amounts required to be deposited in any Provider's Account in the Basic Premium Payment Fund or the Debt Service Reserve Fund or the Prepayment Fund pursuant to. the Agreement or pursuant hereto, and (ii) the right to exercise such rights and remedies conferred on the Provider pursuant to the Agreement as may be necessary or .convenient (x) to enforce payment of the Basic Premium, Prepayments, Supplemental Basic Premium, Termination Premium components identified above and any other amounts required to be deposited in any Provider's Account of the Basic Premium Payment Fund or the Prepayment Fund or the Debt Service .-- Reserve Fund, ar (y) otherwise to protect the interests of the Owners ar the Provider in the event of a default by any Providee under the Agreement; ali rights assigned by the Provider shall be administered by the assignee thereof according to the provisions of this Trust Agreement and for the equal and proportionate benefits of the owners of Certificates. All Basic Premium, Prepayments, Termination Premium components identified in subsection (a)(i) of this., Section and Supplemental Basic Premium shall be paid directly to the Trustee, and all of the Basic Premium, Prepayments, Termination Premium components identified in subsection (a){i) of this Section and Supplemental Basic Premium collected or received by the Provider shall be deemed to be held and to have been collected or received by the Provider as the agent of the Trustee, and if received by the Provider at any time shall be deposited by the Provider, with the Trustee within five Business Days after the receipt thereof, and all such Basic Premium, Prepayments, Supplemental Basic Premium, Termination Premium components identified in subsection (a){i) of this Section shall be 28 forthwith deposited by the Trustee upon the receipt thereof in the proper Providee's account of the Basic Premium Payment Fund or Prepayment Fund or Debt Service Reserve Fund. The Trustee hereby accepts the foregoing assignment far the benefit of the Owners of the Certificates, subject to the conditions and terms hereof, and all such Basic Premium, Prepayments, Supplemental Basic Premium, Termination Premium components and other amounts shall be applied and all such rights so assigned shall be exercised by the Trustee under and pursuant to this Trust Agreement. (b} Agency. The Provider, at the direction of the Providees, hereby designates the Trustee as its agent to receive and collect Risk Premium, Risk Premium Adjustment and any Termination Premium determined with respect thereto, and to hold the Claims Payment Fund created pursuant to this Agreement. In no event shall this relieve the Provider from any obligations~to make any calculation, provide any notice, or take any other action required of it with respect to the Coverage or the pooled self-insurance program. The Trustee hereby agrees to act as agent of the Provider far the limited purpose of collecting, receiving, and holding such moneys. In the event that the Trustee receives any payments of Administrative Premium, however, the Trustee shall immediately pay such amounts to the Provider. (c} Security Interest in Moneys and_Funds. The __ ---- Provider, at the direction of the Providees, and the Providees, as their interests may appear, hereby grant to the Trustee for the benefit of the Owners a lien on and a security interest in all moneys in the funds created hereunder excepting only the Rebate Fund and any moneys to be deposited into such Rebate Fund, including without limitation, the Basic Premium Payment Fund, the Claims Payment Fund, the Delivery Costs Fund, the Prepayment Fund and the Debt Service Reserve Fund and all such moneys shall be held by the Trustee and applied to the respective purposes specified herein and in the Agreement, subject only to Sections 8.07 and 8.08 hereof and Exhibit C hereto. The Provider shall. immediately deposit all amounts of Risk Premium and Risk Premium Adjustment which it shall receive from time to time with the Trustee in the Claims Payment Fund and the Trustee shall act as agent of the Provider with respect to all such amounts on deposit in the Claims Payment Fund . 29 {d) Pledge of Certain Payments. The Basic Premium, Supplemental Basic Premium, Prepayments and Termination. Premium determined with respect to such Basic Premium, Supplemental Basic Premium or Prepayments, are hereby irrevocably pledged to and shall be used for the punctual payment of the interest and principal represented by the Gertificates and such amounts shall not be used for any other purpose while any of the Certificates remain Outstanding, This pledge shall constitute a first and exclusive lien on such amounts in accordance with the terms hereof. SECTION 7.02 Establishment of Basic Premium Payment Fund.- The Trustee shall establish a special fund designated as the "CSAC-EIA Basic Premium Payment Fund" and shall establish separate accounts therein for each Providee designated as the "County of Account" the "County of Account" etc. All moneys at any time deposited by the Trustee in the Basic Premium Payment Fund shall be held by the Trustee in trust for the benefit of the Owners. So long as any Certificates are Outstanding, neither the Providees nor the Provider shall have any beneficial right or interest in the Basic Premium Payment Fund or the moneys deposited therein, except only as provided in this Trust Agreement, and such .moneys shall be used and applied by the Trustee as hereinafter set forth. SECTION 7.03 Deposits. There shall. be deposited in. each Providee's Account in the Basic Premium Payment Fund all Basic Premium or Termination Premium components relating to Basic Premium received by the Trustee from or on behalf of such Providee, including any moneys received by the Trustee for deposit therein pursuant to Section 4.4 {regarding Basic Premium) of the Agreement, Section 8.03 hereof (regarding each Providee's pro rata share of the investment earnings on the Claims Payment Fund.), Section 6.03 hereof {regarding moneys in the Debt Service Reserve Fund in excess of the Reserve Requirement} and any other moneys required to be deposited therein pursuant to the Agreement or pursuant to this Trust Agreement. On or prior to the 15th day of the month immediately preceding. the Basic Premium Payment Date, the Trustee shall notify-each Providee as to what amounts will be on deposit in such Providee's Account of the Basic Premium Payment Fund to be credited towards the Basic Premium due an the next succeeding Basic Premium Payment Date. SECTION 7.04 Application of Moneys. Except as provided in Section 7.06 below all amounts in the Basic Premium Payment Fund shall be used and withdrawn by the 30 Trustee solely far the purpose of paying the principal of and interest evidenced by the Certificates as the same shall become due and payable, in accordance with the provisions of Article II and Article IV. The Trustee shall apply moneys on deposit in the Basic Premium Payment Fund in the following order of priority: {a} On .each Payment Date, an amount sufficient to pay the interest evidenced by the Certificates becoming due and payable an such date shall be set aside by the Trustee and mailed to the registered Certificate Owners; and {b} On each Payment Date, an amount sufficient to pay the principal evidenced by the Certificates becoming .due and payable on such date shall be set aside and paid upon surrender pursuant to Section 2.10 hereof. In no event sha11 moneys on deposit in one Providee's Account be applied to the payment of principal or interest with respect to any other Providee's portion of the Certificates. SEGTION 7.q5 Transfersmof Investment Earnings, The Trustee shall, at least semiannually, transfer any income ar profit on the investment of moneys in each account of the Basic Premium Payment Fund, net of any amounts required to be transferred to the Rebate Fund as provided in Sections 8.07 and 8.08 hereof and Exhibit C hereto, to the Claims Payment Fund, SECTION 7.05 Surplus. Any funds remaining in any account of the Basic Premium Payment Fund after prepayment of all Certificates Outstanding, or provision made therefor satisfactory to the Trustee, including accrued interest and payment of any applicable fees to the Trustee and provision for any amounts required to be transferred to the Rebate Fund pursuant to Sections 8.07 and 8.08 hereof and Exhibit C hereto, shall be transferred by the Trustee to the Claims Payment Fund. ARTICLE VIII MONEYS IN FUNDS; INVESTMENT; REBATE FCJND SECTION $.OI Held in Trust. The moneys and investments held by the Trustee in the Basic Premium Payment Fund, the Debt Service Reserve Fund and the Prepayment Fund under this Trust Agreement are irrevocably held in trust for 31 the benefit of the Owners, and for the purposes herein specified, and the moneys and investments held by the Trustee hereunder in the Claims Payment Fund are held for the purposes herein specified, and are subject to the security interest of the Trustee for the benefit of the Owners, and such moneys, and any income or interest earned thereon, shall be expended only as provided in this Trust Agreement, and shall not be subject to levy or attachment or lien by or for the benefit of any creditor of either the Provider, the Trustee or the Providees or any Owner of Certificates, or any of them. SECTION 8.02 investments Authorized. Subject to the provisions of Sections 3.03, 8.07 and 8.08 hereof and Exhibit C hereto and the No-Arbitrage Certificate signed by the Providees with respect to the Certificates, moneys held by the Trustee hereunder shall be invested and reinvested on maturity by .the Trustee, at the direction of the Provider, to the maximum extent practicable having the highest yield reasonably obtainable consistent with the conduct of prudent persons in the conduct of their affairs, in Permitted Investments; provided, however, with respect to amounts in the Claims Payment Fund representing Loss Reserves, such amounts shall not be invested at any time zn an obligation maturing greater than three years from the date of investment; and with respect to amounts in the Claims Payment Fund representing Undesignated Reserves, such amounts shall be invested subject to the restriction that the average maturity of such investments shall not exceed five years. The Provider Representative may by written order filed in a timely fashion with the Trustee direct such investment in specific Permitted Investments identified in such written order sa long as such investment does not cause the Trustee to violate its fiduciary duties hereunder. Such investments, if registrable, shall be registered in the name of the Trustee for the benefit of the Owners and held by the Trustee. The Trustee may purchase or sell to itself or any affiliate,' as principal or agent, investments authorized by this Section. Such investments and reinvestments shall be made giving full consideration for the time at which funds are required to be available based upon information supplied by the Provider. The Trustee may act as purchaser or agent in the making or disposing of any investment. SECTION 8.03 Dzsposition_af Investments. Any income ar profit on the investment of moneys held by the Trustee in the Claims Payment Fund other than the amounts required to be retained in the Claims Payment Fund pursuant to Section 3.03 hereof, and any income or profit on the investment of moneys held by the Trustee in the Delivery Casts Fund shall 32 be transferred annually, not later than one day prior to the Basic Premium Payment Date and credited to the Basic Premium Payment Fund, subject to the provisions of Sections 8.07 and 8.08 hereof and Exhibit C hereto. SECTION 8.04 Accounting. The Trustee shall Furnish to the Providees, quarterly, an accounting of all investments made by the Trustee. The Trustee shall not be responsible or liable for any loss suffered in connection with any investment of funds made by it in accordance with this Article VIII. SECTION 8.05 Valuation and Disposition of Investments. Subject to the provisions of Sections 8.07 and 8.08 hereof and Exhibit C hereto, for the purpose of determining the amount in any fund, all Permitted Investments credited to such fund shall be valued at cost (exclusive of accrued interest after the first interest payments following purchase). The Trustee shall sell at the best price reasonably obtainable, ar present for redemption, any Permitted Investment so purchased by the Trustee whenever it shall be necessary in order to provide moneys to meet any required payment, transfer, withdrawal ar disbursement from the fund to which such Permitted Investment is credited, and the Trustee shall not be liable or responsible for any loss resulting from such investment. SECTION 8.06 Deposit and Investment of Moneys in Funds. All moneys held by the Trustee in any of the funds and accounts established pursuant to this Trust Agreement shall be invested in Permitted Investments. The Trustee may, and upon the written request of each Pravidee Representative shall, commingle any of the funds held by it pursuant to this Trust Agreement and place them into a separate fund or funds for investment purposes only, provided, however, that all funds or accounts held by the Trustee hereunder shall be accounted for separately notwithstanding such commingling by the Trustee. SECTION 8.07 Rebate Fund. The Trustee shall establish a special fund designated as the "'CSAC-EIA Rebate Fund", and within the Rebate Fund shall establish a Rebate Account (the "Rebate Account") and an Earnings Account (the "Earnings Account"). All money at any time deposited by the Trustee in the Rebate Fund shall be held by the Trustee in trust, to the extent required to satisfy the Rebate Requirement (as defined in Exhibit C hereto), for payment to the United States. The Providees hereby direct the Trustee to make all calculations required by Exhibit C hereto in any year in which the Frovidees shall not have received an opinion of Bond Counsel to the effect that non-compliance with such 33 provisions would not subject interest with respect to the Certificates to federal income tax. All amounts deposited. in or on deposit in the Rebate Eund shall be governed by Section 8.07 of this Trust Agreement and by Exhibit C hereto {which is incorporated herein by reference}. The Trustee shall be deemed conclusively to have complied with such provisions if it follows the directions of the Providees set forth in Exhibit C hereto, and shall have no liability or responsibility to enforce compliance by the Providees with the terms of such Exhibit C. The Trustee, in its discretion, may request an opinion of Bond Counsel as to whether any deposits need to be made into the Rebate Fund, and if so, whether any payments need to be made to the United States from such deposits. If such payments are. required to be made, the Trustee may request that the necessary calculations be made by an independent certified public accountant or other competent entity, upon which calculations. the Trustee may conclusively rely. The Provider shall be responsible for payment of any reasonable fees resulting from the Trustee's actions hereunder but such fees shall not exceed $ per Coverage Period. Any funds remaining in the Rebate Fund after the payment of the final Certificate Outstanding, or provision made therefor satisfactory to the Trustee, including accrued interest and payment of any applicable fees to the Trustee and satisfaction of the Rebate Requirement, shall be withdrawn by the Trustee and remitted to the Provider for remittance to the Providees on a pro rata basis according to their Allocable Proportions. Upon the Providees' written direction, the Trustee shall pay to the United States, out of amounts in the Rebate Fund:' (1) not later than 60 days after the end of the fifth Certificate Year (as defined in Exhibit C hereto) and not less frequently than once each five years thereafter, an amount equal to at least 90% of the Aggregate Rebate Amount (as defined in Exhibit C hereto) as most recently determined; and {2) not later than 30 days after the retirement of the last Certificate, an amount equal to 100% of the Aggregate Rebate Amount (determined as of the date of the retirement of the last Certificate). In the event that, prior to the time of any required payment from the Rebate Fund, the amount in the Rebate Fund is not sufficient to make such payment when such payment is due, the Providees shall direct the Provider to 34 calculate and direct the Trustee to deposit an amount equal to such deficiency from legally available funds into the Rebate Fund prior to the time such payment is due. Each payment required to be-made pursuant to this subsection shall be made to the Internal Revenue Service Center, Philadelphia, Pennsylvania 19255 on or before the date such payment is due, and shall be accompanied by a statement summarizing the determination of the amount required to be paid pursuant to this subsection and by a copy of the Internal Revenue Service Form 8038 signed by the Providees filed with respect to the Certificates. (3) Notwithstanding anything to the contrary in this Trust Agreement, any amount received by the Trustee as investment earnings with respect to investments or deposits in the Rebate Fund shall be credited to and retained in the Earnings Account upon the receipt thereof. {4) In the event that on the first day of any Certificate Year the amount credited to the Rebate Account exceeds the Aggregate Rebate Amount, the Trustee, upon written instructions from the Provider on behalf of the Providees, shall withdraw the-excess from the Rebate Account and credit the excess to the Basic Premium Payment Fund. (5) Far purposes of crediting amounts to the Rebate Account or Earnings Account or withdrawing amounts from the Rebate Account, Nonpurpose Obligations shall be valued in the manner provided in Exhibit C hereto. Within 25 days of each Determination Date (as defined in Exhibit C hereto) an amount sha11 be credited to the Rebate Fund, if and to the extent required, so that the balance of the Rebate Fund shall equal the Aggregate Rebate Amount as of such Determination Date. SECTION 8.08 Arbitra a Covenants. The Trustee, the Provider and each Providee hereby covenant with the Owners that, notwithstanding any other provision of this Trust Agreement, they will make no use of the proceeds of the Certificates or of any other amounts or property regardless of the source or take any action or refrain from taking any action that may cause the obligations of each Providee under the Agreement to be "arbitrage bonds" subject to 35 federal income taxation by reason of Section. 148 of the Internal Revenue Code of 1986, as amended; provided, however, that the Trustee covenants as prow^ided in~thzs Section only in the. event it has control over the investment of the proceeds of Certificates and not in the event it is investing. such proceeds at the instruction of the Providees or the Provider. ARTICLE IX THE TRUSTEE SECTION 9.01 Appointment of_Trustee. Seattle-First National Bank, in Seattle, Washington, a national banking association organized .and existing under and by virtue of the laws of the United States, is hereby appointed Trustee by the Provider and the Providees for the purpose of receiving all moneys required to be deposited with the Trustee hereunder and to allocate, use and apply the same as provided in this Trust Agreement. The Provider and the Providees agree that they will maintain a Trustee with a combined capital (exclusive of borrowed capital) and surplus of at least Fifty Million Dollars {$50,000,000), and subject to supervision or examination by Federal or state authority, so long as any Certificates are Outstanding. If such bank or trust company publishes a report of condition at least annually pursuant to law or to the requirements of any supervising or examining authority referred to above, then for the purpose of this Section the combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. The Trustee. is hereby authorized to pay or,prepay the Certificates when duly presented for payment at maturity, or on prepayment, or on purchase by the Trustee prior to maturity, and to cancel all Certificates upon payment thereof. The Trustee shall keep accurate records of all funds administered by it and of all Certificates paid and discharged. The Trustee shall be compensated for its services rendered pursuant to the provisions of this Trust Agreement. The Providees may remove the Trustee initially appointed, and any successor thereto, and may appoint a successor or successors thereto; ro,~y_ided that any such successor shall be a bank or trust company meeting. the requirements as set forth in this Section 9.01. 36 The Trustee may upon sixty X60) days` notice resign by giving written notice to the Providees and the Provider. Upon receiving such notice of resignation, the Providees shall promptly appoint a successor Trustee. Any resignation or removal of the Trustee and appointment of a successor Trustee shall became effective upon acceptance of appointment by the successor Trustee. Upon such acceptance, the successor Trustee shall mail notice thereof to the Owners at their respective addresses set forth on the Certificate registration books maintained pursuant to Section 2.12. In the event the Providees do not name a successor Trustee within 30 days of receipt of notice o£ the Trustee's resignation, then the Trustee may petition a court of suitable jurisdiction to seek the immediate appointment of a successor Trustee. SECTION 9.02 Liability of Trustee. The recitals of facts, covenants and agreements herein and in the Certificates contained shall be taken as statements, covenants and agreements of the Provider and the Providees, as the case may be, and the Trustee assumes no responsibility for the correctness of the Same, nor makes any representations as to the validity or sufficiency of this Trust Agreement ar of the Certificates nor shall incur any responsibility in respect thereof, other than in connection with the duties or obligations herein or in the Certificates assigned to or imposed upon the Trustee. SECTION 9.03 Merger or Consolidation. Any company into which the Trustee may be merged or converted o~ with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, provided that such company shall be eligible under Section 9.01, shall be the successor to the Trustee without the execution or filing of any paper or further act, anything herein to the contrary notwithstanding. SECTION 9.04 Protection and Rights of the Trustee. The Trustee shall be protected and shall incur no liability in acting or proceeding in good faith upon any resolution, notice, telegram, request, consent, waiver, certificate, statement, affidavit, voucher, band, requisition or other paper or document which it shall in good faith believe to be genuine and to have been passed or signed by the proper board or person or to have been prepared and furnished pursuant to any of the provisions of this Trust Agreement, and the Trustee shall be under no duty to make any investigation or inquiry as to any statements contained or 37 matters referred to in any such instrument, but may, in the absence of bad faith or gross negligence on its part, accept and rely upon the same as conclusive evidence of the truth and accuracy of such statements.. The Trustee may consult with counsel, who may be counsel to any Providee, with regard to legal questions and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in goad faith in accordance therewith. Whenever in the administration of its duties under this Trust Agreement, the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter {unless other evidence in respect thereof be herein specifically prescribed), in the absence of bad faith on its part, shall be deemed to be conclusively proved and established by the certificate of each Providee Representative or the Provider Representative and such certificate shall be full warranty to the Trustee, in the. absence of bad faith or gross negligence on its part, for any action taken or suffered under the provisions of this Trust Agreement upon the faith thereof, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as may seem reasonable to the Trustee. The Trustee may become the Owner of the Certificates with the same rights it would have if it were not Trustee; may acquire and dispose of other bonds or evidence of indebtedness of each Providee with the same rights it would have if it were not the Trustee; and may act as a depositary for and permit any of its officers or directors to act as a member of, or in any other capacity with respect to, any committee formed to protect the rights of Owners of Certificates, whether or not such committee shall represent the Owners of the majority in principal amount of the Certificates then Outstanding. The Trustee may execute any of the trusts or powers hereof and perform the duties required of it hereunder by or through attorneys, agents, or receivers, and shall be entitled to advice of counsel concerning all matters of. trust and its duty hereunder, and the Trustee shall not be answerable for ahe default or misconduct of any such attorney, agent, or receiver selected by it with reasonable care. The Trustee shall not be answerable for the exercise of any discretion or power under this Trust Agreement or for anything whatever in connection with the funds and accounts 38 established hereunder, except only for its own willful misconduct or negligence. The Trustee shall not be deemed to have knowledge of any event or Event of Default hereunder unless and until it shall have actual knowledge thereof, or shall have received written notice thereof, at its principal corporate trust office. Except as otherwise expressly provided herein, the Trustee shall not be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions, covenants ar agreements herein or of any of the documents executed in connection with the Certificates, or as to the existence of an Event of Default thereunder. SECTION 9.05 Com ensation of the Trustee. The Providees hereby agree to pay from time to time on demand, to the Provider and the Trustee the reasonable compensation for the Trustee's services and shall reimburse the Trustee for all its advances and expenditures, including but not limited to advances to and fees and expenses of independent appraisers, accountants, consultants, counsel, agents and attorneys-at-law or other experts employed by it in the exercise and performance of its powers and duties hereunder and the Trustee shall have a lien therefor on any and all funds at any time held by it under this Trust Agreement, excluding the Rebate Fund and any amounts required to be deposited therein, which lien shall be subordinate to the lien of the Owners unless there has occurred ah Event of Default in which event the lien of the Trustee shall be prior and superior to the lien of the Certificate Owners; provided, however, that all compensation of the Trustee shall be in accordance with the Schedule of Trustee Fees attached hereto as Exhibit E. Each Providee's obligations hereunder shall remain valid and binding notwithstanding maturity and payment o£ the Certificates. No provision of this Trust Agreement shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk ar liability is not reasonably assured to it. Any amounts payable by the Providees or the Provider to the Trustee hereunder shall be assessed as Administrative Premium under the Agreement and shall be paid by the Providees in accordance with the Agreement. Failure of the Provider to collect any such Administrative Fremium or the failure of any Providee to pay the same shall not relieve 39 the Provider or Providees of their obligations to the Trustee under this Section. SECTION 9.06 Indemnification of Trustee. The Provider and the Providees hereby agree to indemnify, defend and save the Trustee harmless from and against all claims, losses, costs, expenses, liability and damages, including legal fees and expenses, arising. out of (i} any breach or default on the part of the Providees or the Provider in the performance of any of their obligations under this Trust Agreement and any other agreement made and entered into for purposes of the Coverage, (ii) any act of negligence of any Providee or the Provider or of any of its agents, contractors, servants, employees or licensees with respect to the Coverage, (iii) any act of negligence of any assignee of, or purchaser from, any Providee or the Provider or of any of its or their agents, contractors, servants, employees or licensees with respect to the Coverage, {iv} the Trustee's exercise and performance of its powers and duties hereunder, or (v) any act or omission of the Provider ar any Providee with respect to the .subject matter of this Trust Agreement or the Agreement. No indemnification will. be .made under this Section or elsewhere in this Trust Agreement for willful misconduct, negligence, or breach of duty under this Trust Agreement by the Trustee, its officers, agents, employees, successors or assigns. Each Providee's obligation hereunder shall remain valid and binding notwithstanding maturity and payment of the Certificates. All immunities, indemnifications and releases from liability granted herein to the Trustee sha11 extend to the directors, employees, officers and agents thereof. The Trustee's rights to immunities and protection from liability hereunder and its right to payment of its fees and expenses shall survive its resignation or removal and final payment or defeasance of the Certificates. Any amounts payable by the Provider or the Providees to the Trustee hereunder shall be assessed as Administrative Premium under the Agreement and shall be paid by the Providees in accordance with the Agreement. Failure of the Provider to collect any such Administrative Premium or the failure of any Providee to pay the same shall not relieve the Provider or Providees of their obligations to the Trustee under this Section. 40 ARTICLE X MODIFICATION OR AMENDMENT OF AGREEMENTS SECTION 10.01 Amendments Permitted. This Trust Agreement and the rights and obligations of the Owners and the parties hereto, and the Agreement and the rights and obligations of the parties thereto, may be modified or amended at any time by a supplemental agreement which shall become effective when the written consents of the Owners of at least a majority in aggregate principal amount of the Certificates then Outstanding, exclusive of Certificates disqualified as provided in Section 10.03, shall have been filed with the Trustee. No such modification or amendment shall (1} extend or have the effect of extending the fixed maturity of any Certificate or reducing the interest rate with respect thereto or extending the time of payment of interest, or. reducing the amount of principal thereof or reducing any premium payable upon the prepayment thereof, without the express consent of the Owner of-such Certificate, or~(2) reduce or have the effect of reducing the percentage of Certificates required for the affirmative vote or written consent to an amendment or modification of this Trust Agreement or the Agreement, or (3) modify any of the rights or obligations of the Trustee without its written assent thereto. Any such supplemental agreement shall become effective as provided in Section 10.02 hereof. This Trust Agreement and the rights and obligations of the Owners and the parties hereto, and the Agreement and the rights and obligations of the parties thereto, may be modified or amended at any time by a supplemental agreement, without the consent of any such Owners, but only to the extent permitted by law and only (1) to cure, correct or supplement any ambiguous or defective provision contained herein or therein, or (2) in regard to matters arising hereunder or thereunder, as the parties hereto or thereto may deem necessary ar desirable and which shall not adversely affect the interest of the Owners. Any such supplemental agreement shall become effective upon execution and delivery by the parties hereto or thereto as the case may be. Notwithstanding the foregoing, the Agreement and the Exhibits and Schedules thereto, may be amended without notice to or consent of the Owners and without compliance with this Article as provided in Section 9.3 of the Agreement. SECTION 10.02 Procedure for Amendment with Written Consent of Certificate Owners. A copy of any supplemental agreement requiring the consent of the Owners as provided in 41 Section 10.01 hereof, together with a request to the Certificate Owners for their consent thereto, shall be mailed by the Trustee to each Owner of a Certificate at his address as set forth in the Certificate registration books maintained pursuant to Section 2.12, but failure to receive copies of such supplemental agreement and request sa mailed shall not affect the validity of the supplemental agreement when assented,to as in this Section provided. Such supplemental agreement shall not become effective unless there shall be filed with the Trustee the written consent of the Owners of at least a majority in aggregate principal amount of the Certificates then Outstanding (exclusive of Certificates disqualified as provided in Section x.0.03) and notices shall have been mailed as hereinafter in this Section provided. Each such consent shall be effective only if accompanied by proof of ownership of the Certificates for which such consent is given, which, proof shall be such as is permitted by Section 2.11. Any such consent shall be binding upon the Owner of the Certificate giving such consent and on any subsequent Owner (whether or not~such subsequent Owner has notice thereof} unless such consent is revoked in writing by the Owner giving such consent or a subsequent Owner by filing such revocation with the Trustee prior to the date when the notice hereinafter in this Section provided for has been . mailed. After the Owners of the required percentage of Certificates shall have filed their consents to such supplemental agreement, the Trustee shall mail a notice to the Owners of the Certificates in the manner hereinbefore provided in this Section far the mailing of such supplemental agreement, stating in substance that such supplemental agreement has been consented to by the Owners of the required percentage of Certificates and will be effective as provided in this Section (.but failure to mail copies of said notice shall not affect the validity of such. supplemental agreement or consents thereto}. A record, consisting of the papers required by this Section to be filed with the Trustee, shall be proof of the matters therein stated until the contrary is proved. Such supplemental agreement shall become effective upon the mailing of such last-mentioned notice. SECTION 10.03 Dis alified Certificates. Certificates awned ar held by or for the account of any Providee or the Provider or by any person directly or indirectly .controlling or controlled by, or under direct or indirect common control with any Providee or the Provider (except any Certificates 42 held in any pension or retirement fund} shall not be deemed Outstanding for the purpose of any vote, consent, waiver or other action or any calculation of Outstanding Certificates provided for in this Trust Agreement, and Owners of such Certificates shall not be entitled to vote upon, consent to, or take any other action provided for in this Trust Agreement. SECTION 10.04 Effect of Supplemental Agreement, From and after the time any supplemental agreement becomes effective pursuant to this Article X, this Trust Agreement or the Agreement, as the case may be, shall be deemed to be modified and amended in accordance therewith, the respective rights, duties and obligations of the parties hereto or thereto and all Owners of Certificates Outstanding, as the case may be, shall thereafter be determined, exercised and enforced hereunder and thereunder subject in all respects to such modification and amendment, and all the terms and conditions of any supplemental agreement shall be deemed to be part of the terms and conditions of this Trust Agreement or the Agreement, as the case may be, for any and all purposes. The Trustee may adopt appropriate regulations to require each Certificate~Owner, before his consent provided for in this Article X shall be deemed effective, to reveal if the Certificates as to which such consent is given are disqualified as provided in Section 10.03. SECTION 10.05 Endorsement or Replacement of Certificates Delivered After Amendments. The Trustee may determine that Certificates delivered after the effective date of any action taken as provided in this Article X shall bear a notation, by endorsement, in form approved by the Trustee, as to such action. In that case, upon demand of the Owner of any Outstanding Certificate at such effective date and presentation of his Certificate for the purpose at the office of the Trustee, a suitable notation shall be made on such Certificate. The Trustee may determine that new Certificates, so modified as in the opinion of the Trustee is necessary to conform to such Certificate Owners' action, shall be prepared, executed and delivered. In that case, upon demand of the Owner of any Certificate then Outstanding, such new Certificate shall be exchanged in the corporate trust office of the Trustee in [City of Trustee], without cost to such Owner, for a Certificate of the same character then Outstanding, upon surrender of-such Certificate. 43 SECTION 10.06 Amendatory _Endorsement_of Certificates. Subject to Section 10.01 hereof, the provisions of this Article X shall not prevent any Owner from accepting any amendment as to the particular Certificates held by him, provided that due notification thereof is made on such Certificates. ARTICLE XI COVENANTS; NOTICES SECTION 11.01 Compliance with and Enforcement_ of this Trust A reement. The Providees covenant and agree with the Owners to perform all obligations and duties imposed on them under this Trust Agreement and the Agreement. The Provider covenants and agrees with the Owners to perform all obligations .and duties imposed on it under this Trust Agreement and the Agreement. The Providees will not do or permit anything to be done, or omit or refrain from doing anything, in any case where any such act done or permitted to be done, or any such omission of or refraining -from action, would or might be a ground for cancellation or termination of the Agreement by the Provider thereunder. SECTION 11.02 Observance of Laws and Re lotions. Each Providee will well and truly keep, observe and perform all valid and lawful obligations or regulations now or hereafter ,imposed on them by contract, or prescribed by any law of the United States, or of the State, or by any . officer, board or commission having jurisdiction or control, as a condition of the continued enjoyment of any and every. right, privilege or franchise now owned or hereafter acquired by the Providees,' including their rights to exist and carry on business as political subdivisions, to the end that such rights, privileges and franchises shall be maintained and preserved, and shall not become abandoned, forfeited or in any manner impaired. SECTION 11.03 Defense of Suits. Each Providee shall promptly, and also upon request of the Trustee or any Owner, from time to time take such action as may be necessary or proper to defend against all Claims and any other proceedings related to such Claims, and shall indemnify and save the Trustee and every Owner harmless Pram all loss, cost, damage and expense, including attorneys` fees, which they or any of them may incur by reason of any such Claim or proceedings, excluding any loss, cost, damage or expense 44 arising out of the willful misconduct or negligence on the part of the Trustee or such Owner, as the case may be. SECTION 11.04 Pro_vide_es' Budgets. Each Frovidee shall supply to the Provider and to the Trustee in such detail as the Provider and the Trustee may require, nv later than August 1 of each Coverage Period prompt written evidence of budget or appropriation (which may be evidence of payment) of Total Premium and any additional amounts required under Section 4.2 of the Agreement due in such Coverage Period. The Provider shall determine if the~amaunts so budgeted or appropriated are adequate for the payment of any Providee's Total Premium which may become due under the Agreement. If they are not, the Provider will notify the Trustee, and the Trustee will notify such Provides to take such action as may be necessary to cause such annual budget to be amended, corrected ar augmented so as to include therein the amounts required to .be raised by such Provides in the then ensuing Fiscal Year for the payment of Total Premium which may become due under the Agreement and such Frovidee will notify the Trustee of the proceedings then taken or proposed to be taken by such Frovidee; and the Trustee shall forward a copy of such notice to the Provider. Each Frovidee will keep the Trustee advised of all proceedings thereafter taken by such Frovidee. SECTION 11.05 Further Assurances. The Provider and such Provides will make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary ar proper to carry out the intention or to facilitate the performance of this Trust Agreement, and for the better assuring and confirming unto the Owners the rights and benefits provided herein. SECTION 11.06 General Tax Covenants, In addition to the arbitrage covenants contained in Section 8.08 hereof, each Frovidee and the Provider covenant that they will not make any use of the proceeds of the obligations provided herein or any other funds of such Frovidee or take or omit to take any other action that would cause such obligations to be a "private activity band" within the meaning of Section 141 of the Code, or "federally guaranteed" within the meaning of Section 149(b) of the Code. Ta that end, so long as any Basic Premium is unpaid, each Frovidee and the Provider, with respect to such proceeds and such other funds, will comply with all requirements of such Sections and all regulations of the United States Department of the Treasury issued thereunder and under Section 1.03 of the Internal Revenue Code of 1954, as amended, to the extent that such requirements are, at the time, applicable and in effect. 45 Re orts Avai__able _ O_w_ ners. ilpon written request to thepTrustee yr the ,Pr,,,,,,,, ~~~~ ovider, the Trustee or Provider, as the case may be, shall provide any Owner with copies of any report of the Actuary or Qualified Claims Auditor delivered pursuant to Section 4.4(e} or 3.6 of the Agreement. ARTICLE XII LIMITATION OE LIABILITY SECTION 12.01 Limited Liability of each Providee. Except as provided nn Sections 9.05 and~9.Ob hereof and except for the payment of Participation Premium and Risk Premium Adjustments when due in accordance with the Agreement and the performance of the other covenants and agreements of each Providee contained herein and in the Agreement, no Providee shall have any obligation or liability to any of the other Providees or to the Owners or with respect to'the terms, execution, delivery nr transfer of the Certificates, or the dnstribution of Basic Premium to the Owners by the Trustee. SECTION 12.02 _No.Liabiiity_of any Providee or Provider for Trustee Performance. Except as expressly provided ~--~"~~~~~- herein, none of the Providees nor the Provider shall have any obligation or liability to any of the other parties or to the Owners with respect to the performance by the Trustee of any duty impnsed upon it under this Trust Agreement. SECTION 12.03 Limited Liability of Trustee. The Trustee shall have no obligation or responsibility for providing information to the Owners concerning the investment character of the Certificates or for the actions or representations of any other party to this Trust Agreement (except as provided herein). -The Trustee shall have nn obligation or Inability to any of the other parties or the Owners with respect to this Trust Agreement or the failure or refusal of any other party to perform any covenant or agreement made by any of them under thus Trust Agreement or the Agreement, but shall be responsible solely for the business-like performance of the duties and obligations expressly imposed upon it hereunder. The recitals of facts, covenants and agreements herein and in the Certificates contained shall be taken as statements,' covenants and agreements of the Providees or the Provider (as the case may be), and the Trustee assumes no responsibility for the correctness of the same, makes no representations as to the validity or sufficiency of this 46 Trust Agreement or of the Certificates, sha11 incur no responsibility in respect thereof, other than in connection with the duties or obligations herein or in the Certificates assigned to or imposed upon it. The Trustee shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful misconduct. SECTION 12.04 Limited Liability of Provider. The Provider shall have no liability for payment of any Premium other than to promptly deliver any Premium received from any Providee (other than Administrative Premium) to the Trustee as provided herein, or for the compliance of Providees with the covenants an their part contained herein. SECTION ].2.45 Opinion of Counsel. Before being required to take any^action, the Trustee may require an Opinion of Independent Counsel acceptable to the Trustee which Opinion shall be made available to the other parties hereto upon request, which counsel may be counsel to any of the parties hereto, or a verified certificate of any party hereto, ar both, concerning the proposed action. If it does so in good faith, the Trustee sha11 be absolutely protected in relying thereon. The Trustee shall not be responsible for the sufficiency of the Agreement. The Trustee shall not be responsible or liable far any losses suffered in connection with any investment of funds made by it under the terms of and in accordance with this Trust Agreement provided that it has used ordinary care in making such investments. SECTION 12.06 Limitation of Rights to Parties and Owners. Nothing in this Trust Agreement or in the Certificates expressed or implied is intended or shall be construed to give any person other than each Providee, the Provider, the Trustee and the Owners, any legal or equitable right, remedy or claim under or in respect of this Trust Agreement or any covenant, condition or provision hereof; and all such covenants, conditions and provisions are and shall be for the sole and exclusive benefit of each Providee, the Provider, the Trustee and the Owners. ARTICLE XIII EVENTS OF DEFAULT AND REMEDIES OF CERTIFICATE OWNERS SECTION 13.OI. Assignment of Rights. Pursuant to this Trust.Agreement the Provider has transferred, assigned and 47 set over to the Trustee for the benefit of the Owners (1) all of .the Provider's rights to receive Basic Premium Supplemental Basic Premium, Prepayments and certain components of Termination Premium without recourse to be paid by the Providees under and pursuant to the Agreement, and (2) effective immediately upon the occurrence of an Event of Default under the Agreement and without further action on the part of the Provider, such rights and remedies of the Provider under the Agreement as may be necessary or convenient (i) to enforce payment of the Basic Premium, Supplemental Basic Premium, Prepayments, Termination Premium components and any other amounts required to be deposited in the Basic Premium Payment Fund, Debt Service Reserve Fund and Prepayment Fund, or (ii] otherwise to protect the interests of the Owners or the Provider in an Event of Default. This assignment shall not be construed to require the Trustee to perform any obligations of the Provider with respect to Coverage. SECTION 13.02 Remedies. If an Event of Default shall happen, then, and in each and every such case during the continuance of such Event of Default, the Trustee may exercise any and all remedies available pursuant to law or granted pursuant to-the Agreement; provided, however, that- notwithstanding anything herein or in the Agreement to the contrary, there shall be no right under any circumstances to accelerate the maturities of the Certificates or otherwise to declare any Basic Premium not then in default to be immediately due and payable. SECTION 13.03 Application of Funds. All moneys received by the Trustee pursuant to any right given or action taken under the provisions of this Article XIII or of Article X of the Agreement shall be deposited into the Basic Premium Payment Fund and be applied by the Trustee in the following order upon presentation of the several Certificates representing interests in the defaulting Provider's Basic Premium, and the stamping thereon of the payment if only partially paid, or upon the surrender thereof if fully paid - First, to the payment of the costs and expenses o.f the Trustee and of the Owners in declaring such Event of Default and exercising any remedies therefor, including reasonable compensation to its or their agents, attorneys and counsel; Second, to the payment to the persons entitled thereto of ail installments of interest then due in the order of the maturity of such installment, and, if the 48 amount available shall not be sufficient to pay in full any installment or installments maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the persons entitled thereto, without any discrimination or preference; and Third, to the payment to the persons entitled thereto of the unpaid principal component of any Certificates which shall have become due, whether at maturity or by call for prepayment, in the order of their due dates, with interest evidenced by the overdue principal and interest at a rate equal to the rate paid with respect to the Certificates and, if the amount available shall not be sufficient to pay in full all the amounts due with respect to the Certificates on any date, together with such interest, then to the payment thereof ratably, according to the amounts of principal due on such date to the persons entitled thereto, without any discrimination or preference. Notwithstanding the foregoing, Basic Premium paid by a given Providee shall only be applied to the payment of the portion of the Certificate representing interests in such Providee`s Basic Premium. SECTION 13.4 Institution of Legal Proceedings. if one or more Events of Default shall happen and be continuing, the Trustee in its discretion may, and upon the written request of the Owners of a majority in principal amount of the Certificates then Outstanding, and upon being indemnified to its satisfaction therefor, shall, proceed to protect or enforce its rights or the rights of the Owners by a suit in equity or action at law, either for the specific performance of any covenant or agreement contained herein or in the Agreement, or in aid of the execution of any power herein granted, or by mandamus or other appropriate proceeding for the enforcement of any other legal or equitable remedy as the Trustee shall deem most effectual in support of any of its rights or duties hereunder; provided that such direction shall not be otherwise than in accordance with the provisions of law and of this Agreement and that the Trustee shall have the right to decline to follow any such direction if the Trustee shall be advised by counsel that the action or proceedings so directed may not be taken lawfully, or if the Trustee in good faith shall determine that the action or proceeding so directed would involve the Trustee in personal liability or be unjustly prejudicial to Certificate Owners not party to such direction. 49 SECTION 13.OS Non-waiver. Nothing in this Article XIII or in any other provision of this Trust Agreement or in the Certificates shall affect ar impair the obligation of each Providee which is absolute and unconditional, to pay or prepay the Premium as provided in the Agreement. No delay or omission of the Trustee or of any Owner to exercise any right or power arising. upon the happening of any Event of Default shall impair any such right or power ar shall be construed to be a waiver of any such Event of Default or an acquiescence therein, and every power and remedy given by this Article XIII to the Trustee or to the Owners may be exercised from time to time and as often as shall be deemed expedient by the Trustee ar the Owners. SECTION 13.06 Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Trustee or to the Owners is intended to be exclusive of any other remedy, and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter exp.sting, at law or in equity or by statute or otherwise. SECTION 13.07 Power of Trustee to Control Proceeda.ngs. In the event that the Trustee, upon the happening of an Event of Default,- shall have taken any action, by judicial proceedings or otherwise, pursuant to its duties hereunder, whether upon its own discretion or upon the request of the Owners of a majority in principal amount of the .Certificates then Outstanding, it shall have full power, in the exercise of its discretion for the best .interest of the Owners, with respect to the continuance, discontinuance, withdrawal, compromise, settlement or other disposal of such action; provided, however, that the Trustee shall not, unless there. no longer continues an Event of Default, discontinue, withdraw, compromise or settle, or otherwise dispose of any litigation pending at law or in equity, if at the time there has been filed with it a written request signed by the Owners of at least a majority in principal amount of the Outstanding Certificates hereunder opposing such discontinuance, withdrawal, compromise, settlement or other disposal of such litigation. SECTION 13.08 Limitation on Certificate Owners' Right to Sue. No Owner ofrany Certificate executed hereunder shall have the right to institute any suit, action or proceeding at law or ~.n equity, for any remedy under ar upon this Trust Agreement, unless (a) such Owner shall have previously given to the Trustee written notice of the occurrence of an Event of Default under an Agreement; 50 (b) the Owners of a majority in aggregate principal amount of all the Certificates then Outstanding shall have made written request upon the Trustee to exercise the powers hereinbefore granted or to institute such action, suit or proceeding in its awn name; (c) said Owners shall have tendered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; and (d) the Trustee shall have refused or omitted to comply with such request for a period of 60 days after such written request shall have been received by, and said tender of indemnity shall have been made to, the Trustee. SuEh notification, request, tender of indemnity and refusal or omission are hereby declared, in every case, to be conditions precedent to the exercise by any Owner of any remedy hereunder; it being understood and intended that no one or more Owners shall have any right in any manner whatever by his or their action to enforce any right under this Trust Agreement, except in the manner herein provided and for the equal benefit of all Owners of the Outstanding Certificates. The right of any Owner to receive payment of said Owner's proportionate interest in the Basic Premium as the same become due, or to institute suit for the enforcement of such payment, shall not be impaired or affected without the consent of such Owner, notwithstanding the foregoing provisions of this Section or any other provision of this Trust Agreement. SECTION 13.03 Agreement to Pay Attorneys' Fees and Expenses. Tn the event any party to this Trust Agreement should default under any of the provisions hereof and the nondefaulting party should employ attorneys or incur other expenses for the collection of moneys or the enforcement or observance of any obligation or agreement on the part of the defaulting party contained herein, the defaulting party agrees that it will on demand therefor pay to the nondefaulting party the reasonable fees of such attorneys and such other expenses so incurred by the nondefaulting party. 51 ARTICLE XTV MISCELLANEOUS SECTION 14.01 Defeasance. If all Outstanding Certificates shall be paid and discharged in any one or more of the following ways: {a) by well and truly paying or causing to be paid the principal of and interest and prepayment premiums, if any, with respect to all Certificates Outstanding, as and when the same become due and payable; (b) if prior to maturity and having given notice of prepayment by depositing with the Trustee, in trust, at or before maturity, an amount of cash which, together with amounts then on deposit in the Debt Service Reserve Fund .and the Basic Premium Payment Fund, is sufficient to pay all Certificates Outstanding, including all principal and interest with respect thereto and premium, if any; (c) by depositing with the Trustee, in trust, Federal Securities together with cash, if required, in such amount as will, in the opinion of an independent certified public accountant, together with interest to accrue thereon and moneys then on deposit in the Debt Service Reserve Fund and the Basic Premium Payment Fund together with the interest to accrue thereon,_be fully sufficient to pay and discharge all Certificates {including all principal and interest represented thereby and redemption premiums, if any} at or before their maturity date; or (d) by depositing with the Trustee, under an escrow deposit and trust agreement, security far the payment of the Basic Premium as more particularly described in Section 11.1 of the Agreement, said security to be held by the Trustee as agent for the Providees to be applied by the Trustee to pay the Basic Premium as the same become due and payable and make a Prepayment in full on any Prepayment.. Date, pursuant to Section 11.1 of the Agreement notwithstanding that any Certificates shall not have been surrendered for payment; all obligations of the Provider, the Trustee and the Providees with respect to all Outstanding Certificates shall cease and terminate, except only the obligation of the Trustee to pay or cause to be paid, from Basic Premium paid by or on behalf of the Providees from funds deposited pursuant to paragraphs (b} through {d) of this Section, to the Owners of Certificates not so surrendered and paid all 52 sums due with respect thereto, and in the event of deposits pursuant to paragraphs (b) through (d), the Certificates shall continue to represent direct and proportionate interests of the Owners thereof in Basic Premium under the Agreement and except that the Pravidees' obligations to make Risk Premium Adjustments under Section 4.5 of the Agreement shall not be terminated; and provided, that, in the event of deposits pursuant to paragraphs (b} through (d) above, such deposit shall include any amounts required to satisfy the Rebate Requirement, as defined in Exhibit C hereto. Any funds held by the Trustee, at the time of one of the events described in paragraphs (a) through (d) of this Section, which are not required for the payment to be made to Owners or for the payment of the Trustee's fees and expenses, shall be paid over to the Provider for disbursement to the Providees in accordance with the terms of the Agreement. SECTION 14.02 NonpPresentment of Certificates. In the event any Certificate shall not be presented for payment when the principal with respect thereof becomes due, either at maturity, or at the date fixed for prepayment thereof, if moneys sufficient to pay such Certificate shall have been deposited in the Basic Premium Payment Fund or the Prepayment Fund, all liability of the Providees to the Owner thereof far payment of such Certificate shall forthwith cease, terminate and be completely discharged, and thereupon it shall be the duty of the Trustee to hold such moneys, without liability for interest thereon, for the benefit of the Owner of such Certificate who shall thereafter be restricted exclusively to such moneys, for any claim of whatever nature on his or her part under this Trust Agreement or on, or with respect to, said Certificate. Any moneys so deposited with and held by the Trustee not so applied to the payment of Certificates within six (6) years after the date on which the same shall have become due shall be paid by the Trustee to the Pravidees in proportion to the shares in the Basic Premium represented by the Certificates for payment of which such moneys were held, free from the trusts created by this Trust Agreement. Thereafter, Owners shall be entitled to look only to the Providees for payment, and then only to the extent of the amount so repaid by the Trustee. No Providee shall be liable for any interest on the sums paid to it pursuant to this section and shall not be regarded as a trustee or trustees of such money. 53 SECTION 14.03 Records. The Trustee shall keep complete and accurate records of all moneys received and disbursed under this Trust Agreement, which shall be available for inspection by each Provides, the Provider and any Owner, or the agent of any of them, at any time during.. regular business hours. Any Owner shall have the right at any time to receive copies of the most recent reports of the Qualified Claims Auditor and the Actuary, to receive copies of the Agreement and this Trust Agreement, as amended, and to be informed of amounts on deposit in the Claims Payment Fund .and the amounts of Loss Reserves and Undesignated Reserves. SECTION 14.04 Notices. All written notices to be given under this Trust Agreement shall be given by mail or personal delivery to the party entitled thereto at its address set.~orth below, or at such address as the party may provide to the other party in writing from time to time. Notice shall be deemed to have been received upon the earlier of actual receipt or five business days after deposit in the United States mail, in certified form, postage prepaid or, in the case of personal delivery, upon delivery to the address set forth in Exhibit D hereto. SECTION 14.05 Governing Law. This Trust Agreement shall be construed and governed in accordance with the laws of the State. SECTION 14.06 Sindin Effect; Successors. This Trust Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. Whenever in this Trust Agreement either the Provider, the Providees ar the Trustee is named or referred to, such reference shall be deemed to include the successors or assigns thereof and all the covenants and agreements in this Trust Agreement contained by or on behalf of the Provider, the Providees or the Trustee shall bind and inure to the benefit of the respective successors and assigns thereof whether so expressed or not. SECTION 14.07 Execution in Counterparts. This Trust Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and .the same agreement. SECTION 14.08 Destruction of Cancelled Certificates. Whenever in this Trust Agreement provision is made for the surrender or cancellation by the Trustee and the delivery to the Provider of any Certificates, the Trustee may, upon the 54 request of each Provides Representative, in lieu of such cancellation and delivery, destroy such Certificates and deliver a certificate of such destruction to the Providees. SECTION 14.09 Actions Required on No_n-Business Days: In any case where a payment is required~to be made on any date which is not a Business Day, then payment may be made on the next succeeding Business Day with the same force and effect as if made on the day required. SECTION 3.4.10 Headings. The headings or titles of the several Articles and Sections hereof, and any table of contents appended to copies hereof, shall be solely for convenience of reference and shall not affect the meaning, construction or effect of this Trust Agreement. All references herein to "Articles", "Sections" and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Trust Agreement; and the words "herein", "hereof", "hereunder" and other words of similar import refer to this Trust Agreement as a whale and not to any particular Article, Section or subdivision hereof. SECTION 14.11 Waiver of Notice. Whenever in this Trust Agreement the giving of notice by mail or otherwise is required, the giving of such notice may be waived in writing by the person entitled to receive such notice and in any case the giving or receipt of such notice shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. SECTION 14.12 Separability__o~ Invalid Provisions. Tn - ------ case any one or more of the provisions contained in this Trust Agreement or in the Certificates shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such invalidity, illegality ar unenforce- ability shall not affect any other provision of this Trust Agreement, and this Trust Agreement shall be construed as if such invalid oz illegal or unenforceable provision had never been contained herein. The parties hereto hereby declare that they would have entered into this Trust Agreement and each and every other section, paragraph, sentence, clause or phrase hereof and authorzxed the delivery of the Certificates pursuant to this Trust Agreement irrespective of the fact that any one or mare sections, paragraphs, sentences, clauses or phrases of this Trust Agreement may be held illegal, invalid or unenforceable. IN WITNESS WHEREOF, the parties have executed this Trust Agreement as of the date and year first above written, 55 and such Trust Agreement shall be effective fram the date of execution shown below. Execution Date: 1987. SEATTLE-FIRST NATIONAL BANK, as Trustee By: Assistant Vice President GSAC EXCESS INSURANCE AUTHORITY, as Provider By: COUNTY OF ALPINE as Providee By COUNTY OF AMADOR as Providee By COUNTY OF BUTTE as Providee By 56 COUNTY OF CALAVERAS as Providee By COUNTY OF COLUSA as Providee By COUNTY OF DEL NORTE as Providee By COUNTY OF FRESNO as Providee By COUNTY OF GLENN as Providee By COUNTY OF HUMBOLDT as Providee By COUNTY OF IMPERIAL as Providee By 57 -.. ~ , t COUNTY OF INYO as Providee By COUNTY OF KINGS as Providee By COUNTY OF LAKE as Providee By COUNTY OF LASSEN as Providee By COUNTY OF MADERA as Providee By COUNTY OF MARIPOSA as Providee By COUNTY OF MENDOCINO as Providee By 58 COUNTY OF MERGED as Providee By COUNTY OF MODOC as Providee By COUNTY OF MONO as Providee By COUNTY OF NEVADA as Providee By COUNTY OF PLACER as Providee By COUNTY OF PLUMAS as Providee By COUNTY OF SAN LUIS OBISPO as Providee By 59 ;. COUNTY OF SANTA BARBARA as Providee By COUNTY OF SANTA CRUZ as Providee By COUNTY OF SHASTA as Providee By COUNTY OF SIERRA as Providee By coUNTY of slsxlYOU as Providee By COUNTY OF SOLANO as Providee By COUNTY OF SONOMA as Providee By 6Q COUNTY OF STANISLAUS as Providee By COUNTY OF SUTTER as Providee By COUNTY OF TEHAMA as Providee By COUNTY OF TRINITY as Providee By COUNTY OF TUOLUMNE as Providee By COUNTY OF YUBA as Providee By 63. Fi'YF7 T R T'T' ~ (FORM OF CERTIFICATE OF PARTICIPATION] CERTIFICATE OF PARTICIPATION (CSAC-EIA) Evidencing the Proportionate Interest of the Owner Hereof In Basic Premium to be Paid by Each of the COUNTY OF ALPINE, COUNTY OF AMADOR, COUNTY OF BUTTE, COUNTY OF CALAVERAS, COUNTY OF COLUSA, COUNTY OF DEL NORTE, COUNTY OF FRESNO, COUNTY OF GLENN, COUNTY OF HUMBOLDT, COUNTY OF IMPERIAL, COUNTY OF INYO, COUNTY OF KINGS, COUNTY OF LAKE, COUNTY OF LASSEN, COUNTY OF MADERA, COUNTY OF MARIPOSA, COUNTY OF MENDOCINO, COUNTY OF MERGED, COUNTY OF MODOC, COUNTY OF MQNO, COUNTY OF NEVADA, COUNTY OF PLACER., COUNTY OF PLUMAS, COUNTY OF SAN LUIS OBISPD, COUNTY OF SANTA BARBARA, COUNTY OF SANTA CRUZ, COUNTY OF SHASTA, COUNTY OF SIERRA,' COUNTY OF SISKIYOU, COUNTY OF SOLANO, COUNTY OF SONOMA, COUNTY OF STANISLAUS, COUNTY OF SLITTER, COUNTY OF TEHAMA, COUNTY OF TRINITY, COUNTY OF TUOLUMNE and COUNTY OF YUBA, CALIFORNIA to the Interest Rate CSAC EXCESS INSURANCE AUTHORITY Certificate Payment Date Dated Date f''TT4 Tp 1987 REGISTERED OWNER: PRINCIPAL AMOUNT: THIS IS TO CERTIFY THAT the registered owner named above, or registered assigns, as the Registered Owner of A-1 this Certificate of Participation (the "Certificate"} is the owner of a proportionate interest in the right to receive certain Basic Premium and Prepayments thereof under and defined in that certain Liability Risk Coverage Agreement_ (the "Agreement"}, dated as of June 1, 1987, by and among the CSAC EXCESS INSURANCE AUTHORITY, a joint exercise a~ powers agency duly organized and existing under the laws of the State of California (the "Provider") and each of the COUNTY OF ALPINE, COUNTY OF AMADOR, COUNTY OF BUTTE, COUNTY OF CALAVERAS, COUNTY OF COLUSA, COUNTY OF DEL NORTE, COUNTY OF FRESNO, COUNTY OF GLENN, COUNTY OF HUMBOLDT, COUNTY OF IMPERTAL, COUNTY OF INYO, COUNTY OF KINGS, COUNTY OF LAKE, COUNTY OF LASSEN, COUNTY OF MADERA, COUNTY OF MARIPOSA, COUNTY OF MENDOCTNO, COUNTY OF MERGED, COUNTY OF MODOC, COUNTY OF MONO, COUNTY OF NEVADA, COUNTY OF PLACER, GOUNTY OF PLUMAS, COUNTY OF SAN LUIS OBISPO, COUNTY OF SANTA BARBARA, COUNTY OF SANTA CRUZ, COUNTY OF SHASTA, COUNTY OF SIERRA, COUNTY OF SISKIYOU, COUNTY OF SOLANO, COUNTY OF SONOMA, COUNTY OF STANISLAUS, COUNTY OF BUTTER, COUNTY OF TEHAMA, COUNTY OF TRINITY, COUNTY OF TUOLUMNE and COUNTY OF YUBA (collectively referred to herein as the "Providees" and individually as a °Providee"}, each a political subdivision organized and existing under and by virtue of the Constitution and the laws of the State of California, which Basic Premium and Prepayments and certain other rights and interests under the Agreement have been assigned to SEATTLE-FIRST NATIONAL BANK, as trustee (the "Trustee"), having a corporate trust office at which it conducts corporate trust business in .Seattle, Washington (said office being herein referred to as the "Principal Officer'). The Registered Owner of this Certificate is entitled to receive, subject to the terms of the Agreement, on the Certificate payment date specified above, the principal amount specified above, representing a portion of the Basic Premium designated as principal coming due during the Coverage Period (as defined in the Agreement} during which such Certificate payment date occurs, and to receive an 1, 1987, and semiannually thereafter an 1 and 1 of each year (the "Payment Dates"} until payment in full of said portion of principal, the Registered Owner's portion of the Basic Premium designated as interest coming due during the Coverage Period during which such Payment Dates occur; provided that interest with respect hereto shall be payable from the Payment Date next preceding the date of execution o£ this Certificate (unless (i) this Certificate is executed on a Payment Date in which event interest shall be payable fram the date hereof, or (ii} this Certificate is executed after the close of business an the A-2 fifteenth day of the month prior to the. following Payment Date (the "Record Date"), in which event interest shall be payable from such Payment Date, or (iii) this Certificate is executed prior to 1, 1987, in which event interest shah. be payable from 1, 1987). The portion of the Basic Premium designated as interest is the result of the multiplication of the aforesaid pardon of the Basic Premium designated as principal by the rate per annum identified above. Said amounts are payable in lawful money of the United States of America. The amount representing principal payable at maturity ar upon prepayment in whole or in part is payable to the Registered Owner by check of the Trustee upon presentation and surrender of this Certificate at the Principal Office of the Trustee. The amounts representing interest are payable by check mailed by the Trustee to the Registered Owner hereof as of the Record Date immediately preceding the Payment Date at his address as it appears on the registration books of the Trustee ar at such other. address as the Registered owner may have filed with the Trustee far that purpose. Interest with respect to any Certificate may; at the option of any Owner in an aggregate principal amount of $1,000,000 or more evidenced by the written request of such Owner to the Trustee, be paid to such Owner by wire transfer to the bank and account number. on file with the Trustee as of the Record Date. The total amount of each payment of principal or interest made to the Owner of this Certificate is comprised of interests in Basic Premium from each of the Providees in the percentages as set forth below: A-3 Proyidee Percentage COUNTY OF ALPINE COUNTY OF AMADOR COUNTY OF BUTTE COUNTY OE CALAVERAS COUNTY OF COLUSA COUNTY OF DEL NORTE COUNTY OF FRESNO COUNTY OF GLENN COUNTY OF HUMBOLDT COUNTY OF IMPERIAL COUNTY OF INYO COUNTY OF KINGS COUNTY OF LAKE COUNTY 4F LASSEN COUNTY OF MADERA COUNTY OF MARIPOSA COUNTY OF MENDOCINO COUNTY OF MERGED COUNTY OF MODOC~ COUNTY OF MONO COUNTY OF NEVADA COUNTY OF PLACER COUNTY OF PLUMAS COUNTY OF SAN LUIS OBISPO COUNTY OF SANTA BARBARA COUNTY OF SANTA CRUZ COUNTY OF SHASTA COUNTY OF SIERRA COUNTY OF SISKIYOU COUNTY OF SOLANO COUNTY OF SONOMA COUNTY OF STANISLAUS COUNTY OF SUTTER COUNTY OF TEHAMA COUNTY OF TRINITY COUNTY OF TUOLUMNE COUNTY OF YUBA 100% A-4 REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS CERTIFICATE ON THE REVERSE HEREOF WHICH SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH HEREIN. IN WITNESS WHEREOF, this Certificate has been executed and delivered by Seattle-First National Bank, as Trustee; acting pursuant to the Trust Agreement. SEATTLE-FIRST NATIONAL BANK as Trustee Execution Date: Authorized Officer (REVERSE SIDE OF CERTIFICATE] CERTIFICATE OF PARTICIPATION IN BASIC PREMIUM PAID BY THE COUNTY OF ALPINE, COUNTY OF AMADOR, CDUNTY OF BUTTE, COUNTY OF CALAVERAS, COUNTY OF COLUSA, COUNTY OF DEL NORTE, COUNTY OF FRESNO, COUNTY OF GLENN, COUNTY OF HUMBOLDT, COUNTY OF IMPERIAL, COUNTY OF INYO, COUNTY DF KINGS, COUNTY OF LAKE, COUNTY OF LASSEN, COUNTY OF MADERA, COUNTY OF MARIPOSA, COUNTY OF MENDOCINO, COUNTY OF MERGED, COUNTY OF MODOC, COUNTY OF MONO, COUNTY OF NEVADA, COUNTY OF PLACER, COUNTY OF PLUMAS, COUNTY OF SAN LUIS OBISPO, COUNTY OF SANTA BARBARA, COUNTY OF SANTA CRUZ, COUNTY OF SHASTA, COUNTY OF, SIERRA, COUNTY OF SISKIYOU, COUNTY OF SOLANO, COUNTY OF SONOMA, COUNTY OF STANISLAUS, CDUNTY OF BUTTER, COUNTY OF TEHAMA, COUNTY OF TRINITY, COUNTY OF TUOLUMNE and COUNTY OF YUBA, CALIFORNIA This Certificate has been executed and delivered by the Trustee pursuant to the terms of a Trust Agreement by and among the Trustee, the Provider and the Providees, dated as of June 1, 1987 {the "Trust Agreement") which Trust Agreement authorizes the execution and de~.ivery of Certificates in the aggregate principal amount of $ The Certificates have been executed and delivered far the purpose of funding a self-insurance reserve fund created thereunder (the "Claims Payment Fund") available to pay liability lasses of the Providees. Each Provides is A-S authorized to enter into-the Agreement and the Trust Agreement under the Constitution and the laws of the State of California. Reference is hereby made to the Agreement and the Trust Agreement (copies of which are on file at the Principal Office of the Trustee} for a description of the terms on which the Certificates are delivered, the rights thereunder of the Registered Owners, the rights, duties and immunities of the Trustee and the rights and obligations of the Providees under the Agreement, to all of the provisions of which Agreement and Trust Agreement the Registered Owner of this Certificate, by acceptance hereof, assents and agrees. The Providees are obligated to pay Basic Premium from any source of legally available funds, and each Providee has covenanted in the Agreement to make the necessary annual appropriations therefor. The obligation of each Providee to make Basic Premium payments is subject to abatement if at any time Coverage (as defined in the Agreement} is not provided to pay Settlements (as defined in the Agreement} of any Providee. The obligation of each Providee to pay its Basic Premium does not constitute an obligation of such Providee for which such Providee is obligated to levy ar pledge any form of taxation or for which such Providee has levied or pledged any form of taxation. The obligation of each Providee to pay its Basic Premium does not constitute a debt of such Providee, the State of California or any of its political subdivisions, and does not constitute an indebtedness within the meaning of any constitutional or statutory debt limitation or restriction. In the event a Providee fails to make a Basic Premium payment the Trustee shall use amounts in the Debt Service Reserve Fund established under the Trust Agreement to make payments of each deficit in payment of principal and interest represented by the Certificates. Each Providee has covenanted to pay Supplemental Basic Premium annually in an amount up to 10% of its gross Basle Premium to replenish the Debt Service Reserve Fund. To the extent available, moneys on deposit in the Claims Payment Fund may be used to make payments of any deficit in payment of principal and interest with respect to the Certificates remaining after the Basic Premium Payment Fund and Debt Service Reserve Fund have been exhausted. If the Debt Service Reserve Fund and the Claims Payment Fund are for any reason exhausted, however, the default of one Providee in its Basic Premium may cause a partial default of payments due with respect to outstanding Certificates, even though the remaining Providees pay Basic Premium in a timely manner. A-6 To the extent and in the manner permitted by the terms of the Trust Agreement, the provisions of the Trust Agreement and the Agreement may be amended by the parties thereto with the written consent of the Registered Owners of at least a majority in aggregate principal amount of the. Certificates then outstanding, and may be amended without such consent under certain circumstances. No such modification or amendment shall (1} extend or have the effect of extending the fixed maturity of any Certificate or reducing the interest rate with respect thereto or extending the time of payment of interest, or reducing the amount of principal thereof or reducing any premium payable upon the prepayment thereof, without the express consent of the Owner of such Certificate, or (2} reduce or have the effect of reducing the percentage of certificates required for the affirmative vote or written consent to an amendment or modification of the Trust Agreement or the Agreement, or (3} modify any of the rights or obligations of the Trustee without its written assent thereto. This Certificate is transferable by the Registered Owner hereof, in person or by his duly authorized attorney, at the office of the Trustee, but only in the manner, subject to the limitations and upon payment of the charges provided in the Trust Agreement and upon surrender and cancellation of this Certificate. Upon such transfer a new Certificate or Certificates, of authorized denomination or denominations, for the same aggregate principal amount, maturity and interest rate, will be delivered to the transferee, This Certificate also may be exchanged for a like aggregate principal amount of Certificates of other authorized denominations as prescribed in the Trust Agreement. The Providees, the Provider and the Trustee may treat the Registered Owner hereof as the absolute owner hereof for all purposes whether or nit this Certificate shall be overdue, and the Providees, the Provider and the Trustee shall not be affected by any notice to the. contrary. The Certificates are also subject to prepayment prior to maturity as a whale ar in part on any Payment Date on or after 1, as follows: (a} in whole, at the option of all Providees exercising their option under Section 11.2 of the Agreement to prepay the principal component of .the Basic Premium from amounts in the Claims Payment Eund and other lawfully available moneys; (b) in part, at the option of any Providee exercising its option under Section 11.3 of the Agreement to prepay its principal components of Basic Premium; (c) in part, at the option of any Providee exercising its option under Section b.2 of the Agreement to withdraw from Coverage by providing for the A-7 payment of a Termination Premium, a component of which will be in an amount equal to the amount that would be required to prepay such Providee's principal components of Basic Premium plus-its interest component to the date of prepayment; and {d} in part, at the option of the Provider exercisi~xg its option under Section 6.3 of the Agreement to expel any Providee from Coverage by providing far the payment of a Termination Premium in an amount equal to the amount that would be required to prepay such Providee's principal components of Basic Premium plus its interest component to the date of prepayment. In every such case, prepayment of such Certificates shall be made in an integral multiple of $5,000 but not in an amount of less than $2D,000, at the prepayment prices, expressed as percentages of the principal amount represented by such Certificates to be prepaid, set forth in the following table, together with accrued interest to the prepayment date: Prepa yment Date Prepayment Price ~. and 1, _ 1 and 1, _ 1 and 1, ____. ]. and 1, 1, and thereafter In the event of any Prepayment in part pursuant to subparagraphs (b}, {c} or (d) above, the Trustee shall prepay Certificates, held by each owner, in an amount sufficient to pay the portion of each such Certificate representing interests in the Basic Premium of the Providee or Providees on behalf of which Prepayment is being made. As provided in the Trust Agreement, notice of prepayment shall be mailed, not less than 30 nor more than 60 days before the prepayment date, to the Registered Owner of this Certificate, but neither failure to receive such notice nor any defect in the notice so mailed shall affect the sufficiency of the proceedings for prepayment. If this Certificate is called for prepayment and payment is duly provided therefor as specified in the Trust Agreement, interest shall cease to accrue with respect hereto from and after the date fixed £or prepayment. THIS IS TO FURTHER CERTIFY that all acts, conditions and things required by the Constitution and statutes of the State of California and the Trust Agreement to exist, to have happened and to have been performed by the Trustee precedent to and in connection with the execution and A-8 ~ f ~ i. delivery of this Certificate do exist, have happened and have been performed in regular and due time, form and manner as required by law, and that the Trustee is duly authorized to execute and deliver this Certificate, and that the amount of this Certificate, together with all other Certificates executed and delivered under the Trust Agreement, is not in excess of the amount of Certificates authorized to be executed and delivered thereunder. ASSIGNMENT ~'OR VAI.CTE RECEIVED, the undersigned hereby sells, assigns and transfers unto (please prin.t,or typewrite name, address and social security or other identifying number of Transferee) the within Certificate and all rights thereunder, and hereby irrevocably constitutes and appoints to transfer the within Certificate an the books kegt for registration thereof, with full power of substitution in the premises. Dated: Signature guaranteed NOTICE: Signature(s) must be guaranteed by a member of the New York Stock Exchange or a commercial bank or trust company. NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within Certificate in every particular, without alteration or enlargement or any change whatever. A-9 EXHIBIT B FORM OF WRITTEN REQUISITION Seattle-First National Bank 1001 Fourth Avenue - 9th Floor Seattle, Washington 98154 RE: Disbursement from the Claims Payment Fund pursuant to Section 3.Q2 of the Trust Agreement, dated as of June 1, 1987 (the "Agreement"), by and among SEATTLE-FIRST NATIONAL BANK, as Trustee (the "Trustee"), CSAC EXCESS INSURANCE AUTHORITY (the "Provider"} and the COUNTY OF ALPINE, COUNTY OF AMADOR, COUNTY OF BUTTE, COUNTY OF CALAVERAS, COUNTY OF COLUSA, COUNTY OF DEL NORTE, COUNTY OF FRESNO, COUNTY OF GLENN, COUNTY OF HUMBOLDT, COUNTY OF IMPERIAL, COUNTY OF INYO, COUNTY aF KINGS, COUNTY OF LAKE, COUNTY OF LASSEN, COUNTY OF MADERA, COUNTY OF MARIPOSA, COUNTY OF MEND0CIN0, COUNTY OF MERGED, COUNTY OF MODOC, COUNTY OF MONO, COUNTY OF NEVADA, COUNTY OF PLACER, COUNTY OF PLUMAS, COUNTY OF SAN LUIS OBISPO, COUNTY OF SANTA BARBARA, COUNTY OF SANTA CRUZ, COUNTY OF SHASTA, COUNTY OF SIERRA, COUNTY OE SISKIYOU, COUNTY OF SOLANO, COUNTY OF SONOMA, COUNTY OF STANISLAUS, COUNTY OF BUTTER, COUNTY OF TEHAMA, COUNTY OF TRINITY, COUNTY OF TUOLUMNE and COUNTY OF YUBA, CALIFORNIA (each, a "Providee") REQUISTTION NO. You are hereby instructed to pay to the undersigned Provider, or to at , $ as a Settlement [Risk Premium Adjustment Refund] from the Claims Payment Fund as provided in Section 3.4 of the Liability Risk Coverage Agreement dated as of June 1, 1987, among the Providees and the Provider (the "Coverage Agreement"). This amount has been incurred within the scope of Coverage (as defined in the Coverage Agreement), has been settled or finally adjudicated in accordance with the terms of the Coverage Agreement and the Memorandum of Coverage appended thereto [is due as a Risk Premium Adjustment calculated in accordance with the terms of the Coverage Agreement], and has not been the basis of any previous disbursements. Attached hereto is a certified copy of the [settlement/judgment] and itemized list of costs and expenses in connection with the Settlement. [Delete the foregoing sentence in case of Risk Premium Adjustment Refund.] B-~ 1 [In the case of withdrawal or expulsion, the following form shall be used: You are hereby instructed to pay to the undersigned Provider the Allocable Share of as Providee, as determined in accordance with Section 5.2 of the Coverage Agreement, for safekeeping in a segregated account by the Provider on behalf of the Providee, until the earliest practicable date when it can be returned to the Providee, all as described in such Agreement.] Very truly yours, RECEIPT ACKNOWLEDGED: By Provider Representative SEATTLE-FIRST NATIONAL BANK, as Trustee i B-2 EXHIBIT C FORM OF LETTER OF INSTRUCTIONS TO THE TRUSTEE [Date of Delivery] Seattle-First National Bank Seattle, Washington Re: Certificates of Partici anon CSAC-EIA In the Trust Agreement dated as of June 1, 19$7 {the "Trust Agreement") among the COUNTY OF ALPINE, COUNTY OE AMADOR, COUNTY OF BUTTE, COUNTY OF CALAVERAS, COUNTY OF COLUSA, COUNTY OF DEL NORTE, COUNTY OF FRESNO, COUNTY OF GLENN, COUNTY OF HUMBOLDT, COUNTY OF IMPERIAL, COUNTY OF INYO, COUNTY OF KINGS, COUNTY OF LAKE, COUNTY OF LASSEN, COUNTY OF MADERA, COUNTY OF MARIPOSA, COUNTY OF MENDOCINO, COUNTY OF MERGED, COUNTY OF MODOC, COUNTY OF MONO, COUNTY OF NEVADA, COUNTY OF PLACER, COUNTY OF PLUMAS, COUNTY OF SAN LUIS OBISPO, COUNTY OF SANTA BARBARA, COUNTY OF SANTA CRUZ, COUNTY OF SHASTA, COUNTY OF SIERRA, COUNTY OF SISKIYOU, COUNTY OF SOLANO, COUNTY OF SONOMA, COUNTY OF STANISLAUS, COUNTY OF BUTTER, COUNTY OF TEHAMA, COUNTY OF TRINITY, COUNTY OF TUOLUMNE and COUNTY OF YUBA, CALIFORNIA {the "Pravidees"), the CSAC EXCESS INSURANCE AUTHORITY {the "Provider") and Seattle-First National Bank, as trustee (the "Trustee"), and in the Liability Risk Coverage Agreement, dated as of June ~., ].987 (the "Agreement"), among the Providees and the Provider, we have covenanted, among other things, that we will take all action necessary and permitted by law to assure that the interest paid and to be paid with respect to the Certificates remains exempt from federal income taxation, that we will observe and not violate the requirements of Section 148 of the Internal Revenue Code of 1986, as amended (the "Code"), and that we will take all reasonable steps to assure compliance with certain requirements of Section 148 of the Code relating to limitations on the yield that may be obtained from certain investments made with proceeds of the Certificates and certain other money in funds and accounts held by you. As Trustee, you have agreed to accept the duties and obligations imposed thereby. We hereby direct you not to make any use of the proceeds of the Certificates that would cause the Certificates to be considered "arbitrage bonds" C-1 within the meaning of Section 148 of the Code, or to be considered bonds not described in Section 103{a) of the Code and applicable regulations promulgated from time to time under Section 3.48 of the Code and under Section 103{c) of the Internal Revenue Code of 1954, as amended; provided, however, that notwithstanding anything to the contrary contained herein, all immunities, indemnities and exceptions from liability contained in the Trust Agreement, insofar as they relate to the Trustee, shall apply to this Letter of Instructions. To perform our obligations under our covenants described above and otherwise, and to implement our instructions to you described above, we set forth instructions to you regarding the investment and use of money in various funds and accounts held by you so that such investments and the use of such money will comply with applicable y~.eld limitations and rebate restrictions under Section 148 of the Code. All personnel concerned with the funds and accounts held by you must be familiar with these instructions because the tax-exempt status of the interest . with respect to the Certificates depends upon compliance with such limitations. 1. Nonpurpose Obligations. These rules shall apply to the investment of Gross Proceeds,. as defined below, in any security, obligation, annuity contract or any other investment-type property other than obligations described in Code Section 103{a), that is not acquired to carxy out the governmental purpose of the Certificates {"Nonpurpose Obligations"). Far purposes of this letter, the term °Gross Proceeds" means: {i) proceeds derived from the sale of the Certificates; {ii) investment earnings on amounts described in {i) above; (iii) amounts that are reasonably expected to be or are in fact used to pay debt service represented by the Certificates, including a portion of the amounts deposited in the Basic Premium Payment Fund; (iv) amounts on deposit in the Debt Service Reserve Fund; C-2 (v) amounts pledged as security for the payment of debt service represented by the Certificates by the Provider or Providees or another governmental unit of which the Provider or Providees are a part; and (vi) investment earnings on amounts described in (i)-(v) above. 2. Tem orar Period Investments. Certain amounts on deposit in the following funds and accounts may be invested at an unrestricted yield for the following temporary periods: a. proceeds derived from the sale of the Certificates deposited in the Delivery Costs Fund and in the Claims Payment Fund to be expended to pay the costs of issuance of the Certificates and the costs of acquiring Coverage are.not entitled to a temporary period; b. earnings on amounts described in 2{a) are entitled to a temporary period ending one year from the date of receipt; c. amounts deposited in the Basic Premium Payment Fund are entitled to a temporary period ending thirteen months from the date of receipt; d. amounts deposited in the Prepayment Fund {"Sinking Fund Money") are entitled to a temporary period ending thirty (30) days from the date of deposit; and e. earnings on amounts in the Basic Premium Payment Fund and Prepayment Fund are entitled to a temporary period ending one year from the date of receipt. 3. Debt Service Reserve Fund Investments. Amounts on deposit in the Debt Service Reserve Fund may be invested at a yield in excess of the yield on the Certificates to the extent not in excess of 10% of the proceeds of the Certificates. The balance must not be invested in any Nonpurpose Obligation that has a yield greater than the yield on the Certificates. 4. Restricted Investments. Gross Proceeds other than amounts eligible for a temporary period as described in paragraph 2 and amounts described in paragraph 3 shall be invested either in obligations the interest on which is exempt from federal income tax under Section 103(a) of the Cade or in Nonpurpose Obligations with a yield that does not exceed the yield on the Certificates (in the case of C-3 ~' ~ Nonpurpose Obligations acquired with Gross Proceeds derived from the safe of the Certificates and investment earnings thereon, the yield on the Certificates plus 1/$ of one percentage paint). 5. Yields and Debt Service. Yields are to be calculated by means of an actuarial method of yield calculation whereby the term "yield" means that discount rate which when used in computing the present worth of all payments of principal and interest to be paid on the obligation produces an amount equal to the purchase price of the obligation. The yield on investments must be computed. by the use of the same frequency interval of compounding interest on the Certificates. For purposes of calculating the yield on the Certificates, the purchase price of the Certificates is the delivery price of the Certificates as described in paragraph For purposes of calculating the.. yield on Nonpurpose Obligations, the purchase price of a Nonpurpose Obligation shall be its fair market value an the date it becomes Gross Proceeds. b. Market Price. For purposes of calculating the yield on any obligation as required under this Letter, the purchase price of the obligation must be the fair market price of the obligation on an established market. This means that you may not pay a premium and that you may not accept a lower interest rate than is usually paid in order to adjust the yield on an obligation. The market price of a certificate of deposit issued by a commercial bank may be determined by reference to the bona fide bid price quoted by a dealer who maintains an active secondary market in such certificates of deposit. Investments made pursuant to an investment agreement may be regarded as being made at a fair market price if (i) at least 3 bids are received on the investment contract from persons without an interest in the Certificates; (ii) the winning bidder provides a certificate that, based on its reasonable expectations on the date the contract is entered into, investments will not be purchased or sold at a price other than their £air market value; (iii) the yield on the investment contract is at least equal to the yield offered under the highest bid received from a noninterested party; and (iv) the yield on the investment contract is at least equal to the yield offered on similar contracts. For other obligations traded on an established market, the fair market value shall be the mean between the bid and offered prices for such obligations on the date of purchase or the date the obligation becomes a Nonpurpose Obligation. If amounts must be restricted to a certain yield and obligations cannot be purchased on an established market or a bona fide fair market price cannot be C-4 established at a yield that does nat exceed the maximum permissible yield, you may acquire or hold tax-exempt securities, currency, or United States Treasury Certificates of Indebtedness, Notes and Bonds -- State and Local Government Series {"BEGS") that yield no mare than the maximum permissible yield. These SLGS are available at the Federal Reserve Bank. You should be aware that, under current Treasury Department Regulations governing SLGS, which are in effect until December 31, 1986 and may be superseded thereafter under the Tax Reform Act of 1986, such obligations may not be purchased until 20 days after a subscription for them is tendered and received by a Federal Reserve Bank or Branch. Accordingly, if current rules or similar rules containing time constraints are in effect, you must act promptly in subscribing for-SLGS in the event you determine such restricted investments are necessary. At your request, if necessary, we will adopt a resolution authorizing .you, as Trustee, to act as our agent for use in subscribing for SLGS in our name in connection with the Certificates. You, as Trustee shall maintain records for each such obligation sufficient to establish that its purchase price is the fair market value as determined under the rules set forth above. 7. Rebate Requirement. Notwithstanding the investment of Grass Proceeds at an unrestricted yield for a temporary period set forth in paragraph 2 or as part of the Debt Service Reserve Fund as described in paragraph 3, the Code requires that an amount equal to the sum of (i) the excess of the aggregate amount earned on all Nonpurpose Obligations acquired with Gross Proceeds over the amount that would have been earned if such investments had a yield equal to the yield on the Certificates, plus (ii) any income attributable to the excess described in (i}, be paid to the United States (the "Rebate Requirement"}. We have covenanted in Section 8.08 of the Trust Agreement and Section 2.1(d) and Section 2.2(f) of the Agreement to comply with the requirements of Section 148 of the Code. Accordingly, we hereby direct you to comply with the Rebate Requirement, as provided below, To enable us to fulfill our obligation under such covenant and to make such payments, you are hereby directed and you hereby covenant to (i} prepare within 25 days after the close of each Certificate Year (defined as the one year period beginning on the day after the expiration of the preceding Certificate Year, with the first Certificate Year beginning on the date of delivery of the Certificates and ending one year later) beginning with the Certificate Year ending _, and within 25 days after retirement of the last obligation in the issue, a statement setting forth the Rebate Amount (as C-5 ~. , described in paragraph 7.4) and the Aggregate Rebate Amount (as described in paragraph 7.5) as of the end of such Certificate Year, and the method for making the determination in any form or statement prescribed therefor by the Internal Revenue Service or the U.S. Treasury and (ii) effect the transfers required by paragraph 8.5. To comply with the Rebate Requirement, the procedures described below should be followed: 7.1. With respect to all Nonpurpose Obligations acquired in any fund or account established and held by the Trustee, you shall record the following information: (i) purchase date, (ii) purchase price, {iii) information establishing that the purchase price is the fair market value as of such date (egg., the published quoted bid by a dealer in such an investment an the date of purchase), {iv} any accrued interest paid, {v) face amount, (vi) coupon rate, (vii) periodicity of its interest payments, {viii} disposition price, (ix} any accrued interest received, (x} disposition date. To the extent any investment is allocated to these funds or accounts, it sha11 be treated as if it were acquired at its fair market value at that time. 7.2. The last day of each Certificate Year-and the date on which the last of the Certificates is redeemed or matures shall constitute a "Determination Date". Not less than 25 days after each Determination Date, you shall determine the amount of earnings received during the period beginning on the date of issue and ending with the Determination Date with respect to each investment described in paragraph '1.1. In calculating the amount of such earnings, you shall take into account {i) the purchase price of each investment in accordance with paragraph S above, (ii) any discount or premium on the purchase price on the investment amortized over the period from its date of purchase or, if different, the date on which it becomes Gross Proceeds as a Nonpurpose Obligation to its date of scheduled maturity in accordance with the method of amortization of the discount applicable under federal income tax Law, and (iii) any gain or loss on the date of disposition of any investment determined by subtracting from the disposition price of the investment either {x) the purchase price thereof, or {y) the fair market value thereof on the date it became Gross Proceeds as a Nonpurpose Obligation, whichever is applicable. You may not take into account any transaction costs incurred in acquiring, carrying, selling or redeeming such obligations. C-6 7.3. Not less than 25 days after each Determination Date, you shall calculate the amount of earnings, based upon the respective purchase prices of the Nonpurpose Obligations (or fair market value of such Nonpurpose Obligations where applicable-see paragraph 5} that would have been received with respect to each investment described in paragraph 7.1 during the period commencing with the date of issue and ending with such Determination Date if their annual yield had been equal to the yield on the Certificates. The hypothetical amount determined hereunder should, where applicable, be based on corresponding and contemporaneous reductions in the amounts invested in Nonpurpose Obligations. For purposes of this calculation, the yield on the Certificates shall be based on the actual yield on the Certificates during the period from the date of delivery of the Certificates and the date the computation is made and based on the delivery price of the Certificates. The delivery price of the Certificates is the initial offering price to the public (not including bond houses, brokers and similar persons acting in the capacity of underwriters or wholesalers) at.which a substantial amount of the Certificates were sold or, if privately placed, the price paid by the first buyer of such obligations or the acquisition cost of the first buyer. The purpose of the calculations under this paragraph is to determine the amount that would have been earned on all Nonpurpose Obligations if the yield on each such Nonpurpose Obligation had been equal to the composite yield on the Certificates for the period beginning on the date of issue and ending on the Determination Date. 7.4. Nat less than 2S days after each Determination Date, you shall calculate the net amount equal to the sum of all amounts determined in paragraph 7.2 as of each Determination Date less the amount computed pursuant to paragraph 7.3 as of such Determination Date. Such excess, if any, shall be the "Rebate Amount". The Rebate Amount shall not be less than zero. 7.5. Not less than 25 days after each Determination Date, you shall determine the "Aggregate Rebate Amount." The Aggregate Rebate Amount as of the first Determination Date shall be the Rebate Amount. The Aggregate Rebate Amount as of the second Determination Date and subsequent Determination Dates shall be the Rebate Amount as of the current Determination Date (i) reduced, but not below zero, by the amount of any payments made to the United States as described in paragraph 7.8, and {ii) increased by the amount of earnings during the Certificate Year on the Aggregate Rebate Amount determined as of the preceding Determination C-7 ~- „r Date (and as reduced by any payments to the United States of America during such Certificate Year beginning with the preceding Determination Date as described in paragraph 7.7.) Pursuant to Section 8.07 of the Trust Agreement, you shall, on or prior to 25 days following the Determination Date, make deposits to the Rebate Fund sufficient to bring the amount on deposit in the Rebate Fund to an amount equal to the Aggregate Rebate Amount. If the Aggregate Rebate Amount is less than the amount on deposit in the Rebate Fund, you shall transfer such excess from the Rebate Account, but not the Earnings Account, to the Claims Payment Fund. 7.5. Any amount earned on amounts in the Basic Premium Payment Fund, and amounts earned on such amount, if allocated to the Basic Premium Payment Fund, shall not be taken into account for purposes of determining the amounts. described in paragraphs 7.2, 7.3 and 7.7 if the gross earnings on .such fund is less than $100,000 far the Certificate Year,. unless the Providees elect to take such amounts into account on the date of delivery in the Trust Agreement or a related document. In the absence of an election, such obligation shall be ignored for purposes of the above calculations. 7.7. The amount of earnings on the Aggregate Rebate Account includes all income attributable to the excess determined in paragraph 7.5 whether or not that income exceeds the yield on the Certificates, and may not be taken. into account in the calculation of the Rebate Amount. You shall determine the amount of such earnings as of each Determination Date by treating the Aggregate Rebate Amount to that date as being invested in cash or a specified investment (but only to the extent such cash or specified investment is actually held). To the extent there are no investments or cash, the Aggregate Rebate Amount shall be deemed to have been invested at the Bond yield for purposes of determining the Aggregate Rebate Amount. The earnings on the Rebate Account and the Earnings Account during the preceding Certificate Year shall be transferred by you to the Earnings Account. 7.8. The Aggregate Rebate Amount sha11 be paid to the United States in installments. The first payment shall be made not later than 30 days after the end of the fifth Certificate Year after the date of delivery of the Certificates;~;~each subsequent payment must be made not later than 5 years after the preceding payment was due. Payments shall be made first from the Earnings Account and then from the Rebate Account. Each payment must be in an amount not less than 90 percent of the Aggregate Rebate Amount as of C-8 the close of the last Certificate Year prior to payment. All of the Aggregate Rebate Amount must be paid to the United States within 60 days after the last payment of principal of the Certificates. Payment shall be made to the Internal Revenue Service Center, Philadelphia, Pennsylvania 19255 and shall be accompanied by a copy of the Eorm 8038 filed in connection with the Certificates and a statement summarizing the determination of the amount required to be paid to the United States. If the net amount determined in paragraph 7.3 exceeds the net amount determined in paragraph 7.2 as of any Determination Date, you shall not recover the amount of such deficit from any Aggregate Rebate Amount previously paid to the United States or from amounts on deposit in the Earnings Account. 7.9. The Rebate Requirement shall be treated as being met if all Gross Proceeds are expended for the governmental purposes for. which the Certificates were issued within six months after the date of delivery or if all Grass Proceeds, other than an amount not exceeding the lesser. of 5% or $].00,000 of such Gross Proceeds (the "Remaining Proceeds") are so spent and the Remaining Proceeds are spent within 12 months of the date of delivery of the Certificates. Notwithstanding the fact that all such proceeds are spent within 6 months, or l2 months, as the case may be, of the date of delivery and no other Grass Proceeds are anticipated for the remainder of the term of the issue, if Gross Proceeds becomes available after the end of the initial 6-month or 12-month period, the Rebate Requirement shall be met when the Aggregate Rebate Amount earned with respect to the Gross Proceeds that arises following the end of the initial f-month or 12-month period is paid to the United States in accordance with paragraph 7.8. $. Amendment. In order to comply with the covenants in the Trust Agreement and the Agreement regarding compliance with the requirements of the Code and the exemption from federal income taxation of the interest paid and to be paid on the Certificates, the procedures described in this letter may be modified by the Provider or the Providees as necessary, based on the advice of counsel, to comply with rulings, regulations, legislation or judicial decisions as may be applicable to the Certificates. By signature of your officers below, who are authorized to act for and on your behalf for this purpose, you acknowledge that you have examined this letter and agree to follow the instructions and guidelines it contains in discharging the duties and obligations accepted by you under C-9 1 , ~ .1 ~ the Trust Agreement and to fulfill your commitments under the Agreement. Sincerely, COUNTY OF ALPINE as Providee By COUNTY OF AMADOR as Providee By COUNTY OF BUTTE as Providee h CALAVERAS COUNTY OF COLUSA as Providee By COUNTY OF DEL NORTE as Providee By C-1Q By COUNTY OF FRESNO as Pravidee By COUNTY OF GLENN as Providee By COUNTY OF HUMBOLDT as Pravidee By COUNTY OF IMPERIAL as Providee By COUNTY of INYO as Pravidee By COUNTY OF KINGS as Providee By COUNTY OF LAKE as Providee By C-11 r COUNTY OF LASSEN as Providee By COUNTY OF MADERA as Providee By COUNTY OF MARIPOSA as Providee By COUNTY OF MENDOCINO as Providee By COUNTY OF MERGED as Providee By COUNTY OF MODOC as Providee By COUNTY OF MONO as Providee By C-12 COUNTY OF NEVADA as Providee By COUNTY OF PLACER as Providee By COUNTY OF PLUMAS as Providee By COUNTY OF SAN LUIS OBISPO as Providee By COUNTY OF SANTA BARBARA as Providee By COUNTY OF SANTA CRUZ as Providee By COUNTY OF SHASTA as Providee By C-i3' '\ ` E ~ ~ , +. COUNTY OF SIERRA as Providee By COUNTY OE SISKIYOU as Providee By COUNTY OE SOLANO as Providee By COUNTY OF SONOMA as Providee By COUNTY OF STANISLAUS as Providee By COUNTY OE SUTTER as Providee By COUNTY of TEHAMA as Providee By C-14 ~. COUNTY OF TRINITY as Providee By COUNTY OE TUOLUMNE as Providee By COUNTY OF YUBA as Providee By CSAC EXCESS INSURANCE AUTHORITY as Provider By: Title: SEATTLE-FIRST NATIONAL BANK, as Trustee By: Title: C-1S ~ .f ,. , v EXHIBIT D NOTICE ADDRESSES If to the Providees: County of Alpine County of Amador County of Butte County of Calaveras County of Co~lusa County of Del Norte County of Fresno County of Glenn County of Humboldt D-Z • r~ County of Imperial County of Ingo County of Kings County of Lake County of Lassen County of Madera County of Mariposa County of Mendocino County of Merced County of Modoc D-2 ~ ,ti .~ ..~ ~• County of Mono Gounty of Nevada County of Placer County of Plumas County of San Luis Obispo Gounty of Santa Barbara County of Santa Cruz County of Shasta County of Sierra County of Siskiyou D-3 County of Solano County of Sonoma County of Stanislaus County of Sutter County of Tehama County of Trinity County of Tuolumne County of Yuba If to the Frvvider: CSAC Excess Insurance Authority 9310 Tech Canter Drive, Suite 290 Sacramento, California 95826 Attention: If to the Trustee: Seattle-First National. Bank 1001 Fourth Avenue - 9th Floor Seattle, Washington 98154 Attention: David Pringle D-4 i ~ . ,. EXHIBIT E SCHEDULE OF TRUSTEE FEES ~. E-1