For and in consideration of the mutual covenants contained herein, the parties to this Joint Self-Insurance Agreement (“SIA”) hereby amend and restate their Predecessor Self-Insurance Agreements as follows:

1. Predecessor Self-Insurance Agreements. This SIA is based upon and arises out of prior self-insurance agreements among most of the same parties to this SIA. The original Predecessor SIA was made and entered into as of December 30, 1976, by and between certain public utility districts, most of which are signatory hereto, and was previously amended and restated as of July 21, 1978, October 21, 1982, July 25, 1987, July 28, 1988, March 30, 1995, February 27, 1997, and March 16, 2000.

All Predecessor SIAs prior to the February 27, 1997 amended and restated SIA were executed under the name “Washington Public Utility Districts’ Utilities System Joint Liability Self-Insurance Agreement.” The February 27, 1997 amended and restated SIA added Property Coverage through the Property Risk Pool to the SIA, and the word “Liability” was deleted from the title. Effective June 17, 1999, the name “Washington Public Utility Districts’ Utilities System” was changed to “Public Utility Risk Management Services” (or “PURMS”). On March 16, 2000 the SIA was again amended and restated to add a Health & Welfare Risk Pool, effective as of April 1, 2000.

2. Amended and Restated Self-Insurance Agreement. By this SIA, the Members of the Public Utility Risk Management Services Joint Self-Insurance Fund (“Fund”) wish to redefine their duties and obligations to and among themselves with respect to their participation in the PURMS Risk Pools known as the Liability Pool and Property Pool, and also wish to establish a separate but related Risk Pool to be known as the Health & Welfare Pool (or “H&W Pool”) to provide self-insured Health & Welfare Benefits Coverage (“H&W Coverage”) to Members. The Members therefore agree that, as of the date hereof, this SIA supersedes the Washington Public Utility Districts’ Utilities System Joint Liability Self-Insurance Agreement dated December 30, 1976, and all subsequent restatements thereof and amendments thereto. The Members further agree that this SIA, the Operational Rules and any Procedural Memoranda issued shall hereafter govern the operation of the Fund, the Liability Pool, the Property Pool and the H&W Pool, and the rights and obligations of their respective Members; provided, however, that Defense and Coverage for Liability Claims and Coverage for Property Losses arising from Loss Events which took place prior to the date of this SIA shall be determined pursuant to the terms of the Predecessor SIA then in effect, except as may be otherwise provided under ¶ 5.4 by the Board. Each Member signing this SIA hereby agrees to be bound by its terms and all amendments hereto adopted by the Members in accordance with the procedures contained in ¶ 5.2 of this Agreement, and by the decisions of the Board.1

3. Definitions. The words defined in the Definitions section of this SIA (which is set forth in § II as a separate document but which is incorporated herein fully by this reference) shall have the meanings stated therein when set out in initial caps and used in the SIA, Operational Rules or Procedural Memoranda. Unless specifically provided otherwise, for the Liability Coverage, the term “Employee” shall include “Insured Agents” and “Insured Volunteers,” and with respect to the H&W Coverage, “Employee” shall include such Employee’s Dependents, unless otherwise inconsistent in the context.

4. Status of the Parties, Purpose of Agreement and Authority of the Fund.

4.1 Nature of Parties/Purpose and Existence of Fund. The Fund is an unincorporated association of Local Government Entities, and is organized and existing under RCW 48.62.010 et seq., and other applicable statutes enacted to permit and facilitate the joint exercise by Local Government Entities of their powers. The Fund consists of three Risk Pools, the Liability Pool, the Property Pool and the Health & Welfare Pool, which are governed by a common Board of Directors, subject to ¶¶4.4.2 and 6.3.1 regarding Board Votes on issues affecting particular Risk Pools.

The Liability Pool has been operating continuously since January 1, 1977, under the Predecessor Self-Insurance Agreements. The purpose of establishing and maintaining the Liability Pool has been and is to allow the Members to achieve greater economy and efficiency in their functions and operations regarding their insurance coverages and risk management by providing Members and their Employees with protection against liability for claims by Third-Parties through joint self-insurance and the joint purchase of insurance or excess insurance.

The Property Pool has been operating continuously since it was established on February 27, 1997 by the amended and restated SIA of that date. The purpose of establishing the Property Pool was to provide Members with coverage for direct physical loss or damage to the property of Members or their Employees through joint self-insurance and jointly purchased Excess Insurance.

The H&W Pool was established by Unanimous Vote of the Board on March 16, 2000, effective April 1, 2000. The purpose of establishing the H&W Pool was to permit each Member to provide its Employees and Dependants with self-insured Health & Welfare Benefits Coverage tailored specifically to each Member’s needs, as defined by each Member’s respective Coverage Booklet, and to achieve cost savings for all Members through the joint administration of their respective Benefits Plans and the joint purchase of Stop Loss Insurance acquired by the H&W Pool.

4.2 Authority of Fund/Independent Legal Entity. The Fund is an independent legal entity with all of the authority granted or implied by applicable Washington law and by this Agreement, including without limitation, the authority to sue or be sued in its own name, the authority to hire attorneys to defend Members and Employees against Liability Claims, and the authority to settle or adjust Claims, defend or prosecute lawsuits, and pay judgments on behalf of Members and Employees. Without limiting the generality of the foregoing, the Fund shall have the power and authority, exercised through the Board in accordance with this Agreement, specifically:

(a) To acquire, collect, hold and dispose of money and other assets;

(b) To receive loans or grants and to incur debts and liabilities;

(d) To hire and terminate employees, agents and independent contractors;

(e) To appoint a treasurer, who shall be the Auditor, and to invest Fund assets;

(f) To establish and implement rules, policies and procedures governing the Fund’s operations;

(g) To establish and delegate authority to committees and subcommittees;

(h) To decide issues and promulgate Board Decisions binding upon the Fund’s Members and to amend the Agreement as deemed appropriate (in accordance with the Voting Standards set forth in ¶ 5 of this Agreement);

(i) To establish and implement Risk-Management Programs, including Loss Control Guidelines, in accordance with ¶ 17;

(j) To establish and impose penalties upon Members, including withdrawal of Fund Coverage or expulsion of Members, for violation of this Agreement or the Operational Rules or Board Decisions, as provided in this Agreement; and

(k) To possess and to exercise any other powers and to perform all other functions reasonably necessary to effectuate the purposes of the SIA, as amended from time to time.

It is the intent of this Agreement to permit the Fund and its Board of Directors to exercise powers to the full limit as permitted by RCW 48.62, et seq., and any other applicable laws, so long as the exercise of such powers is not inconsistent with this Agreement.

4.3 The Fund Distinguished from the System. The System is an unincorporated association formed for the purpose of obtaining group insurance for its members. The System offers its members the opportunity to participate in a number of different programs of jointly acquired insurance. The Fund is one such program, but it is a separate and distinct entity from the System. Members of the Fund must also be members of the System. However, members of the System are not required to participate in the Fund, and membership in the System does not by itself create any rights in or liabilities to the Fund or any of its Risk Pools.

4.4 The Fund’s Joint Operation of the Risk Pools.

4.4.1 Participation in or Withdrawal from Risk Pools at Members’ Choice. Local government entities that are or become signatory to this Agreement may choose to become Members in any or all of the Fund’s Risk Pools, subject to, where applicable, the terms for New Members contained in ¶ 18, and the terms for Withdrawal contained in ¶ 20.

4.4.2 Common Board of Directors/Right to Vote. The Board of Directors for the Fund shall govern all of the Fund’s Risk Pools pursuant to the terms of this SIA, subject to ¶ 6.3.1’s restriction on the right to Vote on issues affecting a particular Risk Pool to the Directors representing Members of that Risk Pool. Any issue affecting the Fund generally, or all Risk Pools, shall be decided by the full Board of Directors of the Fund by the Voting Standard applicable to the issue. The full Board, by Majority Vote, shall also decide whether an issue affects the Fund generally or two or more of its Risk Pools (and therefore should be decided by a Vote of the full Board) versus whether the issue affects only one Risk Pool (and therefore should by decided only by the Directors whose Members participate in that Risk Pool). (See also, ¶ 6.3.1.)

4.4.3 Separate Assessments and Accountings for Risk Pools. The Fund shall assess Members in each of the Risk Pools separately under their respective Assessment Formulas and the assets of each Risk Pool shall be accounted for separately and invested separately by the Fund.

4.4.4 SIA Provisions Applicable to “The Fund” Govern the Risk Pools. Throughout the SIA, “the Fund” used generally shall refer to the legal entity that operates the Risk Pools and shall mean and include the Liability Pool, the Property Pool and the H&W Pool and, where applicable in the context, can refer to the Governing Bodies of the Fund and its Risk Pools. The provisions of general application in this SIA regarding governing and operating “the Fund” shall apply to all Risk Pools and Members therein, unless the context indicates otherwise. A Member of any Risk Pool is deemed to be a Member of “the Fund.” A Member that ceases being a Member of any and all Risk Pools shall no longer be a Member of “the Fund.”

4.5 Risk Pools Entitled to Beneficial Use of Their Respective Assets. The Fund shall be deemed the legal owner of all assets and investments generated by the Risk Pools through Assessments or otherwise, which shall be held by the Fund in trust for the use and benefit of its respective Risk Pools and their respective Members, and any other assets coming into the Fund’s possession in connection with the Fund’s operations; provided, however, that:

4.5.1 Assets generated by a particular Risk Pool through Assessments or otherwise shall be used for the benefit of that Risk Pool and the Members thereof, consistent with the terms of this SIA, and not for the direct benefit of any other Risk Pools; provided, however, that Risk Pool Assets may be used: (a) to make Inter-Pool Loans in accordance with ¶ 13.3.1; (b) for Program Development in accordance with ¶ 13.3.2; and (c) for the establishment of a Special Purpose Account in accordance with ¶ 13.4.4 (see also ¶ 13.1.2 re uses of Actual Risk Pool Balances, and ¶ 13.2.4.2 re uses of H&W Pool Reserves).

4.5.2 The income and expenditures with respect to each Risk Pool shall be accounted for separately and set forth separately on the Fund’s financial statements;

4.5.3 Only Directors representing Members participating in a particular Risk Pool may Vote on the use or disposition of the assets or investments of that Risk Pool; and

4.5.4 Upon the Dissolution of a particular Risk Pool, the assets and investments held by the Fund for the benefit of that Risk Pool shall be used on behalf of or distributed to the Members of that Pool in connection with the Dissolution, all in accordance with ¶ 21 governing Dissolution.

4.6 Members Have No Direct Ownership Interest in Fund or Risk Pool Assets. Except as may be provided otherwise in this Agreement, no Member or Employee or Former Member of any Risk Pool shall have any claim to, nor any right, title, or interest in, any Assets held by the Fund, regardless of whether such Assets are held by the Fund on its own behalf or in trust for a particular Risk Pool and its Members. No Third-Party, including any creditor of any Member or Employee, shall have any direct claim against, nor any right, title, or interest in or to, any Assets held by the Fund at any time.

4.7 There are no Third-Party Beneficiaries (Except Employees with Respect to Defense and Liability Coverage and H&W Coverage). No person or entity not a Member shall be construed to be a third-party beneficiary of the SIA; provided, however, that Employees shall be third-party beneficiaries but only with respect to those Substantive Rights applicable to Employees arising out of the Liability Coverage, Defense, and to the extent applicable, the Claims Resolution provisions of this Agreement (as set forth in §§ III through VI, and § VII, respectively) with respect to Liability Claims asserted against them, or arising out of the H&W Coverage as set forth in § XIV, with respect to their own H&W Claims; and provided further, that any such third-party beneficiaries shall be bound by the terms of the SIA and the Operational Rules, and all procedures set forth therein, and by the Procedural Memoranda.

4.8 Fund May Not Obligate Members Directly. The amounts payable under the Fund’s Coverages (§§ III through VI, §§ X – XI, and § XIV) as well as any other obligations of the Fund to or on behalf of Members or Employees under this SIA, shall be paid only from the Assets available in the Fund, subject to the restriction limiting the use of Assets held on behalf a particular Risk Pool for the benefit of that Risk Pool and its Members, as provided in ¶ 4.5. The Fund shall not have authority to obligate any Member to independently pay any amount except pursuant to the Fund’s authority to make Assessments of the Members of its Risk Pools in accordance with ¶ 13.

4.9 Service of Process on Fund. The Fund hereby designates the Washington State Risk Manager as its attorney solely for the purpose of receiving service of all legal process issued against the Fund in Washington based on causes of action arising in Washington. The Fund further designates its Administrator to receive on behalf of the Fund all legal process against the Fund served upon the State Risk Manager.

5. Program Documents, Amendment Procedures and Voting Standards.

5.1 Basic Self-Insurance Program Documents. The Fund shall be governed by and operate in accordance with the Program Documents, which shall consist of the Self-Insurance Agreement; the Appendices to the Self-Insurance Agreement; the Operational Rules; and Procedural Memoranda.

5.1.1 The Self-Insurance Agreement. The primary Program Document is the Self-Insurance Agreement, or SIA, which consists of fifteen (15) separate Sections (numbered § I - § XV) as follows:

§ I Interlocal Agreement—executed by the Members pursuant to RCW 39.34 et seq., this Section establishes the structure and operations of the Fund, sets forth the Members’ basic rights and obligations with respect to the Fund, and incorporates by reference fourteen (14) additional Sections of the SIA.

§ II Definitions-- which are intended to have common meanings throughout the Program Documents, except as otherwise provided;

§ III Commercial General Liability Coverage--which includes the Insuring Agreements and Conditions and the Exclusions for the Fund’s “CGL Coverage”;

§ IV Public Officials and Entity Liability Coverage--which includes the Insuring Agreements and Conditions and Exclusions for the Fund’s “PO&E Coverage”;

§ V Automobile Liability Coverage--which includes the Insuring Agreements and Conditions and Exclusions for the Fund’s “Auto Coverage”;

§ VI Pollution Liability Coverage--which includes the Insuring Agreements and Conditions and Exclusions for the Fund’s “Pollution Coverage”;

§ VII Claims Resolution--which addresses, among other subjects, procedures for the determination of Coverage, Members’ duties, Member participation in litigation, selection of Defense Counsel for and Defense of Liability Claims, and settlement and payment of Coverage;

§ VIII Liability General Assessment Formula--which determines the respective amounts Members of the Liability Pool shall pay for their jointly self-insured Liability Coverages under §§ III-VI;

§ IX Liability Premium Assessment Formula--which determines the respective amounts Members of the Liability Pool shall pay for their jointly purchased Excess Liability Insurance;

§ X Property Coverage--which includes the Interest and Property Insured and the Conditions and Property and Perils Excluded with respect to the Fund’s “General Property Coverage” (excluding Member’s Autos, which are covered separately under § XI);

§ XI Auto Physical Damage Coverage--which includes the Interest and Property Insured and the Conditions and Property and Perils Excluded with respect to the Fund’s Auto Physical Damage Coverage;

§ XII Property General Assessment Formula--which determines the respective amounts Members of the Property Pool shall pay for their jointly self-insured Property Coverages under §§ X-XI;

§ XIII Property Premium Assessment Formula--which determines the respective amounts Members of the Property Pool shall pay for their jointly purchased Excess Property Insurance;

§ XIV Health & Welfare Coverage--which contains the terms and conditions for providing H&W Coverage for the Employees and Dependents of Members of the H&W Pool based on the Benefits set forth in Members’ respective Coverage Booklets; and

§ XV Health and Welfare General Assessment Formula--which determines the respective amounts Members of the H&W Pool shall pay as a result of their membership in the H&W Pool for their own Employees’ H&W Claims, Shared H&W Claims and Operational Costs, including Stop Loss Insurance.

5.1.2 Appendices to Self-Insurance Agreement. The Appendices to the SIA are set forth in § XVI and include: the Fund’s Investment Policy (Appendix A); the Administrator’s Contract (Appendix B); the Broker’s Contract (Appendix C); and General Counsel’s Engagement Letter (Appendix D). While the Appendices are referenced in the SIA, they are not deemed a part of the SIA, and except for the Investment Policy which can only be amended by a Two-Thirds Vote of the Board, the other Appendices can be modified by the Administrative Committee, subject to further modification or reversal by Majority Vote of the Board pursuant to § I ¶ 6.2.8.

5.1.3 Operational Rules. Another Program Document is the Operational Rules which is set forth separately from the SIA under its own name. The Operational Rules are designed to provide greater detail for the authority and operation of the Fund in supplement to the SIA.

5.1.4 Procedural Memoranda. Procedural Memoranda are documents which may be issued from time to time by the Administrative Committee reflecting Administrative Committee decisions on issues and procedures affecting the day-to-day practical operation of the Fund and decisions regarding interpretation of various Program Documents. Procedural Memoranda are subject to Board modification or reversal by Majority Vote pursuant to § I ¶ 5.2.2(c).

5.1.5 Inter-Relation of Program Documents. Although the Self-Insurance Agreement is set forth in separate Sections, all Sections shall be deemed part of the same transaction and shall be construed together. In the event of conflicting terms between or among the Program Documents, such Documents shall govern in the following descending order of authority: first the SIA; next the Operational Rules; and last, the Procedural Memoranda.

5.2 Amendment Procedures.

5.2.1 Statement of Purpose. Based on experience under Predecessor SIAs, the Members of the Fund have determined that to require that all current Fund Members unanimously approve every amendment to the SIA and unanimously re-execute the Inter-local Agreement to make any such amendment binding was cumbersome and inefficient. The Members therefore desire to establish Amendment Procedures and Voting Standards for amending all Program Documents that alleviate these problems by permitting the Board to amend most (but not all) of the provisions of the Program Documents by a Voting Standard less stringent than a Unanimous Vote, and any such amendments shall become effective without the necessity of all Members executing a revised Inter-local Agreement.

5.2.2 Warrant of Authority and Voting Standards for Amending Program Documents.2 Each Member hereby agrees, represents and warrants that such Member’s approval and execution of the Inter-local Agreement Section of the Self-Insurance Agreement and adoption of the Operational Rules incorporated therein is pursuant to specific authority granted by an Authorizing Resolution duly enacted by such Member’s governing body. Each Member further agrees, represents and warrants that such constitutes a lawful agreement by such Member to be bound by the authority of the Board under this SIA to amend the Program Documents, and bind such Member and its Employees thereby, pursuant to the following Voting Standards:

(a) The Self-Insurance Agreement may be amended by Super-Majority Vote of the Board, except where a Unanimous Vote, together with an Authorizing Resolution from each Member, is required in accordance with ¶¶ 5.3 and 5.5.

(b) The Operational Rules may be amended by a Two-Thirds Vote of the Board, except for those provisions in the Operational Rules dealing with subjects for which the SIA mandates amendment by a Super-Majority Vote or Unanimous Vote; and

provided, however, that any more specific provision in a Program Document that provides for amendment on a particular subject by a different Voting Standard shall supersede the general Voting Standards in sub-¶¶ (a) through (c) above; and provided further, that the Voting Standards for amending the Program Documents contained in sub-¶¶ (a) through (c) above shall be subject to the restrictions contained in ¶¶ 5.3 and 5.4 below.

5.3 Provisions Subject to Amendment Only by Unanimous Vote and Authorizing Resolutions. Any amendment to the SIA that requires a Unanimous Vote shall also require approval by an Authorizing Resolution of the governing body of each Member to become effective. (see ¶ 5.5). The following paragraphs shall only be amended by Unanimous Vote:

(a) The provisions in the following paragraphs dealing with the following subjects: ¶¶ 4.2 through 4.8 (re basic Fund structure and authority); ¶¶ 5.2 through 5.6 (re Amendment Procedures and Voting Standards); ¶¶ 6.1- 6.3 (re the Board of Directors); ¶ 7.6 (re Decisions on Issues not on Agenda); ¶ 13 (re Assessments); ¶ 14 (re Fund’s Excess Insurance); ¶ 19 (re Appeal Procedures); ¶ 20 (re Withdrawal from a Risk Pool or the Fund); ¶ 21 (re Dissolution of a Risk Pool or the Fund) and ¶ 24.5 (re Arbitration and Venue); and

(b) Wherever the SIA or Operational Rules specifically so provide with respect to specified subjects.

5.4 Conditions and Restrictions on Amendment of Program Documents by Less than Unanimous Vote of the Board.

5.4.1 Prospective Amendments. Any and all provisions of the Program Documents, whether dealing with Procedural or Substantive Rights, may be amended by the applicable Voting Standard for prospective application with respect to all Fund matters addressed by the Program Documents and all Loss Events (and related Claim Resolution issues) that take place after the effective date of the amendment. Unless otherwise provided in the language of the Prospective Amendment, the effective date thereof shall be the date the Board voted to approve the amendment.

5.4.2 Rules Regarding Amendments Having Retroactive Effect.

5.4.2.1 Amendments Effecting Procedural Rights. Any amendment affecting a Member’s or Employee’s Procedural Rights under the SIA shall, unless otherwise provided in the amendment, automatically be given “retroactive” application in the sense that, from its effective date, such Procedural Amendment shall govern the resolution of all pending Claims and all Loss Events, known or unknown, even if they happened prior to the effective date of the Procedural Amendment, and regardless of the Procedural Rights that were in effect in the applicable SIA at the time of the Loss Event. This ¶ 5.4.2.1 shall also apply to Members and their Employees who later become Former Members.

5.4.2.2 Retroactive Grants of Coverage. By Super-Majority Vote, the Board may amend the SIA to provide additional, expanded or different Liability or Property Coverages retroactively, to a date certain specified in the amendment, which shall apply to all unresolved known and unknown Loss Events that happened after such amendment’s retroactive effective date; provided, however, that Former Members on the date the amendment is approved by the Board shall not be entitled to the benefit of such Retroactive Coverage. The cost of providing such Retroactive Coverage shall be paid from the Assets constituting the Actual Risk Pool Balance of the Risk Pool receiving the Retroactive Coverage, which shall be replenished through normal General Assessments of the Risk Pool’s Members; provided, however, any Risk Pool Member that voted against the Retroactive Coverage that gives notice of its intent to withdraw under ¶ 20.1 within thirty (30) days of the Board Vote to adopt the Retroactive Coverage shall not be entitled to such Coverage and shall be exempt through the end of the calendar year of its Withdrawal from paying its Assessment Share of the portion of any General Assessment relating to Coverage Payments and Defense Costs or Property Claim Costs the Fund pays for Covered Claims arising from the Retroactive Coverage, and shall remain exempt therefrom as a Former Member. A Member or Employee involved in a Covered Liability Claim arising out of the Retroactive Coverage shall have the rights and obligations relating to Defense under the SIA currently in effect.

Each Member of the H&W Pool may provide for retroactive grants of H&W Coverage for their respective Employees and their Dependants as provided for in the H&W Coverage § XIV ¶ 2.2.3, with respect to providing a Benefit to Employees generally, and in § XV ¶ 5.2, with respect to a specific H&W Claim which has been denied.

5.4.2.3 No Amendment Shall be Applied Retroactively to Deprive Members or Employees of “Vested” Substantive Rights for Covered Claims. No amendment of the SIA or Operational Rules shall be applied to the extent that the effect would be to deprive a Member or Former Member (or their Employees to the extent such Rights are applicable hereunder, without such Member’s or Former Member’s written consent), of a Vested Substantive Right with respect to Coverage for any Covered Claim arising from any Loss Event that has taken place as of the date of the Board’s adoption of the amendment. The Substantive Rights of a Member (or Employee of a Member) of the Liability or Property Pools, whether under the current Program Documents or under Predecessor SIAs, shall be deemed Vested as of the date of the Loss Event. Except for the right of Appeal pursuant to ¶ 19.2.3 herein with respect to the denial of Coverage for an H&W Claim, any “Substantive Rights” of Employees and Dependants of Members of the H&W Pool, shall be determined in accordance with such Members applicable Coverage Booklets, and are a matter between such Member and its Employees.

5.5 Authorizing Resolutions by Members. Each current Member of the Fund that executes this SIA, amended and restated as of December 7, 2001, and each New Member that hereafter joins the Fund, shall provide the Administrator with a formal Authorizing Resolution duly enacted by the Member’s or New Member’s governing body. The Authorizing Resolution shall specifically authorize the Member or New Member to execute the SIA, or shall ratify the prior execution thereof by the Member’s or New Member’s Director, and shall provide that the Member will be bound by any amendments to the Program Documents approved in accordance with the Amendment Procedures and Voting Standards contained in this ¶ 5. In addition, any amendments to the Program Documents on subjects required under the terms of ¶ 5.3 to be passed by Unanimous Vote must also be approved by an Authorizing Resolution enacted by each Member to become effective; provided, however, that such Resolutions may ratify the prior Board Votes of Members’ Directors, the documents previously executed by Members’ Directors, and/or such Member’s de facto operation under or acceptance of the benefits under and terms thereof. The effective date for execution of the SIA or for any amendments thereto shall be the effective date stated therefore in the Board’s Resolution regarding the same, regardless of whether such Authorizing Resolution approves prospective execution or ratifies prior execution by the Member’s Director. Amendments on subjects governed by a Voting Standard other than a Unanimous Vote shall become effective as of the Effective Date when passed by the Board by the applicable Voting Standard, without the need for an Authorizing Resolution from each Member and without each Member’s Director actually having to execute a document reflecting such amendment.

5.6 Adoption of the SIA and Operational Rules. The Fund and each Member hereby adopts the SIA, amended and restated and effective as of December 7, 2001, consisting of this Inter-local Agreement and SIA §§ II through XV, which are set forth as separate documents in the SIA Notebook and incorporated herein by this reference. (see ¶ 5.1). The Fund and each Member also hereby adopt the Operational Rules, amended and restated and effective as of April 1, 2000 (also set forth as a separate document in the SIA Notebook).

5.7 Documenting Amendments. Amendments requiring a Unanimous Vote shall be prepared in writing for Board discussion and, if adopted, shall be signed by the Director for each Member. As soon as reasonably possible, all Members shall deliver copies of their Authorizing Resolutions therefore to the Administrator. Copies of the fully executed amendment shall be distributed to the Members. Amendments requiring a less than Unanimous Vote, and amendments to the other Sections of the SIA (i.e., Definitions, Coverages, Claims Resolution, and Assessment Formulas), and to the Operational Rules, shall be prepared in writing and signed by any two Fund Officers to establish the authenticity of the amendment. A copy of the amendment as signed by the Fund Officers, and a revised version of the SIA Section reflecting the amendment, shall be distributed to each Member.

6. Board of Directors.

6.1 Composition of Board.

6.1.1 Designation of Director. The business and affairs of the Fund and its respective Risk Pools shall be managed and governed by a Board of Directors, which shall be the policy-making body of the Fund. Each Entity that is a Member of a Risk Pool shall be entitled and required to appoint one Designated Director to the Board, and in addition, to identify a First and Second Alternate Director, in accordance with the Operational Rules. With respect to each Member that is a public utility district, its Designated Director shall be one of its Commissioners. With respect to each Member that is not a public utility district, it may appoint any Officer or member of its board to act as its Director. Alternative Directors and Employee Designees may be Employees. The specific procedures and timing for identifying Designated Directors, First and Second Alternate Directors, and Employee Designees, and their relative voting rights on behalf of the Member, are set forth in the Operational Rules. (See Op. Rules, ¶ 6.1.1).

6.1.2 Employee Designees. In addition to the Director designation required pursuant to ¶ 6.1.1, each Member shall, on an annual basis, in writing, notify the Administrator of the identity of any of its Employees who are entitled to vote on behalf of the Member at Board Meetings in the event the Director or an Alternate Director is unable to attend, as more specifically provided for in the Operational Rules.

6.1.3 Authority of Employee Designees. Unless the context of the SIA or Operational Rules clearly indicates otherwise, Employee Designees shall be included within the meaning of “Director” and shall have all of the same rights, authority and obligations as the Directors for whom they are substituting.

6.2 Specific Authority and Duties of Board. In addition to managing and governing the overall affairs and business of the Fund, the Board’s authority, obligations, duties and responsibilities under this Agreement shall specifically include, but shall not be limited to:

6.2.1 By the applicable Voting Standards (see ¶¶ 5.2.2 and 5.3), amending the SIA, the Operational Rules or Procedural Memoranda.

6.2.2 By Super-Majority Vote, amending the General Assessment Formulas (§§ VIII, XII, and XV) and the Premium Assessment Formulas (§ IX and XIII).

6.2.3 By Super-Majority Vote, setting the amounts of the Designated Risk Pool Balances (see ¶ 13.1.1), the Coverage Limits (e.g., § III, ¶ 2.2), and the Deductible for the Liability Coverage (e.g., § III, ¶ 2.3), and determining whether to levy any Discretionary General Assessment which would raise any Actual Risk Pool Balance to an amount greater than the applicable Designated Risk Pool Balance (¶ 13.2.3) and any Special Purpose Assessment that would increase the money in a Special Purpose Account to an amount greater than the funding level therefore originally established by Super-Majority Vote (¶ 13.2.4).

6.2.4 By Super-Majority Vote, determining whether any Local Government Entity applying for membership in the Fund pursuant to ¶ 18 shall become a New Member and, if so, upon what terms and conditions.

6.2.5 By Majority Vote, reviewing and deciding, in accordance with the Appeal Procedures contained in ¶ 19, any Appeal by a Member or Employee of any decision made or action taken by the Administrative Committee as reviewed and decided by the Executive Committee upon appeal, except as otherwise provided in ¶ 19.1(a) and (b), and subject to the Board’s authority in ¶ 6.2.11.

6.2.6 By Majority Vote, establishing Special Purpose Committees composed of Directors and/or Members’ staff and, except for matters requiring decision by a Voting Standard more stringent than a Majority Vote, delegating such authority thereto as the Board deems appropriate (see ¶ 9.1).

6.2.7 By Majority Vote, determining what Primary and Supplemental Excess Coverages and what Stop Loss Coverage the Fund will acquire from insurance carriers on behalf of the Members of its Risk Pools pursuant to ¶¶ 14.1 and 14.2.

6.2.8 By Majority Vote, approving, rejecting or modifying the contracts negotiated by the Administrative Committee with the Administrator, the Broker and General Counsel, and with any Third-Parties on behalf of the Fund or any of its Risk Pools. (see Op. Rules, § I, ¶ 9.4.3(i)).

6.2.9 By Majority Vote, deciding any issue properly brought before the Board by any Member, pursuant to the procedures for placing Decision Issues on the Agenda in ¶ 7.4, or as otherwise provided for by the SIA (see ¶¶ 7.2, 7.3 and 7.6; see also, ¶ 19.1(a) and (b) and ¶ 6.2.11)).

6.2.10 By Majority Vote, reviewing and approving recommendations by the Administrative Committee regarding the Fund’s Risk Management Programs, and making decisions regarding Board Remedies for violation of the same (see ¶ 17).

6.2.11 By Majority Vote, appointing and removing members of the Operations and Administrative Committees, and delegating to or withdrawing from such Committees and the Executive Committee (see ¶ 9.2) such authority, duties and jurisdiction as the Board deems appropriate, regardless of the authority, duties and jurisdiction established for such Committees in the SIA or Operational Rules; provided, however, that, except for the provisions specifically addressing such Committees’ duties, authority and jurisdiction, the Board may not, under the power of this sub-¶¶, effectuate in fact an amendment to the SIA on a related subject requiring amendment by more than a Majority Vote unless the Board vote also satisfies the highest Voting Standard applicable to all SIA provisions affected.

6.2.12 By Majority Vote (except where otherwise specifically provided), ultimately deciding issues that reach the Board regarding Defense and/or settlement of Covered Claims or prosecution and settlement of Coverage Litigation or other suits involving the Fund or the System, including establishing by Majority Vote any parameters on the Executive or Administrative Committees’ authority with respect thereto (see ¶ 9.2(b) and (c), and Op. Rules, § I, ¶¶ 9.4.3(e) and (f)).

6.3 Quorum and Votes.

6.3.1 Member’s Vote, Quorum, and General Voting Standards. Each Director shall be entitled to one Vote on all issues considered by the Board that relate to a Risk Pool in which the Member that employs the Director participates. Decisions on issues affecting the Fund generally, or two or more Risk Pools, shall be made by the full Board representing all Members of the Fund. (see also, ¶ 4.4.2.) Unless the SIA expressly provides for decision by some other Voting Standard, all Board Decisions shall be made by a Majority Vote of the Directors present or otherwise participating, so long as there is a Quorum, which shall be the act of the Board and shall bind all Members. The Board may by Majority Vote withdraw authority from any Committee on any subject, as permitted by ¶ 6.2.11. The SIA also has established and employs Voting Standards for Board Decisions on specified subjects that are more stringent than a Majority Vote, including a Two-Thirds Vote, a Super-Majority Vote, and a Unanimous Vote. Board Decisions regarding amending the Program Documents shall be governed by the Voting Standards contained in ¶¶ 5.2.2 and 5.3. The Board shall not make any official Board Decision unless there is a Quorum of Directors participating.

6.3.2 Participation in Meetings and Binding Acts of the Board. Directors and members of any Standing Committee or any Special Purpose Committee designated by the Board may participate in a meeting of the Board or such Committee by means of telephone or video conference or similar communications equipment by which all persons participating in the meeting can hear and communicate with each other at the same time. Participation by such means shall constitute physical presence at the meeting and shall count toward a Quorum. All Members shall be bound by all Board Decisions duly made in accordance with the terms of the SIA.

6.3.3 Absence of Directors/Binding Acts of Employee Designees. If a Member’s Director and Alternate Directors cannot attend or otherwise participate in a Board meeting, any Employee Designee of the Member may attend such meeting and shall be entitled to fully participate in the meeting. (see Op. Rules, § I, ¶ 6.1.2(A)). The presence or participation of any such Employee Designee at the meeting shall be deemed to be the presence of the Member’s Director, and the votes and other actions of the Employee Designee shall be deemed to be the votes and actions of the Member’s Director.

7. Board Meetings.

7.1 General Meetings.

7.1.1 Time, Place and Notice. The Board shall conduct an annual and a semi-annual General Meeting each calendar year. The Board’s General Meetings may coincide with similar meetings of the System. The specific procedures for the scheduling and providing notice of the General Meetings are set forth in the Operational Rules.

7.1.2 Permitted Action/Agenda Issues. In addition to such other business as may properly come before the Board, the Board shall hear and consider reports from the Administrator, the Administrative Committee and the Auditor. The Board may decide or take action on any issue raised at a General Meeting, whether or not the issue was included in the Agenda; provided, however, the Board shall not decide or take action at such meeting on any issue requiring approval by a Voting Standard more stringent than a Majority Vote if the issue was not included in the Agenda, except as otherwise permitted in ¶ 7.6, nor on any Appeal Issue that is subject to the mandatory Appeal Procedures set forth in ¶ 19.2, except as otherwise permitted in ¶ 19.1(a) or (b), unless and until such Issue has been submitted to the Appeal Procedures and the Appeal Procedures have been fully exhausted through the Executive Committee level.

7.2 Special Meetings. Special Meetings of the Board shall be held at such times and places as designated by the Administrator within thirty (30) days after receipt by the Administrator of a written request therefore from any Director of a Member, any Fund Officer, any two members of the Administrative Committee or the Administrator. A Special Meeting may be called in whole or in part for the purpose of deciding an Appeal Issue that has been submitted to the Appeal Procedures, even though such Procedures have not been fully exhausted through the Executive Committee level, so long as the requirements of ¶ 19.1(b) are satisfied. The specific procedures for notifying Directors and other interested parties of Special Meetings are set forth in the Operational Rules. The Notice shall state the purpose(s) for the Special Meeting and shall be accompanied by an Agenda identifying the Decision Issues, including those for which the Special Meeting has been called and those which otherwise have been timely submitted to the Administrator in accordance with ¶ 7.4. The Board shall not decide any issue at the Special Meeting not specified in the Notice of Special Meeting or in the accompanying Agenda.

7.3 Emergency Meetings. Emergency Meetings of the Board shall be held at such times and places as designated by the Administrator upon the request of any three Directors of Members, any two Fund Officers, or any three members of the Administrative Committee. The Emergency Meeting shall be held as soon as reasonably possible following the Administrator’s receipt of the request. The purpose of the Emergency Meeting may be in whole or in part to decide an Appeal Issue that is subject to the mandatory Appeal Procedures of ¶ 19 and which would otherwise be required to proceed through exhaustion of those Procedures before Board review and decision, so long as the requirements of ¶ 19.1.(b) are satisfied. The Board shall not decide any issues other than those specified in the Notice of Emergency Meeting. The specific procedures for notifying the Directors and other interested parties of Emergency Meetings are set forth in the Operational Rules.

7.4 Meeting Agendas/Member Submission of Issues for Decision by Board. The Administrator shall include all issues on the Agenda for the next General Meeting, or Special Meeting, for which written requests have been received by the Administrator from any Director, any Fund Officer, or any member of the Administrative Committee, in accordance with the Operational Rules. All issues submitted to the Administrator at least fourteen (14) days prior to the date set for the Meeting shall be deemed to be Discussion Issues which shall at least be discussed at such Meeting. All written requests to include Decision Issues on the Agenda to be voted upon by the Board must be delivered to the Administrator at least thirty (30) days prior to the date set for the General or Special Meeting. No issue for which a vote is requested shall be included as a Decision Issue on the Agenda if the issue is subject to the Primary Jurisdiction of the Administrative Committee established in ¶ 9.4.4 and the Appeal Procedures have not been exhausted, except as otherwise provided in ¶ 19.1(a) or (b). The Board may defer action on any Decision Issue properly on the Agenda by Majority Vote.

7.5 Waiver of Defects in Agenda or Notice of Meeting. Defects in the Agenda or Notice of Meeting for any Board meeting, including defects as to content, timeliness or other defects, may be waived in writing by any Director at any time, either before or after such meeting. Any such defects shall be deemed waived by the presence of a Member’s Director at the meeting unless such Director shall, prior to or at the commencement of such meeting, or, with respect to an Agenda defect, prior to or at the commencement of consideration of the issue or item of business omitted, deliver an oral or written objection to the President, or any other person chairing the meeting, and to the Administrator.

7.6 Decisions on Issues Not on Agenda or in Notice of Meeting. So long as a Super-Majority of the Directors of all Members are present at or otherwise participating in any General Meeting of the Board in accordance with ¶ 6.3.2, the Board may by Majority Vote raise, discuss and decide any issue, including any Appeal Issue otherwise subject to the Appeal Procedures in ¶ 19, by the Voting Standard applicable to such issue, regardless of whether such issue was included in the Agenda or the Notice of the General Meeting; provided, however, that this ¶ 7.6 shall not apply to any issues requiring a Board decision Unanimous Vote, Super-Majority Vote or Two-Thirds Vote. This ¶ 7.6 also shall not apply to Special or Emergency Meetings of the Board.

7.7 Pre-Vote Analysis. The Administrative Committee shall conduct a Pre-Vote Analysis of Decision Issues as set forth in the Operational Rules.

7.8 Rules of Conduct for Meetings. Meetings of the Board and any Committees of the Fund shall be governed by Roberts Rules of Order.

7.9 Open Meetings, Executive Sessions and Maintenance of Confidentiality and Privileges. It shall be the Board’s policy to conduct its meetings openly, in compliance with the Open Public Meetings Act (RCW 42.30 et seq.). The Board, however, shall have the authority to meet confidentially in Executive Session, on its own initiative or at the request of any Fund Officer, as permitted by the Open Public Meetings Act and other applicable Washington law. The Board shall attempt to conduct its meetings so as to preserve the attorney-client and attorney work-product privileges where appropriate and reasonably possible.

7.10 Recessed Meetings. So long as there is a Quorum, a recess of any Board Meeting may be taken until such time and place as those present may determine by Majority Vote, without new Notice being given or new Agendas being sent.

7.11 Members Involved in Pending or Potential Litigation with the Fund. All Employees and representatives of a Member, including its Director, by Majority Vote, may be excused from the portions of the discussions at a Board Meeting that relate to the subject of the pending or potential litigation between the Fund and that Member or that Member’s Employee. Further, the Minutes of the Board Meeting that reflect any discussions and or decisions under these circumstances may be prepared as Confidential Minutes, and not disseminated to the Members generally with the Published Minutes of such Meeting.

8. Fund Officers.

8.1 Enumeration and Qualifications. The Fund Officers shall be a President, a Vice-President, and a Secretary-Treasurer. No person shall be eligible to serve as an Officer of the Fund unless he or she is also a Commissioner of a Member of one of the Risk Pools, or other member of the governing body of such a Member, and a Designated Director. The Fund Officers shall be nominated and elected by the Board at its year-end General Meeting by Majority Vote.

8.2 Term of Office, Vacancies and Removal. Except as provided in ¶ 21.2, the Fund Officers shall hold office for a period of one year commencing on January 1 and until their successor or successors are elected and assume office on January 1 of the following year. The protocol for the succession of officers and the filling of vacancies is set forth in the Operational Rules. Any Fund Officer may be removed from office for any reason by a Two-Thirds Vote of the Board.

8.3 President. The President shall be the chief executive and operating officer of the Fund and, subject to the authority of the Board, shall have general charge, supervision, and control over the business and affairs of the Fund, and shall be responsible for its management. The President shall preside over all Board Meetings and Executive Committee Meetings, oversee compliance with the procedures for the conduct of the Fund’s business as required by the SIA and the Operational Rules, perform such other duties as are assigned to the President in the SIA and the Operational Rules, and perform such other duties as may from time to time be assigned by the Board.

8.4 Vice-President. In the event of the absence or disability of the President, the Vice-President shall have and may exercise the authority and perform the duties of the President. In addition, the Vice-President shall perform such other duties as the Board or President may from time to time assign.

8.5 Secretary-Treasurer. In addition to the duties assigned to the Secretary-Treasurer in the SIA and the Operational Rules, the Secretary-Treasurer shall perform such other duties as the Board or President may from time to time assign.

9. Committees.

9.1 Special Purpose Committees. The Board, by resolution duly adopted by Majority Vote, may designate from among its members or the members of the Operations or Administrative Committees, one or more Special Purpose Committees, each of which shall have such duration and shall exercise such authority as designated by the Board in such resolution; provided, however, that no such Committee shall be delegated the authority to make a Board Decision with respect to matters which require approval by a Voting Standard higher than a Majority Vote. (See also ¶ 6.2.6).

9.2 Executive Committee.

9.2.1 Composition and Duties. The Fund shall have an Executive Committee whose members shall be composed of the three Fund Officers, the Standing AC Members and the Annual AC Members. Each member of the Executive Committee shall have one vote on matters addressed by the Executive Committee. The chairperson of the Operations Committee and a representative of the Administrator shall be non-voting, ex-officio members of the Executive Committee; provided, however, in the event of a tie-vote, the chairperson of the Operations Committee shall provide the tie-breaking vote. Except as the Board may otherwise establish from time to time by Majority Vote, pursuant to ¶ 6.2.11, and in addition to the duties assigned to the Executive Committee elsewhere in the SIA and in the Operational Rules, the duties and authority of the Executive Committee shall be to:

(a) Review and approve all of the Fund’s Monthly Receipts and Expenditures Analyses when the Executive Committee meets;

(b) Provide consultation and advice to the Administrative Committee in connection with Coverage Litigation or the defense or prosecution of any other lawsuit in which the System or the Fund is a party, and make all decisions regarding settlement of same; provided, however, pursuant to ¶ 6.2.11 and by Majority Vote, the Board may modify or restrict the authority of the Executive Committee with respect thereto, including establishing the conditions of prosecution or settlement of any such lawsuit. (See also, ¶ 6.2.12 and Op Rules, § I, ¶ 9.4.3(f)).

(c) Subject to the Board’s authority in ¶ 6.2.11, decide issues with respect to potential or pending Covered Claims transferred to the jurisdiction of the Executive Committee in accordance with ¶ 6.2.12. (See also, Op. Rules, § I, ¶ 9.4.3(e)).

(d) Hear and decide all Appeal Issues in accordance with the procedures in ¶ 19;

(e) Make Emergency Decisions on any issues submitted by the Administrative Committee on all matters that can be decided by the Board by Majority Vote.

(f) The Executive Committee also shall perform such other duties and have such other authority as the Board may from time to time assign.

9.2.2 Executive Committee Meetings. The Executive Committee shall meet as required in the Operational Rules.

9.2.3 Additional Executive Committee Authority for Initial Operation of H&W Pool. Because of the uniqueness of the H&W Pool in permitting Members to have different types and levels of H&W Benefits, and because it is not possible to anticipate all possible effects of this and the Assessment Formulas provided for the H&W Pool, and notwithstanding any of the provisions of the SIA, for an indefinite period of time after the H&W Pool commences operations, and subject to termination of this authority by Majority Vote of the Board, the Executive Committee shall have authority to act on behalf of the Board with respect to any issue affecting only the H&W Pool requiring less than a Super-Majority Vote, and notwithstanding the immediately foregoing limitation re Voting Standards, the Executive Committee may also approve adjustments in the H&W Assessment Formula to achieve fairness in the operation of the H&W Pool even though such would otherwise require a Super-Majority Vote of the Board; provided, however, that the Administrator shall provide all H&W Pool Members with written notice of such decision by the Executive Committee within seven (7) days thereof; and provided further that any decisions made by the Executive Committee on issues that would otherwise have required a Board Vote under any Voting Standard, shall automatically be on the Agenda for review, and ratification or reversal, at the Board’s next General Meeting, or sooner by a properly called Special or Emergency Meeting. Should the Board modify or reverse any such decision by the Executive Committee, all Members agree that reasonable measures may be taken as necessary to return the situation to the status quo, as if the Executive Committee had not made the decision that was modified or reversed.

9.3 Operations Committee.

9.3.1 Composition and Duties of Committee Members. The Fund shall have an Operations Committee composed of one Employee from each Member who has knowledge regarding the Member’s insurance and risk management issues.

9.3.2 Duties of Operations Committee. The Operations Committee shall have such duties and authority as may be assigned in the SIA and the Operational Rules, subject to ¶ 6.2.11, and as may be designated by the Board from time to time.

9.4 Administrative Committee.

9.4.1 Composition. The Fund shall have an Administrative Committee consisting of four (4) Standing AC Members, and from time-to-time, up to two (2) additional Annual AC Members. All such Administrative Committee members shall be appointed by the Board by Majority Vote from the Operations Committee. Pursuant to ¶ 6.2.11, members of the Administrative Committee may be removed at any time by a Majority Vote of the Board. One of the four Standing AC Members shall be the Fund’s Auditor, with the qualifications required by ¶ 12.1. The Standing AC Members and any Annual AC Members shall be the Voting AC Members. The chairperson for the Administrative Committee shall be a Standing AC Member, and shall be chosen by the Committee at the first Administrative Committee meeting of each new calendar year. The chairperson of the Operations Committee and a representative of the Administrator shall be non-voting, ex-officio members of the Administrative Committee; provided, however, in the event of a tie-vote, the chairperson of the Operations Committee shall provide the tie-breaking vote. Additional persons may from time to time be appointed as a Member’s Representative to the Administrative Committee for specific purposes in accordance with the provisions of ¶¶ 15.3 or 19.2.6, or § VII, ¶¶ 3.1 and 3.2, and shall be subject to any limitations contained therein and in the Operational Rules. In the event of a vacancy caused by a member of the Administrative Committee resigning, becoming disabled or otherwise becoming incapable of performing his or her duties under this ¶ 9.4, the President may appoint an interim member to the Administrative Committee, who shall serve until such time as the disability, other incapacity or reason for vacancy is removed, or a permanent successor is duly appointed by the Board.

9.4.2 Term. The term for each Standing AC Member shall be four calendar years and shall be staggered for the purpose of ensuring continuity of experience within the membership of the Committee. The term for any Annual AC Member shall be one (1) calendar year.

9.4.3 Authority and Responsibilities. Subject to ¶ 6.2.11, the Administrative Committee shall have such duties and authority as may be assigned in the SIA and the Operational Rules, and as may be designated by the Board from time to time. (See Op. Rules, § I, ¶ 9.4.3).

9.4.4 Primary Jurisdiction and Delegation of Authority. The authority and duties identified in Op. Rules, § I, ¶ 9.4.3 shall be deemed within the Administrative Committee’s Primary Jurisdiction and issues relating to the subjects of such authority and duties shall be addressed by Members and Employees in the first instance to the Administrative Committee (see ¶ 19.1); provided, however, that Appeal Issues may at any time be addressed to the Board in the first instance as permitted in ¶ 19.1(a) or (b); and provided, further, that the Administrative Committee’s Primary Jurisdiction shall always be subject to modification or withdrawal by the Board as provided in ¶ 6.2.11. The Administrative Committee has the authority to delegate any ministerial portions of its duties, including those contained in § 9.4.3, to the Administrator, and any such delegations shall be specifically set forth in the Administrator’s Contract; provided, however, that the Administrative Committee shall always be accountable to the Fund for the performance of all its responsibilities.

10. Fund Administration.

10.1 Fund Administrator.

10.1.1 Administrator’s Duties. The Fund shall retain an Administrator to assist in the operation and administration of the Fund and its Risk Pools. The Administrator shall have such duties and authority as provided in the SIA and the Operational Rules, as well as such other duties and authority as the Board and/or the Administrative Committee and the Administrator may agree upon, including those set forth in the Administrator’s Contract, as amended or re-executed from time to time. The Administrator’s Contract currently in effect is contained as an appendix in § XVI‑D. The term of the Administrator’s Contract shall not be greater than one year unless a longer term is approved by Super-Majority Vote. The person or entity serving as the Administrator shall not also serve as Broker for the Fund or any of its Risk Pools.

10.1.2 Procedures Governing Selection or Renewal of Administrator. Annually, the Board shall determine whether to renew the Administrator’s Contract, and if so, upon what terms and conditions. In making this decision, the Board shall be guided by the applicable standards for selecting an Administrator set forth in the Operational Rules and by applicable law. Decisions regarding the initial execution or the renewal of an Administrator’s contract shall be by Majority Vote. Any decision to remove or replace the Administrator during the term of the Administrator’s Contract, however, shall require a Two-Thirds Vote.

10.1.3 Administrator’s Bond. The Administrator shall furnish such bonds for the protection of the Fund, covering all persons in the Administrator’s office having access to the Fund’s money or involved in any way with the Investment Procedures or Disbursement Procedures, as may be requested and approved by the Administrative Committee, in an amount established by the Administrative Committee; provided, however, that the Administrator shall always provide such bonds in such amounts as may be required by law, regardless of whether requested by the Administrative Committee. The Fund shall purchase any such bonds at its own expense. The Fund may indemnify the Administrator for the loss of any security the Administrator may have pledged to secure any such bond provided such indemnification is consistent with the terms of ¶ 23.2; and provided further, that such indemnification shall not apply when the loss covered by the bond resulted from the negligence, gross negligence or intentional acts or omissions of the Administrator.

10.2 Fund Broker. The Fund shall retain a Broker to provide insurance brokerage services to the Fund. The Broker shall have such duties and authority as provided in the SIA and the Operational Rules, as well as such other duties and authority as the Board and/or the Administrative Committee and Broker may agree upon, including those set forth in the Broker Contract, as amended or re-executed from time to time. The Broker’s Contract currently in effect is contained as an appendix in § XVI‑E. The term of the Broker’s Contract shall not be greater than one year unless a longer term is approved by Super-Majority Vote. The person or entity serving as the Broker shall not also serve as Administrator for the Fund. Decisions regarding the initial execution or the renewal of a Broker’s Contract shall be by Majority Vote. Any decision to remove or replace the Broker during the term of the Broker’s Contract, however, shall require a Two-Thirds Vote.

10.3 General Counsel. The Fund shall retain an attorney or law firm to act as the Fund’s General Counsel to provide general legal advice to the Fund and to handle such lawsuits, including subrogation claims and Coverage Litigation, as may be assigned. General Counsel shall take its day-to-day directions regarding the Fund’s legal work from the Administrator, subject to superseding instructions from the Administrative Committee, Executive Committee or the Board. General Counsel may also represent Members individually, or their Employees, provided that there is no actual or reasonably probable conflict of interest with the Fund inherent in such representation. The General Counsel Engagement Letter currently in effect is contained as an appendix in § XVI‑F.

11. Fund Records and Board and Committee Meeting Minutes.

11.1 Official Fund Records. The Fund shall maintain complete and accurate records of its activities, including records of all business brought before the Board and its disposition. Without limiting the generality of the foregoing, the Official Records of the Fund shall include those records set forth in the Operational Rules.

11.2 Custodian and Right to Inspect Records. The Administrator shall be the custodian of all Official Records of the Fund, including those relating to decisions by the Board and those reflecting recommendations and decisions of the Executive, Operations and Administrative Committees. Directors and members of the Administrative and Operations Committees shall have the right, upon reasonable written notice to the Administrator, to inspect and copy any and all Official Records of the Fund at the Administrator’s office upon payment of a reasonable copying fee. Copies of the Fund’s Official Records will be made available to the public in accordance with applicable law. Specific procedures for public access to such Records shall be set forth in the Operational Rules.

11.3 Board and Executive and Operations Committee Minutes. The Administrator shall ensure that all motions, their disposition and all other proceedings of the Board and Executive and Operations Committees are memorialized and transcribed into proposed Minutes. The proposed Minutes shall be reviewed, approved and distributed in accordance with the Operational Rules.

11.4 Minutes of Administrative Committee Meetings. The Administrative Committee shall ensure that all actions taken at Administrative Committee meetings are memorialized and converted to Minutes. Copies of the Administrative Committee Minutes shall be distributed in accordance with the Operational Rules.

11.5 Confidentiality Rules. Discussions before the Board and Fund Committees regarding subjects permitted by applicable Public Disclosure Laws to be held confidential shall be conducted in Executive Session and shall not be reflected in the published version of the Minutes. (See § I, ¶ 7.9). The confidentiality of such discussions and of any documents reflecting such discussions, and any privileges relating thereto, including the attorney-client and work product privileges, shall be maintained to the maximum extent permitted by law and circumstances.

12. Fund Auditor, Fund Accounting and Financial Reporting Requirements.

12.1 Auditor’s Authority and Duties. The Fund shall have an Auditor who must be both a Standing AC Member, elected from the members of the Operations Committee, and a Financial Officer of a Member. In addition to such other duties as the Board may from time to time assign, the Auditor shall be responsible for and have control of the Assets held by the Fund for the benefit of the Risk Pools and their respective Members, and any Assets held by the Fund outside of and in addition to those held on behalf of the Risk Pools. Subject to the authority of the Board, the Auditor shall be responsible for the deposit or investment in the Fund’s name of all monies held by the Fund in such financial institutions or other investments as are in accordance with the Fund’s Investment Policy. The Auditor shall provide to the Board at its General Meetings, and at any other time upon the request of the Board or a Fund Officer, a report of all of actions taken as Auditor. The Auditor shall have authority to perform all acts necessary to permit the Fund’s Assets to be invested at the highest return consistent with prudence and with the Fund’s Investment Policy, including authority to transfer Assets from one investment to another by means of wire, money market check, or other reasonable means. The Auditor shall have such other duties as set forth in the Operational Rules. The Auditor has the authority to delegate any ministerial portions of the Auditors duties to the Administrator, and any such delegations shall be specifically set forth in the Administrator’s Contract; provided, however, that the Auditor shall always be accountable to the Fund for the performance of all of the Auditor’s responsibilities.

12.2 Fund’s Investment Policy and Procedures. The Fund shall have an Investment Policy, which shall be established, and may be amended from time-to-time, by a Two-Thirds Vote of the Board; provided, however, that such Investment Policy shall be consistent with the requirements of Washington law. The Fund’s Investment Policy is set forth in § XVI, Appendix‑A. (See also, Op. Rules, § I, ¶ 12.2). The Fund shall also have written Investment Procedures to implement its Investment Policy. The Auditor, with the approval of the Administrative Committee, shall have authority to delegate some or all of the ministerial portions of the Investment Procedures to the Administrator, which duties shall be reflected in the Administrator’s Contract; provided, however, that at all times, the Auditor and the Administrative Committee shall generally supervise and be accountable for the Administrator’s activities pursuant to any such delegation.

12.3 Committee Bonds. The Auditor, and all other Voting AC Members shall furnish such bonds, if reasonably available, as may be required by law or by the Board. The Fund shall purchase any such bonds at its own expense, and in addition, may, upon request, indemnify the members of the Administrative Committee for the loss of any security that such members may have personally pledged to secure such bond, subject to the requirements of RCW 54.16.097.

12.4 Fund Disbursement Procedures. All payments issued by the Fund shall be in accordance with the requirements of this paragraph and the applicable procedures set forth in the Operational Rules. The Auditor shall have primary responsibility for the Fund’s Disbursement Procedures. Two (2) members of the Administrative Committee, one of whom may but need not be the Auditor, must approve the issuance of all payments drawn on the Fund, except as provided below with respect to payments for H&W Claims. The Auditor, with the approval of the Administrative Committee shall have authority to delegate some or all of the ministerial portions of the Fund’s Disbursement Procedures to the Administrator, which duties shall be reflected in the Administrator’s Contract; provided, however, that the Administrator shall not be authorized to issue payments drawn on the Fund without the written approval of two (2) members of the Administrative Committee; and provided further that, because of the volume of payments issued by the Administrator on a daily basis to pay for H&W Claims, it is not practical to require the advance approval of two (2) members of the Administrative Committee as a pre-condition for the issuance of such payments, and such requirement shall not apply to such payments, but shall apply to all other H&W Pool payments that are not directly for H&W Claims. (See also, Op. Rules, § I, ¶ 12.4).

12.5 Accounting Guidelines, Financial Statements and Fiscal Year. (See Op. Rules, § I, ¶ 12.5).

12.6 Fund’s Monthly Receipts and Expenditures Analyses. (See Op. Rules, § I, ¶ 12.6).

12.7 Financial Reporting Requirements. (See Op. Rules, § I, ¶ 12.7).

12.8 Separate Accountings of Risk Pools’ Income and Expenses. The Fund shall separately account for the income and expenses of the Fund and each of the Fund’s Risk Pools, although such information may be presented on a single financial statement prepared at the Fund’s direction.

13. Fund and Risk Pool Financing and Assessment Methodology.

13.1 Liability and Property Risk Pool Balances.

13.1.1 Designated Risk Pool Balance. The Liability Pool and Property Pool each shall at all times have an established Designated Risk Pool Balance. The Designated Risk Pool Balance for the Liability Pool shall equal $2,000,000, and the Designated Risk Pool Balance for the Property Pool shall equal two (2) times the currently applicable Maximum Property Retention (as set forth in the General Property Coverage Section, § X, ¶ 4); provided, however, that the Board may increase or decrease the level of the Designated Risk Pool Balance(s) from time to time by Super-Majority Vote; and provided further that the Board may increase or decrease the amount of the Property Coverage Limit by Majority Vote so long as the amount of any increase does not exceed the amount of the Maximum Property Retention. Any changes in the amount of any Designated Risk Pool Balance shall be reflected by an amendment attached to this Agreement and in revised Operational Rules. The applicable Designated Risk Pool Balance serves as a reference point for triggering and/or determining the amounts of any Interim Automatic General Assessments and the Annual Automatic General Assessment for the Liability and Property Pools, as provided in ¶¶ 13.4.1 and 13.4.2, and provides a maximum limit for the amount of any Interim or Annual Automatic General Assessment which may not exceed the difference between the Actual Risk Pool Balance and the applicable Designated Risk Pool Balance.

13.1.2 Actual Risk Pool Balance. The Actual Risk Pool Balance(s) for the Liability and Property Pools shall be funded and replenished by General Assessments. The money constituting the Actual Risk Pool Balance of the Liability Pool shall be used to pay Liability Pool Operational Costs, and the Actual Risk Pool Balance for the Property Pool shall be used to pay Property Pool Operational Costs; provided, however, that Assets constituting the Actual Risk Pool Balance(s) of such Risk Pools may be used: (a) to make Inter-Pool Loans in accordance with ¶ 13.3.1.1; (b) for Program Development in accordance with ¶ 13.3.2.1; and (c) for the establishment of a Special Purpose Account in accordance with ¶ 13.4.4. While the amount of a Risk Pool’s Actual Risk Pool Balance may at times exceed its Designated Risk Pool Balance (see e.g. ¶ 13.1.3), its Actual Risk Pool Balance shall not be greater than the Designated Risk Pool Balance solely as a result of an Annual or an Interim Automatic General Assessment.

13.1.3 Determination of Amount and Use or Disposition of “Surplus” Money Held on Behalf of Liability and Property Pools. From time to time, and for various reasons, the amount of the Liability or Property Pool’s Actual Risk Pool Balance may exceed the level of its Designated Risk Pool Balance, thereby creating a “Surplus”. Such Surplus may be used for any purpose for which the Actual Risk Pool Balance may be used; provided, however, the Board may, by Super-Majority Vote, transfer some or all of such Surplus to one or more Special Purpose Accounts as may exist or be created by the Board in connection with the transfer; and provided further that, notwithstanding the foregoing, the Board may, by Super-Majority Vote, determine to distribute such Surplus to current Risk Pool Members in accordance with ¶ 13.1.4 below; and provided further that, to the extent the Actual Risk Pool Balance (and, therefore, such Surplus) represents proceeds from Coverage Litigation with an Excess Carrier, such monies shall be paid to the Members whose claims were involved in the Coverage Litigation as provided in ¶ 15.9

13.1.4 Distribution of Surplus to Members. By Majority Vote, the Board shall determine the methodology for the allocation of any Surplus the Board has, by Super-Majority Vote (see ¶ 13.1.3), determined should be distributed to current Risk Pool Members. The methodology chosen should take into consideration the source or cause of the Surplus and should be designed as much as possible to return the Surplus to the Members in such a manner as to avoid windfalls or penalties to Members in relationship to such source or cause. For example, if the Surplus was generated by payments recovered from a Former Member for back Assessment Shares the Former Member failed to pay after its Withdrawal Date, the following methodology would be reasonable: The total of the Assessment Shares each Member paid for General Assessments during the relevant time period (i.e., from the Former Member’s Withdrawal Date to the date the Former Member paid such Assessments to the Fund), would be divided by the total amount of General Assessments all Members paid during that relevant time period, and the ratio resulting for each Member would then be multiplied by the Surplus amount to establish the amount to be returned to each Member.

13.1.5 Allocation of Administrative Expenses Among Risk Pools. Each Risk Pool shall be responsible for financing its own Operational Costs, including its Direct Administrative Expenses the Fund incurs in connection with the operation of that Risk Pool, and its allocation of Shared Administrative Expenses. All Administrative Expenses that are not Direct shall be deemed Shared Administrative Expenses. The Administrator, in the first instance, subject to modification by the Administrative Committee, shall determine whether a particular Administrative Expense is to be treated as Direct or Shared. If an Administrative Expense is Shared, it shall be allocated pro rata against the respective Operational Costs of each of the Fund’s Risk Pools; provided, however, if there is a reasonable basis for allocating a Shared Administrative Expense among the Risk Pools in a proportion other than pro rata, the Administrator shall make such non-pro rata allocation, subject to modification by the Administrative Committee; and provided further, and notwithstanding the preceding clauses, at the beginning of each calendar year the Administrative Committee shall (and at any other times deemed appropriate, the Administrative Committee may) establish the relative percentage of Shared Administrative Expenses to be allocated among the respective Risk Pools based on prior experience regarding the relative consumption of administrative services among the Risk Pools. Members shall be provided with reasonable notice of any such percentage allocation of Shared Administrative Expenses established by the Administrative Committee, and any modifications thereof. Any allocation of Shared Administrative Expenses may be modified retroactively or prospectively by the Board at any time by Majority Vote.

13.2 H&W Risk Pool Reserves.

13.2.1 H&W Pool Reserves Funded by Initial Deposits. Prior to commencement of the H&W Pool’s operation, each Initial H&W Member shall pay the amount of its Initial Deposit to the Administrator. The amount of each Initial H&W Member’s Initial Deposit is calculated to approximate three (3) months of reasonably expected H&W Claims Experience for that Member (see Definition of “Initial Deposit”, § II). As a result, the total of all Initial Deposits of all Initial H&W Members should approximate three (3) months of H&W Claims Experience for all Members, and therefore, for the H&W Pool.

13.2.2 Adjustments to Amounts of Initial Deposits. Every three (3) years, and sooner if deemed appropriate by the Administrative Committee, the amount of each Member’s Initial Deposit shall be reevaluated as to whether it continues to approximate three (3) months of reasonably expected H&W Claims Experience for that Member. Subject to the Appeal Procedures in ¶ 19, the Administrative Committee may increase or decrease the amount of a Member’s Initial Deposit to more accurately reflect such Member’s current anticipated H&W Claims Experience. The Member shall pay the amount of any increase in its Initial Deposit within sixty (60) days of notice thereof by the Administrative Committee, even if the Member Appeals the increase. Upon request, the Administrator shall provide the Member with the back-up data relating to the decision to make the increase and the amount thereof. If the adjustment is a decrease in the amount of a Member’s Initial Deposit, the amount of the decrease shall be paid to the Member within sixty (60) days of the date of the Administrative Committee’s decision.

13.2.3 Monthly H&W Assessments to Maintain H&W Pool Reserves. The Monthly H&W Assessments mandated for each Member of the H&W Pool (as provided in § I, ¶ 13.4.5 and § XV, ¶ 2) are designed to reimburse the H&W Pool each month for the prior month’s expenditures on H&W Pool Operational Costs, which includes all H&W Claims Costs. Members must pay such Assessments in full within twenty (20) days of receiving written notice thereof in accordance with and subject to the remedies provided for the Fund in ¶¶ 13.6 and 13.7 re “Assessments”. As a result of this Assessment methodology, the authority of the H&W Pool to make any adjustments deemed necessary to the amounts of Members’ Initial Deposits (see ¶ 13.2.2), and the Fund’s remedies for a Member’s failure to timely pay its Monthly H&W Assessment in full (see ¶ 13.7), the H&W Pool Reserves should consistently approximate three (3) months of H&W Claims Experience for all Members of the H&W Pool.

13.2.4 Ownership of Initial Deposits and Uses of the H&W Pool Reserves.

13.2.4.1 Ownership of Initial Deposits. At all times, the monies constituting each Member’s Initial Deposit, as replenished from time to time under the terms of the H&W General Assessment Formula, shall be owned by the Fund and, although such monies are held by the Fund for the benefit of the H&W Pool and its Members, no H&W Pool Member shall have any right, title or interest in or to such monies (see § I, ¶ 4.5); provided, however, such Members shall have such rights as are provided in ¶ 20.3.2 regarding refund of the Initial Deposit to a Member that withdraws from the H&W Pool, and as provided in ¶ 21.5.2 regarding Dissolution of the H&W Pool. At no time shall an H&W Pool Member be entitled to interest on the amount of its Initial Deposit or Adjusted Initial Deposit, except as otherwise provided in ¶ 20.3.2 regarding the Fund’s late payment of a refund of a Former Member’s Initial Deposit.

13.2.4.2 Uses of H&W Pool Reserves. The Assets constituting the H&W Pool Reserves shall be used only to pay H&W Pool Operational Costs; provided, however, that such Reserves may also be used to make Inter-Pool Loans in accordance with ¶ 13.3.1, or for Program Development in accordance with ¶ 13.3.2.

13.2.5 Determination of Amount and Use or Disposition of “Surplus” Money Held on Behalf of H&W Pool. There shall be deemed to be a “Surplus” in the H&W Pool if, and when, and to the extent that the monies held on behalf of the H&W Pool exceed the total of the amount of all H&W Members’ Initial Deposits, or current Adjusted Initial Deposits, as applicable, times 133 (%) percent. If and to the extent the H&W Pool ever develops a Surplus, the uses of such Surplus shall be governed by the terms of this ¶ 13.2.5, the terms of ¶ 13.1.3 with respect to all matters addressed there except how the “Surplus” is determined, and ¶13.1.4 with respect to distribution of a Surplus to Members, as if such Surplus represented money in excess of a Designated Risk Pool Balance.

13.3 Short-Term Inter-Pool Loans; Authority for Financing the Development of Additional Programs.

13.3.1 Short-Term Inter-Pool Loans.

13.3.1.1 Liability or Property Pools as Loaning Risk Pools. If deemed reasonably necessary or appropriate by the Administrative Committee, with the approval of the Executive Committee, which approval may be given in separate telephone discussions with the Administrator, an Inter-Pool Loan may be made by one Risk Pool to another for the short term financial needs of the Borrowing Risk Pool, to be repaid in full within one hundred and eighty (180) days, together with interest thereon measured by the amount of interest the Loaning Risk Pool lost based on the average investment return the Loaning Risk Pool was realizing on its assets at the time the Loan was made; provided, however, that such Inter-Pool Loans shall only be made by the Loaning Risk Pool if, and only to the extent, such Loans are from assets or monies clearly in excess of liabilities for unpaid Claims and Claims adjustment expenses. Within seven (7) days of the occurrence of an Inter-Pool Loan, the Administrator shall provide written notice thereof to all Fund Members, explaining the reasons therefore. All Members of the Borrowing Risk Pool shall be subject to one or more Discretionary General Assessments under ¶ 13.4.3, in addition to all other Assessments normally required, to be paid at times specified by the Board, in order to repay the Inter-Pool Loan.

13.3.1.2 H&W Pool as Loaning Risk Pool. With respect to any Inter-Pool Loan by the H&W Pool as the Loaning Risk Pool, the conditions, terms and procedures set forth in ¶ 13.3.1.1 shall apply, and in addition:

(a) Any such Inter-Pool Loan shall not unreasonably impair the Reserves or the H&W Pool’s ability to pay its debts as they become due, as determined in the judgment of the Executive Committee (see ¶ 13.2.4.2);

(b) In any event, no such Inter-Pool Loan shall be made that reduces the Reserves to an amount less than 2 times the average of the monthly H&W Pool Operational Costs, based on the previous six (6) months;

(c) At the time such Inter-Pool Loan is made, and subject to the Appeal Procedures in ¶ 19, the Executive Committee shall adopt an Assessment Methodology, and provide H&W Pool Members with notice thereof, that will govern replenishment of the H&W Pool Reserves to the level contemplated in ¶ 13.2.1 in the event the Inter-Pool Loan is not repaid in full within the 180 days, as provided for in ¶ 13.3.1.1, or if, in the interim, it appears in the judgment of the Executive Committee that the H&W Pool will imminently be unable to pay its debts as they become due.

13.3.2. Authority for Financing the Development of Expanded or Additional Programs.

13.3.2.1. Liability and Property Pools. Notwithstanding the general restriction in the SIA that the Assets of a particular Risk Pool shall be used only for the benefit of the Members of that Risk Pool (see ¶¶ 4.5.1, 13.1.2 and 13.2.4), by Super-Majority Vote, the Board may authorize and/or allocate the use of portions of existing or future monies in the Actual Risk Pool Balance(s) of the Liability and/or Property Pools for Program Development, including without limitation, the development or establishment of additional or expanded self-insurance, or other types of insurance, bonding, or risk management programs that, at the time of the expenditures, may not directly benefit the current Members of such Risk Pools, but which Programs will ultimately be available to all Members of the Fund; provided, however, that the provisions of ¶¶ 4.4.2 and 6.3.1 shall apply with respect to Votes on issues affecting a particular Risk Pool; and provided further, that such use of the Actual Risk Pool Balance shall not unreasonably impair the Liability or Property Pool’s ability to pay its debts as they become due. The Actual Risk Pool Balance(s) shall be replenished for any such expenditures in the normal course through Assessments under the applicable General Assessment Formulas, or may be replenished through one or more Discretionary General Assessments.

13.3.2.2. H&W Pool. By Super Majority Vote, the Board may authorize and/or allocate the use of portions of the H&W Pool Reserves for Program Development under the circumstances and terms described in ¶ 13.3.2.1; provided, however, that at the time of approving such use, the Board shall also adopt an Assessment Methodology that will provide for replenishment within a reasonable time of the portions of the H&W Reserves used for such Program Development so that the H&W Pool Reserves are returned to and maintained at approximately the level contemplated in ¶ 13.2.1; and provided further, that such use of the H&W Pool Reserves shall not unreasonably impair the Reserves or the H&W Pool’s ability to pay its debts as they become due.

13.4 Assessments.

13.4.1 Interim Automatic General Assessments re Liability and Property Pools.

13.4.1(a) Liability Pool. Except as provided in ¶ 13.8.2(b), whenever the Actual Risk Pool Balance for the Liability Pool is more than $500,000 below that Risk Pool’s Designated Risk Pool Balance, there shall be an Interim Automatic General Assessment equal to the amount by which the Actual Risk Pool Balance is less than the Designated Risk Pool Balance on the date of the Assessment.

13.4.1(b) Property Pool. Except as provided in ¶ 13.8.2(b), whenever the Actual Risk Pool Balance for the Property Pool is more than the amount of the currently applicable Property Coverage Limit below that Risk Pool’s Designated Risk Pool Balance, there shall be an Interim Automatic General Assessment equal to the amount by which the Actual Risk Pool Balance is less than the Designated Risk Pool Balance on the date of the Assessment.

13.4.2 Annual Automatic General Assessments re Liability and Property Pools. At the beginning of each calendar year, Annual Automatic General Assessments shall be levied for the Liability and Property Pools in amounts necessary to make each Risk Pool’s Actual Risk Pool Balance equal to its Designated Risk Pool Balance.

13.4.3 Discretionary General Assessments re All Risk Pools.

13.4.3.1 Liability and Property Pools. With respect to the Liability and Property Pools, by Majority Vote, the Board may levy a Discretionary General Assessment at any time and in whatever amount the Board shall determine, and the monies collected therefore shall be added to the Actual Risk Pool Balance of the Liability Pool or Property Pool, as applicable; provided, however, that any Discretionary General Assessment which would increase the Liability or Property Pool’s Actual Risk Pool Balance to an amount greater than its Designated Risk Pool Balance must be approved by Super-Majority Vote; and provided further, that the foregoing requirement of a Super-Majority Vote shall not apply to Discretionary General Assessments levied in connection with the dissolution of the Liability or Property Pool after the Dissolution Vote to dissolve such Risk Pool has taken place.

13.4.3.2 H&W Pool. At any time, by Super-Majority Vote, the Board may levy a Discretionary General Assessment on the Members of the H&W Pool in whatever amount the Board shall determine and the monies collected therefore shall be added to the H&W Pool Reserves; provided however, that no such Discretionary General Assessment shall increase the H&W Pool Reserves to an amount greater than five (5) times the average monthly H&W Claims Experience over the most recent twelve (12) months period; and provided further, that said Super-Majority Vote shall also establish an Assessment Methodology that would govern such Assessment, which in the absence of agreement by Super-Majority Vote shall be the current H&W General Assessment Formula; and provided further, that the requirements of a Super-Majority Vote in this sub-¶ shall not apply to Discretionary General Assessments levied in connection with the dissolution of the H&W Pool after the Dissolution Vote to dissolve such Risk Pool has taken place, and in lieu thereof shall be a Majority Vote requirement.

13.4.4 Special Purpose Account, Special Purpose Assessments and Other Funding Mechanisms. At any time, with respect to any one or more Risk Pools, by Super-Majority Vote, the Board may: (a) establish a Special Purpose Account; (b) determine and authorize the maximum amount of funding for such Account; (c) determine whether such funding shall be by Special Purpose Assessment(s) under this ¶ 13.4.4, or by some other funding methodology [e.g., by Discretionary General Assessments pursuant to ¶ 13.4.3, or by the transfer or use of a specified amount of existing or future Assets from the Actual Risk Pool Balance(s) or H&W Reserves of one or more Risk Pools for Program Development under ¶ 13.3.2 (if the purpose of establishing the Special Purpose Account is consistent with Program Development), or by transfer of some or all of a Surplus under ¶¶ 13.1.3, 13.1.4 and/or 13.2.5], or by some specified and approved combination of funding methodologies; and (d) if the funding is to be by Special Purpose Assessment(s), establish the Assessment Methodology therefore.

Once the Special Purpose Account and the method of funding therefore have been established by Super Majority Vote, if the funding is to be in whole or in part by Special Purpose Assessment(s), by Majority Vote, the Board may determine the amount(s) of and levy one or more Special Purpose Assessments of the Members of such Risk Pool(s) to finance that Account; provided, that such Assessments shall not increase the money in such Account to an amount greater than the funding level therefore originally established by Super-Majority Vote.

The Assessments collected for the Special Purpose Account shall only be used for the purposes for which the Account was created, which may include but shall not be limited to, establishing additional reserves for payment of Covered Claims, or creating the financial base for increasing a Risk Pool’s Coverage Limit, or developing or establishing additional Risk Pools or other Fund Programs; provided, however, that by Super-Majority Vote the Board may transfer all or a portion of the money allocated to or held in a Special Purpose Account to the Actual Risk Pool Balance or Reserves of the Risk Pool(s) that generated the money, in proportion thereto, or return it to the Members of the appropriate Risk Pool in accordance with ¶ 13.1.4 above. Monies allocated to or held in any Special Purpose Account shall not be counted in determining the level of any Risk Pool’s Actual Risk Pool Balance or Reserves, or the need for or amount of any Assessment, and shall be identified on the Fund’s Financial Statements as a line item separate from the Actual Risk Pool Balance or H&W Pool Reserves, as applicable.

13.4.5 Monthly H&W Assessments for H&W Pool. Each month, to replenish the H&W Pool for the preceding month’s H&W Pool Operational Costs, each Member of the H&W Pool shall pay its Monthly H&W Assessment within twenty (20) days of receiving written notice thereof. Each Monthly H&W Assessment shall be composed of: (a) the Direct H&W Claims Costs incurred with respect to a Member’s Eligible Employees and Dependents (which are passed through directly to the Member, unless and until they qualify for treatment as Shared H&W Claims); and (b) the Member’s H&W Assessment Share of the Shared H&W Costs (e.g., Administrative Expenses, Stop Loss Insurance Premiums, PPO Charges, and Shared H&W Claims) calculated under the H&W General Assessment Formula. (See § XV, ¶ 2).

13.5 Assessment Formulas.

13.5.1 General Assessment Formulas. The Fund shall have an established General Assessment Formula for each of its Risk Pools to be used to calculate the Assessment Share of each Member for General Assessments relating to each Risk Pool. The Liability General Assessment Formula is set forth separately in § VIII and is incorporated herein by this reference as if fully set forth. The Property General Assessment Formula is set forth separately in § XII and is incorporated herein by this reference as if fully set forth. The H&W Pool General Assessment Formula is set forth separately in § XV and is incorporated herein by this reference as if fully set forth. The Board may from time to time amend these General Assessment Formulas by Super-Majority Vote and such change shall thereafter be reflected by an amendment attached to this Agreement and in a revised General Assessment Formula. The Assessment Share of each Member for a General Assessment shall be calculated according to the General Assessment Formula in effect at the time the General Assessment is made. Except as may be otherwise provided in ¶¶ 5.4.2.2, 14.5, and 20.2.1.1 and 20.2.1.3, each Member must pay its full Assessment Share of all General Assessments; provided, however, that any Member of the Property Pool that establishes one or more of its Assigned Deductibles for Insured Property listed in the Schedule of Values at amounts equal to the Fund’s Property Coverage Limit shall only be responsible for paying its Assessment Share of a Property General Assessment to replenish the Actual Property Pool Balance as follows: (a) for Property Coverage Payments and Property Claim Costs, based on the total of the Insured Values for the Member’s Insured Property with Assigned Deductibles of amounts less than the Property Coverage Limit; and (b) for Direct and Shared Administrative Expenses attributable to the Property Pool, based on the total Insured Value for all of the Member’s Insured Property, regardless of the amounts of the Assigned Deductibles applicable thereto.

13.5.2 Premium Assessment Formulas. The Fund shall have an established Premium Assessment Formula for its Liability and Property Pools to be used to calculate each Member’s Assessment Share of a Premium Assessment relating to each such Risk Pool. The Liability Premium Assessment Formula is set forth separately in § IX and is incorporated herein by this reference as if fully set forth. The Property Premium Assessment Formula is set forth separately in § XIII and is incorporated herein by this reference as if fully set forth. The premium cost for Stop Loss Insurance for the H&W Pool is included in H&W Pool Members’ Monthly H&W Assessments under the H&W General Assessment Formula (see § XV), and therefore, the H&W Pool does not have a separate Premium Assessment Formula. The Board may from time to time amend the Premium Assessment Formulas by Super-Majority Vote, and such change shall thereafter be reflected in an amendment attached to this Agreement and in a revised Premium Assessment Formula. Upon determining the amount of the premium for any Excess Coverage procured by the Fund for the Liability and/or Property Pools pursuant to the terms of ¶¶ 14.1 or 14.2, as applicable, the Board shall levy a Premium Assessment equal to the amount of the premium to be paid by the Fund. Except as may be otherwise provided in ¶ 14.1.1 and ¶ 20.2.1.2, and in ¶ 16.1(E) of the Operational Rules, each Member must pay its Assessment Share of all Premium Assessments; provided, however, that a Member’s Assessment Share of a Property Premium Assessment shall be based on the total Insured Value of all Insured Property, regardless of the amounts of the Assigned Deductibles applicable thereto; and provided, further, that a Member shall not have to pay any Assessment Share of a Property Premium Assessment if, at the time of such Assessment, the Total Insured Value of the Member’s Insured Property is less than the amount of the Property Coverage Limit.

13.5.3 Reserves Assessment Formula for Property Pool. The Reserves necessary to commence operation of the Property Pool, and any additional Reserves required as a result of increases in the Designated Property Pool Balance, shall be collected pursuant to Reserves Assessments. The Reserves Assessment Formula shall be: The Property General Assessment Formula, applied to the Insured Value of all of a Member’s Insured Property to the extent such Property has an Insured Value of less than the Property Coverage Limit, without application of the Annual Assessment Limit (see § XII, ¶ 4), and without consideration of the amounts of the Member’s Assigned Deductibles for its Insured Property below the amount of the Property Coverage Limit.

13.6 Payment of Assessments/Interest. General Assessments for the Liability and Property Pools shall be due and paid within thirty (30) days following receipt of written notice thereof. General Assessments for the H&W Pool (i.e., the “Monthly H&W Assessments”) shall be due and paid within twenty (20) days of receiving written notice thereof (as provided more particularly in ¶¶ 13.2.3 and 13.4.5). Premium Assessments, Discretionary General Assessments (see ¶ 13.4.3), Special Purpose Assessments (see ¶ 13.4.4) and any other types of Assessments shall be due and paid on or before the date specified in the notice provided to Members. If a Member fails to pay its Assessment Share of any Assessment when due, the amount owed shall thereafter accrue interest at the rate of five percent (5%) over the Treasury Bill Rate established as of December 31 of year prior to the year of the Member’s default on the Assessment, or the rate provided by Washington statutes for judgments not founded upon written contracts (currently, RCW 4.56.110(2)) whichever is greater, from the date due until paid.

13.7 Remedies for Unpaid Assessments. If a Member of any Risk Pool fails to pay its Assessment Share of any Assessment by the Date of Default, in addition to any other remedies available under this Agreement or as provided by law, the Fund shall have the following remedies:

(a) Setoff. The amount of the defaulting Member’s indebtedness to the Fund, together with accruing interest, shall be offset against any amounts the Fund then or at any time thereafter owes to or on behalf of such Member or any of its Employees, for so long as such indebtedness exists.

(b) Irrevocable Suspension of Liability or Property Coverage During Loss of Coverage Period. Unless the remaining balance of all amounts in default, including interest thereon, and any costs and attorneys fees the Fund has incurred in connection with such default, are paid in full within 180 days of the Date of Default or, in the Board’s sole discretion, are otherwise resolved or provided for to the satisfaction of the Board by Majority Vote, the Fund shall have no obligation to provide Coverage for or pay Defense Costs or Property Claim Costs with respect to any Claim made by or against the defaulting Member or any of its Employees, as applicable, resulting from a Loss Event which takes place during the period beginning 180 days after the Date of Default and continuing until all amounts in default, including accrued interest thereon and the Fund’s costs and attorneys fees incurred with respect thereto, are paid in full. Upon such payment in full, such Member’s Coverage with respect to such Risk Pool shall be reinstated prospectively, as of the date of such full payment, but such Member and/or its Employees, as applicable, shall not be entitled to Coverage for any Claims that arise out of Loss Events that occurred during such Loss of Coverage Period. Notwithstanding the irrevocable suspension of the defaulting Member’s Coverage during the Loss of Coverage Period, the Member shall remain liable for: (1) its Assessment Share of all Assessments levied during such Loss of Coverage Period; (2) its Assessment Share, whenever levied, of the Incurred Liabilities, Defense Costs, Property Claim Costs, and all Direct Administrative Expenses related to resolving any Loss Events that happen with respect to any and all other Members of the defaulting Member’s Risk Pool during such Loss of Coverage Period; and (3) its Assessment Share, whenever levied, of all Shared Administrative Expenses incurred or paid during such Loss of Coverage Period.

(c) Termination of Membership. Unless all amounts in default, including accrued interest thereon, and any costs and attorneys fees the Fund has incurred in connection with such default, are paid within one (1) year of the Date of Default or, in the Board’s sole discretion, are otherwise resolved or provided for to the satisfaction of the Board by Majority Vote, the defaulting Member shall automatically cease to be a Member of the Risk Pool as of the first anniversary of its Date of Default. In the event of such termination, the terminated Member shall have only such rights and duties as are provided for a Former Member of such Risk Pool in ¶¶ 20.2 through 20.4.

(d) Suspension of H&W Claims Payments and/or Loss of Coverage. In addition to the remedies provided for in ¶¶ 13.7(a)‑(c) above, if a Member of the H&W Pool fails to pay its Monthly H&W Assessment in full by the due date, and after written notice from the Administrator regarding such failure, if the Member fails to pay the balance due on such Assessment within twenty (20) days from the date of receiving such notice, the H&W Pool shall have authority to cease paying the H&W Claims of such Member’s Employees and Dependents until such time as the Member’s default is completely cured, including paying any accrued interest and Claim Resolution Costs due on the delinquent Assessment; provided, however, that upon such payment in full (and contrary to the Loss of Coverage provisions in ¶ 13.7(b) above), such Member’s Coverage shall be reinstated retroactively to the date the Suspension Period commenced; and provided further, that such Suspension of Coverage shall become a Loss of Coverage 180 days after the Suspension Period commenced, retroactive to the Suspension of Coverage Date, as provided in ¶ 13.7(b) above.

13.8 Annual Assessment Limit.

13.8.1 Limit on General Assessments for Liability and Property Pools. Except as otherwise provided in this Agreement, the maximum amount a Member of either the Liability or Property Pool may be required to pay in General Assessments with respect to such Risk Pool in any one calendar year shall equal the greater of: (1) 2% of such Member’s Gross Revenues, or (2) an amount equal to 10% of the total General Assessments levied by the Fund for that Risk Pool in the current year divided by the total number of Members in the Risk Pool. Premium Assessments shall not be included when determining whether a Member has paid its Annual Assessment Limit with respect to the Liability or Property Pool, nor shall the Annual Assessment Limit be applied to limit the amount of any Member’s Assessment Share of a Premium Assessment for such Risk Pool. The H&W Pool shall not have an Annual Assessment Limit.

13.8.2 Annual Assessment Limit Reset and Additional Discretionary General Assessments for Liability and Property Pools. If, during any calendar year, all Members of the Liability or Property Pool reach their respective Annual Assessment Limits:

(a) The Formula Components for Liability General and Premium Assessments shall be revised to reflect each Member’s Historical Claims Experience and Employee Hours Worked as of the date all Liability Pool Members reached their Annual Assessment Limits. The Formula Components for Property General and Premium Assessments shall be updated, if deemed reasonably necessary in the opinion of the Administrative Committee, as of the date all Property Pool Members reached their Annual Assessment Limits;

(b) For purposes of applying the Annual Assessment Limit for the remainder of the year, the amount of Assessments paid by each Member of such Risk Pool for the year to date shall be reset to zero, any Assessments levied thereafter for the remainder of the calendar year shall be calculated as if a new calendar year for the Risk Pool had commenced on the date all Members thereof reached their Annual Assessment Limits;

(c) There shall be no Interim Automatic General Assessments for that Risk Pool for the remainder of the calendar year; provided however, that the Board may, during the remainder of such calendar year, as deemed necessary, by Majority Vote, levy one or more additional Discretionary General Assessments calculated under the applicable General Assessment Formula with the updated Formula Components, and each Member of that Risk Pool shall pay its Assessment Share thereof; and

(d) If the Administrative Committee determines that the Actual Risk Pool Balance will not be sufficient to pay all of such Risk Pool’s obligations for the remainder of the year, it shall so notify the Board of this conclusion and of the amount of the expected shortfall, and the Board shall levy one or more Discretionary General Assessments of the Members of such Risk Pool in amounts sufficient to pay the projected shortfall in such Risk Pool’s financial obligations for the remainder of such year.

14. Fund’s Excess Coverages.

14.1 Mandatory Primary Excess and Other Excess Coverages for Liability and Property Pools.

14.1.1 Minimum Excess Coverage/Mandatory Member Participation. On behalf of the Liability Pool and its Members, the Fund shall purchase Primary Liability Excess Coverage in an amount not less than Five Hundred Thousand Dollars ($500,000.00), with an Attachment Point at the Fund’s Liability Coverage Limit, from whatever Excess Carriers the Board shall determine. On behalf of the Property Pool and its Members, the Fund shall purchase Primary Property Excess Coverage in an amount determined by the Board, in its discretion, with an Attachment Point at the Fund’s Property Coverage Limit, from whatever Excess Carriers the Board shall determine; provided, however, in determining the amount of Primary Excess Property Coverage to acquire, the Board shall give consideration to, but shall not be bound by, the total Insured Value of the largest Member of the Property Pool based on the total value of its Insured Property. In acquiring the Fund’s Primary Excess Coverages, the Board shall make a reasonable attempt, given the coverages available and the costs thereof, to minimize the differences in the scope and nature of the coverage provided by the Primary Excess Coverage as compared to the Coverage provided under the SIA; provided, however, the Board shall have the reasonable discretion to omit Excess Coverage for any risks, including risks for which Coverage is provided under the SIA, or to acquire Excess Coverage that is broader for particular risks than the Coverage provided by the SIA. All Members of the Liability and Property Pools shall participate in the Excess Insurance the Board has designated as the Fund’s Primary Excess Coverage for their respective Risk Pools and shall pay their Assessment Shares of any Premium Assessments levied to pay the premiums for such Excess Coverage, as provided in ¶ 13.5.2; provided, however, that a Member of the Property Pool whose Insured Property listed in the Schedule of Values has a total Insured Value of less than the amount of the Property Coverage Limit shall not be required to participate in any Excess Property Coverage or to pay its Assessment Share of any Property Premium Assessments.

14.1.2 Multiple-Layer Primary Excess Coverage. Subject to the requirements of ¶ 14.1.1 above, the Board may, by Two-Thirds Vote, acquire Primary Excess Coverage consisting of one or more Layers of Coverage having different coverage limits, from either the same or different Excess Carriers; provided, however, that every Member of the Risk Pool acquiring multiple-layer Primary Excess Coverage shall participate in, and pay its Assessment Share of the premium for, at least the first Layer of Coverage excess of the Fund’s applicable Coverage Limit. The Members participating in each Layer of Coverage above the first Layer shall be treated as a separate Subgroup for purposes of determining Members’ Assessment Shares of the Excess Premium attributable to their Layer, as provided in Op. Rules, § I, ¶ 16.1(E). Members that fail to timely notify the Administrator which Layer of Coverage they wish to participate in shall be deemed to have elected to participate only in the first Layer of Coverage excess of the Fund’s Coverage Limit. By Majority Vote, the Board may apply any of the provisions in ¶ 16 and Op. Rules, § I, ¶ 16.1 governing Subgroups to the acquisition of Primary Excess Coverage in layers under this ¶ 14.1.2.

14.1.3 Establishment of Different Coverage Limits for Specific Types of Fund Coverages. By Majority Vote, the Board may decrease prospectively the amount of any Coverage Limit otherwise applicable for specific types of Liability or Property Coverage offered by the Fund; provided that comparable Excess Coverage is acquired that attaches and becomes effective at the lower Coverage Limit for such specific types of coverage. By Super-Majority Vote, the Board may increase prospectively the amount of any Coverage Limit otherwise applicable for specific types of Liability or Property Coverage, provided that comparable Excess Coverage is acquired that attaches and becomes effective at such higher Coverage Limit for such specific types of coverage.

14.2 Supplemental Excess Coverage for Liability and Property Pools.

14.2.1 Stop-Loss Insurance. The Fund may by Majority Vote purchase Liability and/or Property Stop-Loss Insurance in whatever amount and from whatever Excess Carrier the Board decides, unless the Board determines that the cost of such insurance is unreasonably high and substantially exceeds its value to the Fund. All Members of the Risk Pool(s) benefiting therefrom shall be required to pay their Assessment Shares of the premium for such Stop-Loss Insurance which shall be calculated under the applicable Premium Assessment Formula.

14.2.2 Compulsory Participation in Other Excess Insurance. By Super-Majority Vote, the Board may direct the Fund to purchase any other Supplemental Excess Coverage which the Board determines to be reasonably necessary for the protection of the Members of the Liability and/or Property Pool and/or their Employees. All Members of the Risk Pool(s) benefiting therefrom shall be required to pay their Assessment Shares of the Premium Assessments levied to pay the premiums for such Excess Insurance which shall be calculated under the applicable Premium Assessment Formula.

14.3 Mandatory Stop Loss Insurance for H&W Pool. On behalf of the H&W Pool and its Members, the Fund shall purchase Stop Loss Insurance with H&W Pool Aggregate and Individual Stop Loss Points acceptable to the Board. In acquiring such Stop Loss Insurance, the Board shall make a reasonable attempt, given the coverages available and the costs thereof, to ensure such Stop Loss Insurance is following form to the H&W Coverage set forth in any and all H&W Pool Members’ Coverage Booklets as of the effective date of such Stop Loss Policy. Members of the H&W Pool shall pay the Stop Loss Insurance Premium therefore as a Shared H&W Cost as a part of their respective Monthly H&W Assessments, as provided in § XV, ¶ 2.

14.4 Allocation of Expenses Relating to Fund Excess Insurance and Stop Loss Insurance. The Fund shall pay and allocate to the appropriate Risk Pool all Administrative Expenses arising from or incurred in connection with any Excess or Stop Loss Insurance purchased by the Fund under ¶¶ 14.1, 14.2, and 14.3. The Fund shall similarly pay all expenses and legal fees incurred in connection with Coverage Litigation with any Excess or Stop Loss Carrier, as provided in ¶ 15.7 below, and allocate such costs and fees to the Risk Pool benefiting therefrom.

14.5 Board Authority to Provide Coverage for Gaps Relating to Primary Excess Insurance. By Super-Majority Vote, the Board may authorize the Liability or Property Pool to provide Coverage, either prospectively, or retroactively with respect to Loss Events that have already taken place, for all or a portion of any gap between the Risk Pool’s Coverage Limit and the Attachment Point of the coverage provided by a Primary Excess Policy, or any “gap” resulting from a Primary Excess Policy providing the same type of coverage but narrower in scope than that provided under the SIA; provided, however, that this authority shall not be used to provide Coverage through the Fund for a Claim that is in excess of the applicable Coverage Limit to the extent it is for a type of Claim that is excluded under the applicable Primary Excess Policy; and provided further, that any Member that voted against providing the additional Coverage and that gives notice of its intent to withdraw from the Risk Pool under ¶ 20.1 within 30 days of the Board’s vote to adopt the Coverage shall not be entitled to such Coverage and shall be exempt through the end of the calendar year of its withdrawal from paying its Assessment Share of the portion of any General Assessment relating to Coverage Payments, Defense Costs or Property Claim Costs the Fund pays for Covered Claims arising from the additional Coverage, and shall remain exempt therefrom as a Former Member.

14.6 Individual Insurance. Nothing contained herein shall be construed to limit the right of any Member, individually or in conjunction with any other entity, including other Members of the Fund, to purchase insurance for the benefit of itself or its own Employees; provided, however, that the Fund and its Administrator shall have no responsibilities whatsoever with respect to such insurance including procuring such insurance, submitting claims to the insurer, or otherwise administering such insurance policy, and the Fund specifically shall have no obligations with respect to any attorneys fees and costs incurred in connection with any disputes regarding such insurance.

15 Coverage Litigation with Excess or Stop Loss Carriers.

15.1 Right to Invoke Fund’s Coverage Litigation Obligations. A Member of any Risk Pool may request the Fund to pursue Coverage Litigation against one or more Excess or Stop Loss Carriers if the Incurred Liability for a Covered Liability Claim, or the Property Loss Amount for a Covered Property Claim, is likely, or proven, to be in excess of the applicable Coverage Limit or Coverage otherwise provided by the Fund, or where there is a Colorable Dispute, as determined by the Administrative Committee; provided, however, that the Board for the Risk Pool involved must approve the institution of the Coverage Litigation by a Majority Vote. An Employee may request the Fund to pursue Coverage Litigation under the circumstances described in the foregoing sentence, but only with respect to Liability Claims asserted solely against such Employee, or with respect to an H&W Claim of such Employee or his/her Dependent, and then, only through the Member and through a Representative appointed by the Member; provided, however, that the Board for H&W Pool must approve the institution of the Coverage Litigation by a Majority Vote. Insured Agents and Insured Volunteers that have been named as Additional Insureds under an Excess Liability Policy shall have no rights under this ¶ 15. Former Members shall have only such rights under this ¶ 15 as are provided in ¶ 20.5.

15.2 Authority of Board and Committees. The Administrative Committee shall initially decide any issues relating to Coverage Litigation (see Op. Rules, § I, ¶ 9.4.3(f)), subject to the involvement of the Executive Committee and the Board pursuant to ¶¶ 9.2(b) and 6.2.12, respectively.

15.3 Member Representative. The Member or Members whose Claims are involved in the Coverage Litigation shall have the right to appoint a Representative to the Administrative Committee with the rights and restrictions as provided in § VII, ¶¶ 3.1 and 3.2.

15.4 Legal Counsel. The Administrative Committee shall select legal counsel, which may be the Fund’s General Counsel or other attorneys, and shall determine generally what actions counsel shall take. Counsel shall represent the Fund’s interests and the interests of the Members that have claims involved in the Coverage Litigation.

15.5 Prosecution of Lawsuit. Any Members and/or Employees (and Former Members, when applicable under ¶ 20.5) with claims involved in the Coverage Litigation shall be deemed to have assigned to the Fund whatever interests they might have under the Excess or Stop Loss Policy for coverage for the Covered Claim. The Fund, through the Administrative Committee, shall prosecute any Coverage Litigation on behalf of such Members and/or Employees and distribute the Recovery Proceeds resulting from the Coverage Litigation to the Members and/or Employees involved according to ¶ 15.9 below. Notwithstanding the foregoing, if its claim is independent and severable from those of any other Members involved in the Coverage Litigation, as determined in the discretion of the Administrative Committee, any Member, or Member and its Employee, may prosecute its own suit against the Excess or Stop Loss Carrier to recover any shortfall after exhaustion of Coverage provided under the SIA by assuming its own legal expenses and waiving any rights to representation or payment of legal costs by the Fund hereunder.

15.6 Joint Prosecution of Coverage Litigation Under Reservation of Rights.

[RESERVED]

15.7 Legal Expenses. The Risk Pool involved shall pay for all Coverage Litigation Costs the Fund incurs in connection with any Coverage Litigation regarding a Colorable Dispute that the Board determines to pursue against any of the Fund’s Excess or Stop Loss Carriers, including, but not limited to, all attorneys’ fees and expenses arising from such Coverage Litigation; provided, however, after initiating Coverage Litigation, the Board, by Two-Thirds Vote, may determine that a Member’s Coverage dispute with an Excess Carrier has ceased to be reasonable, in which event the Member seeking coverage shall be responsible for any costs and legal fees thereafter incurred in connection with any Coverage Litigation; and provided further, that the Risk Pool involved shall reimburse such Member’s reasonable costs and attorney’s fees thereafter incurred in the Coverage Litigation only as follows: if the Member obtains a judgment or settles for an amount greater than 50% of the amount of its Claim (which Claim amount shall be determined by the Administrative Committee after consultation with the Member at the time the Risk Pool ceased financing the Coverage Litigation), then the Risk Pool will reimburse at 100%; if the Member does not substantially prevail at trial or settles for less than 50% of the amount of such Claim, then the Risk Pool shall have no reimbursement obligation.

15.8 Settlement of Coverage Litigation. Subject to ¶¶ 6.2.11 and 6.2.12, the Administrative Committee shall have the authority provided and follow the procedures set forth in § VII, ¶ 6.1 in connection with settlement of any and all claims involved in the Coverage Litigation.

15.9 Payment of Recovery Proceeds. The Recovery Proceeds received by the Fund on behalf of the Members and/or Employees involved in the Coverage Litigation shall be paid to or on behalf of such Members and/or Employees to the extent of each’s uncompensated Loss Amount; provided, however, that the Fund may retain any Recovery Proceeds in excess of the total of all such Members’ and/or Employees’ uncompensated Loss Amounts as reimbursement toward its Coverage Litigation Costs. If the Net Recovery is not sufficient to pay fully the uncompensated Loss Amounts of all the Members and Employees with claims involved in the Coverage Litigation, it shall be paid to each Member and/or Employee in the ratio of each’s Loss Amount divided by the total Loss Amounts of all Members and/or Employees. With respect to Coverage Litigation relating to Liability Claims, the amounts the Fund incurred in costs and legal fees in pursuing the Coverage Litigation, to the extent they are not reimbursed to the Fund out of the Coverage Litigation, shall be allocated to the Historical Claims Experience of the Members involved in accordance with § VIII, ¶ 4.2.1.

16 Subgroups and the Purchase of Additional Excess or Stop Loss Insurance or Different Liability Insurance.

16.1 Subgroup Procedures and Establishing Subgroup Participants. In addition to the Primary Excess and Stop Loss Coverages the Fund purchases on behalf of the Members of its various Risk Pools as required by ¶ 14.1 and ¶ 14.3, and any Supplemental Excess Coverages the Board determines are reasonably necessary for the Fund to purchase on behalf of such Members as permitted by ¶ 14.2, any two or more Members of a Risk Pool may invoke these “Subgroup Procedures,” in accordance with the Operational Rules, by which less than all Members of a Risk Pool may jointly purchase insurance through the Fund with coverages in addition to those acquired by the Fund under ¶¶ 14.1 and 14.3. (The procedures and rules governing the formation and operation of Subgroups are set forth in detail in Op. Rules, § I, ¶ 16.)

17 Risk Management Program. This paragraph applies to all of the Fund’s Risk Pools.

17.1 Authority and Adoption of Programs. The Fund Board shall establish and maintain a written Risk Management Program for the Liability Pool and the Property Pool. Subject to the Board’s authority under ¶ 6.2.11, the Administrative Committee shall have the primary responsibility for implementation of the Programs. The Liability Risk Management Program shall be designed to reduce the risks of losses from claims against Members (and/or their Employees) and the legal exposure of the Fund through a program that may include Member and Employee education, inspections of Members’ operations and correction of risk problems discovered, review and supplementation of Members’ policies and procedures regarding subjects appropriately the focus of risk management by the Fund, review and consultation with Members regarding individual Member’s claims experience and remedying the causes of patterns of claims, institution of more effective claims handling practices, and the implementation of certain Loss Control Guidelines, among other things. The Property Risk Management Program shall be designed to minimize the risks of Property Losses. Any risk management programs relating to the H&W Pool shall be the responsibility of the respective Members viv-a-vis their own Employees. The written Liability and Property Risk Management Programs formulated by the Administrative Committee shall be presented to the Board which may adopt all or portions of such Programs by a Two-Thirds Vote. Any Risk Management Program duly adopted by the Board pursuant to this paragraph by Two-Thirds Vote shall be binding upon all Members and Employees, and Members who violate any of the mandates of such Program shall be subject to the procedures and Board Remedies set forth in ¶ 17.4 herein.

17.2 Formulation and Adoption of Loss Control Guidelines. In connection with the initial preparation of the Fund’s Risk Management Programs, and thereafter, upon request of the Board or the Executive Committee, or from time to time upon its own initiative, the Administrative Committee may formulate Loss Control Guidelines which, if duly adopted by the Board by Two-Thirds Vote, shall be binding upon all Members. The Loss Control Guidelines adopted by the Board shall be deemed to establish the standards for certain aspects of Members’ plant and/or business operations and shall be designed to reduce the risks that particular types of losses will occur, or to reduce the severity of such losses, or to increase the likelihood of successful Defense of Claims arising from such losses. In formulating and adopting Loss Control Guidelines, the Administrative Committee and Board shall be guided by the following principles:

(a) Complying with the Fund’s obligations regarding its Risk Management Program under State law;

(b) Balancing fairly the competing interests of requiring fairness to all Risk Pool Members by ensuring that no Member’s operations poses an unreasonable risk to the Fund in comparison to the operations of other Members of the Risk Pool, versus ensuring that the Fund does not unduly intrude on its Members’ prerogatives to control their own business affairs; and

(c) Ensuring that any standards set are reasonable to apply to all Members of the Risk Pool and that all such Members can comply with reasonable effort and without unreasonable expense, given the potential magnitude of the exposure presented by the Risk which is the subject of the Guideline.

17.3 Members’ Actions Constituting Violation of Risk Management Program. Members of any Risk Pool shall be subject to the Board Remedies that may be imposed by a Two-Thirds Vote as set forth in ¶ 17.4 for engaging in the following actions or failures to act which cause or fail to remedy Unreasonable Risks:

(a) Unreasonably failing to remedy any Unreasonable Risk identified in a Member’s plant and/or operations as result of a loss control review by the Fund, an agent of the Fund or the Fund’s Excess Carriers before expiration of the Compliance Date identified in the Remediation Letter sent to the Member by the Executive Committee;

(b) Unreasonably failing to correct any violation by a Member of any Loss Control Guideline before expiration of the Compliance Date identified in the Remediation Letter sent to the Member by the Executive Committee;

(c) Unreasonably failing to correct any pattern of acts or omissions that a Member has engaged in that has previously caused at least one similar Loss Event before expiration of the Compliance Date identified in the Remediation Letter sent to the Member by the Executive Committee; or

(d) For any other reason recommended by the Administrative Committee or Executive Committee and approved by the Board by Super-Majority Vote.

17.4 Compliance Procedures and Board Remedies for Violation of Risk Management Program.

17.4.1 Consultation with Member/Issuance of Remediation Letter. Any time the Administrative Committee determines that some aspect of a Member’s plant or operations presents an Unreasonable Risk, the Committee shall so advise the Member in writing, stating the date by which such Unreasonable Risk should be corrected or remedied. If, after such written notice from the Administrative Committee, the Member fails to correct or remedy the Unreasonable Risk within the time stated, the Administrative Committee shall meet with the Member to determine why such Unreasonable Risk continues to exist and to jointly explore with the Member methods for resolving the same. After such meeting, if the Administrative Committee has not reached agreement with the Member satisfactory to the Committee regarding resolution of the Unreasonable Risk, the Committee may apply to the Executive Committee to authorize a Remediation Letter to be prepared and sent by or on behalf of the Executive Committee to the Member. At minimum, the Remediation Letter shall: identify the nature of the violation, describe the correction or remedy sought by the Fund, and state the Compliance Date by which such correction or remedy should occur for the Member to avoid possible imposition of Board Remedies under ¶ 17.4.2 herein.

17.4.2 Effect of Issuance of Remediation Letter and Board Remedies for Violation. The Executive Committee’s issuance of a Remediation Letter and the Member’s failure to correct or remedy the Unreasonable Risk identified in the Remediation Letter by the Compliance Date shall be preconditions to application of the Board Remedies provided for hereunder. At any time after a Member has received a Remediation Letter and the Compliance Date has expired without correction or remediation of the Unreasonable Risk, the Board, in its sole discretion, and at its own initiative or upon application by the Administrative Committee or Executive Committee, may by Two-Thirds Vote:

(a) Deny Coverage from the Fund for any Claim based on a Loss Event that arises out of the circumstances constituting the Member’s violation any time on or after the date the Board votes to impose this Board Remedy, as determined by the Board; or

(b) Terminate such Member’s membership in the Risk Pool, or in the Fund, effective at the end of the calendar year in which the Board votes to impose this Board Remedy, in which event the terminated Member thereafter shall have only such rights and duties as are provided for a Former Member in ¶ 20.

Notwithstanding any other provisions in this ¶ 17, each Member shall retain ultimate control of its own loss control efforts.

18 New Members.

18.1 Admission. Any Local Governmental Entity may be admitted as a New Member of one or more of the Fund’s Risk Pools under the provisions set forth in the Operational Rules upon approval by the full Board by Super-Majority Vote. Any New Member must also become a member of the System.

18.2 Conditions to be Satisfied by New Member.

18.2.1 Conditions Applicable to All Risk Pools. Each New Member shall provide the Administrator with an Authorizing Resolution, shall become a signatory to the Interlocal Agreement, shall be bound by the provisions of the SIA and the Operational Rules, and shall abide by any written conditions for the New Member’s admission imposed by the Board. The terms of the Board’s written approval of the New Member shall be deemed accepted, effective and binding upon the New Member by such Member’s act of joining the H&W Pool and participating in and accepting the benefits thereunder. Furthermore, such terms are binding on the New Member even if otherwise contrary to certain provisions of the SIA.

18.2.2 Additional Conditions to Become New Member of H&W Pool.

18.2.2.1 Information To Be Provided By New Member Applicant. In connection with its application for admission, the proposed New Member of the H&W Pool shall be required to provide to the Administrative Committee information sufficient for the Committee to calculate the amount of the Initial Deposit, in accordance with ¶¶ 18.2.2.2, herein, that must be made by the New Member to become a Member of the H&W Pool, together with any other information requested by the Administrative Committee, including the information necessary to preliminarily determine the results of application of the H&W General Assessment Formula and Member Stop Loss Points to the New Member in connection with the Committee’s review of the New Member’s application.

18.2.2.2 New Member’s Initial Deposit. As a condition of Membership in the H&W Pool, the proposed New Member shall pay to the H&W Pool the amount of its Initial Deposit, as determined by the Administrative Committee, prior to the date H&W Coverage is first provided to the New Member. In determining the amount of the Initial Deposit for a New Member, the Administrative Committee shall be guided by the definition of “Initial Deposit” in § II, herein, but the Committee shall have the discretion to increase or reduce the amount derived therefrom, subject to Board approval, based on the Committee’s evaluation of the H&W Claims Experience likely to arise from the New Member in the first three (3) months after the date the New Member proposes to join the H&W Pool. The New Member’s Initial Deposit shall be treated the same as Initial Members’ Initial Deposits for all purposes, including the Withdrawal of the New Member from the H&W Pool and upon Dissolution of the H&W Pool.

18.2.2.3 Effect of Admission of New Member, if any, Re Stop Loss Insurance and Detrimental Impact on Existing Members. If the proposed effective date for the New Member joining the H&W Pool is any time other than concurrent with commencement of the Stop Loss Policy Year, in determining appropriate conditions to propose to the Board for the New Member to join the H&W Pool, the Administrative Committee shall consider what effect, if any, admission of the New Member at that time would have on the Stop Loss Insurance in place, and whether and to what extent such admission would likely otherwise have a detrimental (or beneficial) financial impact on the existing Members of the H&W Pool. In considering such issues, the Administrative Committee shall be guided by the general policy that, if reasonable under the circumstances, the New Member should bear some or all of any increased costs arising from the Stop Loss Insurance as a result of the New Member joining the H&W Pool. To the extent there is any increase in the Stop Loss Rates for extending coverage to the New Member, or other adverse financial impact on existing H&W Pool Members, and to the extent such increase as it effects all existing Members is not offset by conditions set by the Board for admission of the New Member, all existing Members, including the New Member, shall share such increase based on the number of their respective Eligible Employees if it is a Per Capita Cost increase, and if otherwise, it shall be deemed a Shared H&W Cost under the H&W General Assessment Formula. The respective Members, and not the H&W Pool, shall be responsible for resolving any Stop Loss Rate increase issues that may arise with their respective Eligible Employees as a result of such increase.

18.2.2.4 Recalculation of Member Stop Loss Points if Stop Loss Carrier Increases H&W Pool’s Stop Loss Points. If, as a result of admitting the New Member, the Stop Loss Carrier imposes an increase in one or both of the H&W Pool’s Stop Loss Points for extending coverage to the New Member, Members’ corresponding Stop Loss Points shall be recalculated and the new Stop Loss Points shall become effective on the same date as the increases in the H&W Pools Stop Loss Points imposed by the Stop Loss Carrier become effective. Thereafter, Members’ H&W Claims payments accrued toward their respective Stop Loss Points shall be accounted for and applied as if the increased Member Stop Loss Points were in effect at the beginning of the Coverage Year; provided, however, that no retrospective recalculations shall be made with respect to how H&W Claims already paid prior to the effective date of the increased Stop Loss Points would have been accounted for (i.e., whether they would have been paid as Direct H&W Claims Cost vs. Shared H&W Costs) under the higher Stop Loss Points; provided further, that if a Member has already previously reached a Stop Loss Point in the Coverage Year, but has not accrued a sufficient amount of H&W Claims Costs to satisfy the new, higher Stop Loss Point, such Member must pay the additional H&W Claims Costs necessary to reach the higher Stop Loss Point before its H&W Claims will again be treated as Shared H&W Costs; and provided further, any resulting decrease in Member Stop Loss Points shall be effective when the corresponding decreases in the H&W Pools’ Stop Loss Points become effective, but there shall be no retrospective recalculations regarding how Members’ H&W Claims would have been treated if the lower Stop Loss Points had been effective since the beginning of the Coverage Year.

18.2.2.5 Operation of Stop Loss Points for New Member Joining During Coverage Year. A new H&W Member shall start with zero H&W Claims Costs accrued toward its Stop Loss Points on its Date of Membership.

18.3 New Member Trial Period. Because it is not possible at the time of admission of a New Member to anticipate all of the ramifications admission of the New Member may have on the existing Members of the Risk Pool or on the fairness of applying the Assessment Formulas provided for herein, each Risk Pool shall have the right, by Unanimous Vote of its Board, excluding the vote of the New Member, to terminate the New Member’s Membership in the Risk Pool without cause, effective at the end of the Coverage Year in which the notice thereof was given; provided that such written notice of termination shall be given at least eleven (11) months prior to the end of the Coverage Year in which the termination is to be effective; and provided further, that such termination shall not be permitted after the end of the sixth (6^th) year from the New Member’s Date of Membership. After the effective date of the termination, the New Member shall have all of the rights and obligations of a Former Member under ¶ 18 herein.

18.4 Assessments. Upon admission to one or more of the Fund’s Risk Pools, each New Member shall be responsible for its Assessment Share of all Assessments levied subsequent to the effective date of the New Member’s admission to the Risk Pool; provided, however, that for a period of six (6) years following a New Member’s admission to the Liability Pool, the New Member’s Assessment Share of any Liability General Assessment to replenish the Actual Risk Pool Balance shall not exceed its Assessment Share of all amounts paid by the Fund for Coverage Payments, Defense Costs and Administrative Expenses attributable to Post-Admission Loss Events; and provided, further, that all New Members of any Risk Pool shall pay their Assessment Shares of any Special Purpose Assessments levied in their Risk Pool subsequent to the effective date of their admission.

18.5 Readmission of Former Member. Any Former Member which applies for re-admission to a Risk Pool shall be treated as a New Member to that Risk Pool and subject to this ¶ 18.

19 Appeal Procedures and Administrative Committee’s Primary Jurisdiction.

19.1 Primary Jurisdiction of Administrative Committee and Exceptions Thereto. Subject to ¶ 6.2.11, the Administrative Committee shall have Primary Jurisdiction over all issues relating to the subjects identified as constituting the Administrative Committee’s authority and responsibilities in Op. Rules, § I, ¶ 9.4.3, regardless of whether the Administrative Committee has affirmatively made any decision or taken any action with respect thereto. (See also, ¶ 9.4.4). Any Members wishing to raise any issues for decision with respect to such subjects shall address them in the first instance to the Administrative Committee by submitting them in writing to the Administrator; provided, however, that issues otherwise subject to the Administrative Committee’s Primary Jurisdiction may be addressed directly to the Board for decision in the first instance:

(a) As permitted by ¶ 7.6 in connection with General Meetings; or

(b) As one of the stated purposes for calling a Special Meeting under ¶ 7.2 or an Emergency Meeting under ¶ 7.3; provided, however, that the Administrator determines from a telephone or other poll of the Directors that, out of a Super-Majority of Directors contacted, there is a Majority Vote to consider and decide the issue;

or, the Committee’s authority with respect to such issue may be withdrawn by Majority Vote of the Board at any time pursuant to ¶ 6.2.11.

19.2 Appeal Procedures.

19.2.1 Issues Subject to Mandatory Appeal Procedures. These Appeal Procedures shall apply to all Appeal Issues which are defined as:

(a) All issues relating to any Coverage Determination;

(b) All issues relating to subjects within the Administrative Committee’s Primary Jurisdiction, regardless of whether the Administrative Committee has made any decision or taken any action with respect thereto; and

(c) All complaints, objections and grievances by any Member with respect to any decisions made or action taken by the Administrative Committee on any subject, regardless of whether the subject falls within the Administrative Committee’s Primary Jurisdiction, or by the Executive Committee.

19.2.2 Exception to Appeal Procedures. Members that desire a hearing or a decision by the Fund on any Appeal Issue shall comply with these Appeal Procedures; provided, however, that Appeal Issues otherwise subject to these Appeal Procedures may be addressed directly to the Board for decision by the methods identified in the proviso contained in ¶ 19.1(a) or (b).

19.2.3 Standing to Appeal. Any Member may appeal any Appeal Issue from any level of the Appeal Procedures, regardless of whether the Member previously has been involved in the appeal or will be directly affected by the decision or action under consideration. An Employee may only appeal Appeal Issues relating to his/her own Coverage Determination.

19.2.4 Modification of Requirements. The notice and other procedural requirements contained in this ¶ 19.2 may be modified in accordance with Op. Rules, § I, ¶ 19.2.4.

19.2.5 Time Limits for Appeal. The time limits which Members or Employees must adhere to in order to appeal an Appeal Issue are set forth in Op. Rules, § I, ¶ 19.2.5.

19.2.6 Appeal Representation and Legal Counsel. Any Member properly invoking these Appeal Procedures shall, for itself, or in the case of a Request by an Employee, on behalf of its Employee, appoint a Representative to be the spokesperson for the Member or Employee at all stages of the Appeal Procedures. Subject to the restrictions in § VII., ¶ 3.1.3, the Representative shall have the right to participate in all non-privileged discussions and the right to vote in the decisions of the Administrative and Executive Committees in connection with the Appeal. Any tie vote shall be broken by the chairperson of the Operations Committee. In addition, Members and Employees shall be entitled, at their own expense, to representation by legal counsel.

19.2.7 Processing of the Appeal. The procedures for processing an Appeal are set forth in § I, ¶ 19.2.7 of the Operational Rules. Whether the full Board decides the Appeal Issue or only the Directors of Members participating in the Risk Pool involved shall be decided according to the principles set forth in ¶ 4.2.2. A Majority Vote shall decide the Appeal Issue, unless a higher Voting Standard specifically applies to such Issue.

19.2.8 Exhaustion of Appeal Procedures as Prerequisite to Arbitration. No Member or Employee may seek arbitration of any issue under ¶ 24.4, or court resolution of any issue under ¶ 24.4.7 (except for subparagraphs (b) and (e) thereof), without first exhausting all levels of the Appeal Procedures, or by other procedures in this Agreement properly first addressing the issue to be arbitrated to the Board, and providing a reasonable opportunity for the Board to decide the same. Any Member or Employee directly affected by the Board Decision on the Appeal Issue may submit the Appeal Issue to binding arbitration under ¶ 24.4, or to court resolution, as permitted by ¶ 24.4.7.

20 Withdrawal From a Risk Pool.

20.1 Notice of Intent to Withdraw.

20.1.1 Notice with Respect to Liability and Property Pools. Except under the special circumstances provided in ¶¶ 5.4.2.2 and 14.4, a Member may withdraw from a Risk Pool and cease to be a Member of that Risk Pool, effective as of December 31 of any year, only by delivering written notice of its intent to withdraw to the Administrator on or before October 1 of the calendar year of withdrawal. If such notice of intent to withdraw is not given in accordance with this ¶ 20.1, the notice shall be ineffective and the Member giving such notice shall remain a Member of the Risk Pool and subject to the SIA and all other Program Documents, unless permitted to withdraw upon such terms and conditions as may be imposed by the Board by Super-Majority Vote.

20.1.2 Notice with Respect to H&W Pool. A Member’s notice of intent to withdraw from the H&W Pool shall be given in the manner provided in ¶ 20.1.1; provided, however, that if the H&W Pool’s Coverage Year and Fiscal Year are on a basis other than a calendar year (in order to conform to the period covered by the Stop Loss Policy Year, see § XIV, ¶ 5), a Member can only withdraw effective at the end of a Coverage Year, and a Member’s written notice of intent to withdraw shall be given to the Administrator on or before the 90^th day preceding the end of such Coverage Year.

20.2 Obligations of Former Member to the Fund.

20.2.1 Obligations to Former Member with Respect to Liability and Property Pools.

20.2.1.1 Pre-Withdrawal General Assessments and Replenishment of Actual Risk Pool Balance For Liability and Property Pools. A Former Member of the Liability or Property Risk Pools shall be liable to the Fund for its Assessment Share of all General Assessments levied for that Risk Pool prior to the Withdrawal Date. Interest shall accrue on any amounts not paid when due as provided in ¶¶ 13.4. In addition, a Former Member shall pay to the Fund an amount measured by what would be its Assessment Share of an Interim Automatic General Assessment (but without applying the Annual Assessment Limit) levied for the Risk Pool as of the Withdrawal Date; provided that, with respect to the Property Pool, a Former Member’s Assessment Share shall be based on the highest total Insured Value of the Former Member’s Insured Property listed in the Schedule of Values at any time in the calendar year of withdrawal. Such amount shall be paid within thirty (30) days after the withdrawing Member receives written notice of the amount thereof, and shall bear interest at the rate provided in ¶ 13.4 if not paid when due. A Former Member shall have no obligation to pay any share of any Special Purpose Assessments levied for the Risk Pool after the Notice Date, except to the extent such assessments are for funding a Special Purpose Account at a level established by the Board by Super-Majority Vote prior to the Notice Date.

20.2.1.2 Premium Assessments. A Member which has given its notice of intent to withdraw from a Risk Pool shall be liable for its Assessment Share of all Premium Assessments levied for that Risk Pool for the purpose of paying the premium for any Excess Insurance, Stop-Loss Insurance or Subgroup Policy under which the Member or any of its Employees are or will be a beneficiary; provided, however, that the Member may waive coverage, effective at any time after the Notice Date, under any Excess Policy purchased by the Fund for the Risk Pool. In Such event, the Member shall be entitled to a credit against amounts which, as a Former Member, it becomes obligated to pay pursuant to ¶¶ 20.2.1 and 20.2.3 equal to the amount of premium saved by the Risk Pool as a result of the Member’s waiver of coverage, if any. In no event shall a Member which has given notice of its intent to withdraw be required to pay its Assessment Share for any Premium Assessment levied for the Risk Pool for the purpose of acquiring insurance for which neither the Member nor its Employees will ever be a beneficiary.

20.2.1.3 Post-Withdrawal Expenses. A Former Member shall reimburse the Fund for its Assessment Share of the costs the Fund ultimately incurs in resolving the Incurred Liability Exposure of the Former Member’s Risk Pool as of its Withdrawal Date, and all Administrative Expenses directly related thereto, including but not limited to, legal fees incurred by the Fund in connection with any legal action regarding Coverage for the Former Member by the Fund if the Fund is the prevailing party, arising from Pre-Withdrawal Loss Events. Such Assessment Share shall be calculated according to the applicable Formula for General Assessments based on the Formula Component values in effect for the Former Member as of the Withdrawal Date; provided, however, that the Annual Assessment Limit shall not apply and, provided further that, with respect to the Property Pool, a Former Member’s Assessment Share under the Property General Assessment Formula shall be based on the highest total Insured Value of the Former Member’s Insured Property listed in the Schedule of Values at any time in the calendar year of withdrawal for all General Assessments levied after the Notice Date. The amount owed by a Former Member pursuant to this paragraph shall be determined quarterly based upon the amount paid by the Fund in such quarter for resolving the Incurred Liability Exposure of the Former Member’s Risk Pool as of the Withdrawal Date, and shall be paid within 30 days after the Former Member receives written notice of the amount thereof. If the Former Member fails to make any payment when due, interest shall accrue on the unpaid balance at the rate set forth in ¶ 13.4. A Former Member’s obligation to make payments to the Fund pursuant to this paragraph shall continue despite the Dissolution of the Risk Pool or the Fund pursuant to ¶ 21.

20.2.2 Obligations of Former H&W Member With Respect to the H&W Risk Pool.

20.2.2.1 Pre-Withdrawal H&W Assessments. A Member that has given its notice of intent to withdraw from the H&W Pool shall continue to be liable to the Fund for all of its Monthly H&W Assessments for H&W Pool Operational Costs incurred by the H&W Pool through the end of the Coverage Year/Stop Loss Policy Year as if such Member had not given such notice.

20.2.2.2 Former H&W Member’s Assessment Obligations During Mandatory H&W Claims Runout Period. A Former Member shall remain responsible for paying its Assessment Share of each of the three (3) Monthly H&W Assessments levied in the first three (3) months following the Former Member’s Withdrawal Date (i.e., during the Mandatory H&W Claims Runout Period), and for complying with any and all related obligations under the SIA as if such Former Member continued to be a Member of the H&W Pool during that time period; provided that such Former Member’s Monthly H&W Assessments for the Mandatory Claims Runout Period shall be based on the amount of its Incurred H&W Claims and its Extended Coverage H&W Claims paid in the preceding month, and its Assessment Share of the total of all Members’ (including the Former Members’) Shared H&W Costs incurred in the preceding month, calculated under the H&W General Assessment Formula, after deducting the portion of the Stop-Loss Insurance Premium and Administrative Expenses allocable to the ongoing operations of the H&W Pool in the preceding month.

20.2.2.3 Former H&W Member’s Assessment Obligations After Expiration of Mandatory H&W Claims Runout Period and Prior to H&W Claims Cutoff Date. Except as otherwise provided in ¶ 20.4.2.1(b) regarding a Former Member establishing an earlier H&W Claims Cutoff Date, for the time period after expiration of the Mandatory H&W Claims Runout Period and before the H&W Claims Cutoff Date, a Former Member shall be responsible for reimbursing the H&W Pool for the amount the H&W Pool paid in the preceding month for such Member’s remaining unpaid Incurred H&W Claims and Extended Coverage H&W Claims, together with all related H&W Claims Handling Fees, and for paying its Assessment Share of the amount the H&W Pool paid in the preceding month for any remaining unpaid Incurred Shared H&W Claims.

20.2.2.4 Terms Governing Payment of Assessment by Former H&W Member. With respect to Assessments levied for a Former Member under ¶’s 20.2.2.1, 20.2.2.2 and 20.2.2.3, the amounts of such Assessments shall be paid within twenty (20) days after the withdrawing Member receives written notice thereof, interest shall accrue on any amounts not paid when due as provided in ¶ 13.5, and the delinquent Member shall be subject to the H&W Pool remedies in ¶ 13.6.

20.3 Former Member’s Rights in Fund Assets.

20.3.1 Former Member’s Rights with Respect to Liability and Property Pool Assets. A Former Member shall have no claim to, nor any right, title or interest in, any money or assets owned by the Fund or held by the Fund on behalf of the Former Member’s Risk Pool, including any money or assets attributable to the Former Member’s contributions or Assessments paid to the Fund pursuant to this Agreement; provided, however, that if the Actual Risk Pool Balance on the Withdrawal Date, after deducting the amount of the Fund’s incurred but unpaid Administrative Expenses allocable to the Risk Pool as of that date and the amount of any Recovery Proceeds constituting part of the Actual Risk Pool Balance, is greater than the amount of the Designated Risk Pool Balance in effect as of the Notice Date, the Former Member shall be entitled to a setoff of that portion of such excess monies, calculated according to the applicable Formula For General Assessments in effect on the Withdrawal Date, against any amounts the Former Member becomes obligated to pay pursuant to ¶ 20.2.1 or ¶ 20.2.3. Similarly, the Former Member shall have no right, title or interest in or to any money or assets allocated to any Special Purpose Accounts.

20.3.2 Former H&W Member’s Rights With Respect to H&W Pool Assets ‑ ‑ Return of Balance of Former Member’s Initial Deposit. As specified in ¶¶ 13.2.3.1 and 13.3.5 above, the Former Member’s Initial Deposit (or Adjusted Initial Deposit, as determined per ¶ 13.2.2) shall continue to be replenished by Monthly H&W Assessments to be paid by the Former Member during the Mandatory H&W Claims Runout Period. Within forty five (45) days after the end of the Mandatory Claims Runout Period, and provided the Former Member is current on all payments owed to the H&W Pool, the H&W Pool shall pay fifty percent (50%) of the value of the Former Member’s Initial Deposit (or Adjusted Initial Deposit) to the Former Member, and shall retain the remaining fifty percent (50%) until the H&W Claims Cutoff Date. Within forty five (45) days after the H&W Claims Cutoff Date, and provided the Former Member is current on all payments owed to the H&W Pool, any remaining balance of the remaining 50% of the Initial Deposit (or Adjusted Initial Deposit) shall be paid to the Former Member; and provided further, that the Former Member shall continue to remain responsible to pay its Assessment Share of Incurred Shared H&W Claims paid in the preceding month, which shall be assessed to the Former Member and paid in accordance with ¶ 20.2.2.4. Notwithstanding the provisions above for return to the Former Member of the balance of its Initial Deposit, prior to the date such balance is to be paid to the Former Member, the Former Member shall have no right, title, or interest in or to any of the monies of the H&W Pool, including the portion thereof otherwise attributable to the Former Member’s Initial Deposit. Furthermore, at no time shall any Former Member be entitled to interest on the amount of its Initial Deposit or Adjusted Initial Deposit retained by the H&W Pool, either during the time it is a Member of the H&W Pool, or thereafter while such money is held by the H&W Pool pending expiration of the H&W Claims Cutoff Date; provided, however, a Former Member shall be entitled to interest from the H&W Pool at the rate provided for in ¶ 13.5 regarding delinquent Assessments for any balance of its Initial Deposit not paid when due under this paragraph.

20.4 Claims Relating to Former Members.

20.4.1 Claims Involving Former Member of Liability or Property Pools. The Fund shall continue to provide Coverage, Defense, and services related to those rights to a Former Member and its Employees for Covered Claims based upon Pre-Withdrawal Loss Events; provided, however, that the Fund shall not be obligated to make such payments or provide such services for the Former Member or its Employees if the Former Member is in default under the SIA; and provided, further, that a Former Member shall not be entitled to Coverage by the Fund for any period of time during which the Former Member’s Coverage was suspended under ¶ 13.7(b) for default in paying Assessments. For purposes of making Coverage Determinations for Liability Claims made against a Former Member or any Employee of a Former Member, or for Property Claims made by a Former Member, the term “Member,” as used in the Exclusions contained in the Coverages sections, shall include Former Members, and “Employee” shall include Employees of a Former Member. The Former Member shall be bound by the Claims Resolution Rules and Procedures in effect at the time the Claim is asserted against, or the Property Claim is filed by, the Former Member, as may be amended from time to time thereafter.

20.4.2 Claims Involving Former Member of H&W Pool.

20.4.2.1 H&W Claims Cutoff Date and Termination of H&W Pool’s Obligations to Former H&W Member.

(a) Determination and Effect of H&W Claims Cutoff Date. After expiration of the H&W Claims Cutoff Date applicable to a Former Member, the H&W Pool shall cease having any financial responsibility or obligations under the SIA to provide H&W Coverage for or to pay any unpaid Incurred H&W Claims or Extended Coverage H&W Claims with respect to the Former Member’s Employees and Dependents. The H&W Claims Cutoff Date shall be: (a) the date the Stop‑Loss Carrier ceases coverage and making payment for Incurred H&W Claims in accordance with the terms of the Stop‑Loss Insurance in effect for Members of the H&W Pool on the Former Member’s Withdrawal Date; or (b) the date the last known Incurred H&W Claim or Extended Coverage H&W Claim involving the Former Member’s Employees or Dependents is resolved, as determined by the Administrative Committee, whichever date is later.

(b) Former H&W Member’s Discretion to Establish Earlier H&W Claims Cutoff Date. A Former Member of the H&W Pool may establish an H&W Claims Cutoff Date earlier than the Date that would otherwise be applicable under ¶ 20.4.2.1(a) above, by including in its notice of intent to withdraw a statement that, after the Withdrawal Date, such Member agrees to assume all financial and related responsibility with respect to any and all unpaid Incurred H&W Claims and Extended Coverage H&W Claims relating to its Employees and their Dependents as of the date specified in the notice. As of such date, the H&W Pool shall have no further responsibility for or obligations with respect to such unpaid Incurred H&W Claims or Extended Coverage H&W Claims; provided that in no event shall such earlier H&W Claims Cutoff Date take effect prior to the expiration of the Mandatory H&W Claims Runout Period; provided further, that in giving such notice to the Fund, such Former Member thereby agrees without more to indemnify the Fund, the H&W Pool, the Administrative Committee and the Administrator, and to hold them harmless, from any and all liability arising out of or related in any way to such unpaid Incurred H&W Claims and Extended Coverage H&W Claims; and provided further, that the establishment of an earlier H&W Claims Cutoff Date hereunder shall not operate to terminate a Former Member’s obligation to continue to pay its Assessment Share of any remaining unpaid Incurred Shared H&W Claims. Notwithstanding any earlier H&W Claims Cutoff Date established by the Former Member’s original notice of intent to withdraw, such Former Member may extend or shorten such Cutoff Date by written notice thereof to the Fund; provided such notice is given at least thirty (30) days prior to the new Cutoff Date. In no event shall this Cutoff Date be extended beyond the Date that would otherwise be applicable under ¶ 20.4.2.1(a) above.

(c) H&W Coverage for Former Member Limited to Incurred H&W Claims and Extended Coverage H&W Claims. After the effective date of a Former Member’s withdrawal from the H&W Pool, the Former Member shall only be entitled to H&W Coverage for Incurred H&W Claims and Extended Coverage H&W Claims, and with respect to such Claims, the Former Member shall remain bound by the applicable provisions of the SIA.

20.5 Former Members’ Rights Regarding Coverage Litigation. A Former Member, with respect to a Covered Liability Claim asserted solely against it or one or more of its Employees, or with respect to a Property Claim filed by the Former Member, or with respect to an H&W Claim of its Employee and/or Dependent, may elect whether to invoke the Fund’s Coverage Litigation obligations in ¶ 15.1, and be bound by the rights and obligations set forth therein for Members and Employees, or whether to waive the rights under ¶ 15 and seek coverage under the applicable Excess or Stop Loss Policy on its own and bearing its own legal expenses. If the Former Member is involved in a Multi-Member Claim where Coverage Litigation is anticipated, in its discretion, the Administrative Committee may determine that it is in the best interests of the Fund for any claim the Former Member wishes to make against the Excess or Stop Loss Coverage to be prosecuted by the Fund along with similar claims of the Members. In such event, the Former Member and/or its Employee or Dependent shall be bound by the provisions of ¶ 15 as a “Member,” provided, however, that if there is an actual conflict of interest between the Former Member and the Members with respect to any material issues involved in the Coverage Litigation preventing representation by common Defense Counsel, the Former Member shall not be bound by nor have any rights under ¶ 15.

20.6 Indemnity of Fund. A Former Member shall indemnify, defend, and hold the Fund harmless from any and all damages, loss, costs, or expenses of every kind and nature, including attorneys’ fees, as to any and all causes, claims, demands, actions, or suits asserted against the Fund or any of its Members or their Employees related in any way to any Claim against the Former Member or its Employees for which the Fund does not provide Coverage pursuant to ¶ 20.4.

21 Dissolution of a Risk Pool or the Fund.

21.1 Procedures. The full Board may dissolve the Fund by Super-Majority Vote, effective at the end of the calendar year in which the Vote to dissolve occurred. Even without a Super-Majority Vote of the full Board, the Fund will be deemed to be dissolved at the end of the calendar year in which the Fund’s last Risk Pool is dissolved. Any Risk Pool may be dissolved by a Super-Majority Vote of the Directors representing Members participating in that Risk Pool, also effective at the end of the calendar year in which the Vote to dissolve occurred; provided however, if the H& W Pool Coverage Year and Fiscal Year are on a basis other than the calendar year (in order to conform to the period covered by the Stop Loss Policy Year, see § XIV, ¶ 5), Dissolution of the H&W Pool shall only be effective at the end of the Coverage Year/Stop Loss Policy Year in which the Vote to dissolve occurred; provided however, that the H&W Pool shall be dissolved the effective date the Fund is dissolved.

21.2 Post-Dissolution Administration.

21.2.1 Provisions Applicable to All Risk Pools. In the event a Risk Pool is dissolved, the Directors representing Members participating in that Risk Pool shall remain Directors for that Risk Pool and shall wind up the affairs of the Risk Pool. In the event the full Board dissolves the Fund, the Directors for the Board on the date of the Dissolution Vote shall remain Directors and shall wind up the affairs of the Fund. All Members of the Risk Pool being dissolved, or the Fund, as of the Dissolution Date, and all Former Members to the extent they remain responsible for a portion of the Fund’s Incurred Liability Exposure with respect to a Risk Pool as of their Withdrawal Dates, shall continue to be bound by the terms of the SIA and the Operational Rules in effect on the date of the Dissolution Vote. A Member whose Director as of the Dissolution Date resigns or becomes unable to serve shall appoint a successor Director. In the event the Fund is dissolved, the Fund Officers and members of the Administrative Committee as of the date of the Dissolution Vote also shall continue to serve in such capacities until wind up of all of the affairs of the Fund has been completed. The Board shall appoint a successor for any Fund Officer or member of the Administrative Committee who shall resign or become unable to serve.

21.2.2 Additional Administrative Provisions with Respect to H&W Pool. In addition, in connection with the Board’s decision to Dissolve the H&W Pool, by Majority Vote the Board shall determine the H&W Claims Cutoff Date applicable to the H&W Pool and its Members; provided that if such a date is not established by Majority Vote, the applicable H&W Claims Cutoff Date shall be when last known H&W Claim is resolved, as determined by the Administrative Committee, and at the latest, conclusively established when no H&W Claim is received by the Administrator for 4 consecutive months; and provided further, an Extended Coverage H&W Claim shall not qualify as a “last known claim” in the preceding clause, and any such Extended Coverage H&W Claim shall not prevent establishment of the H&W Pool’s Claims Cutoff Date.

21.3 Coverage. Following dissolution of a Risk Pool, the Fund shall continue to provide Coverage, and to pay Defense Costs, Property Claim Costs and H&W Claim Costs, as applicable, in connection with all Covered Claims resulting from Loss Events which took place prior to the Risk Pool’s Dissolution Date; provided, however, that the Fund’s obligations with respect to the H&W Pool herein are subject to the terms of and decisions made by the Board pursuant to ¶21.2.2 above.

21.4 Post-Dissolution Assessments.

21.4.1 Post-Dissolution Assessments for Liability and Property Pools. As soon as practical following the Dissolution Vote for a Risk Pool, the Board shall levy a Discretionary General Assessment in such amount as the Board shall determine is necessary to provide the Fund with sufficient assets to pay the Fund’s estimate of the Incurred Liability Exposure of the Risk Pool(s) as of the Dissolution Date, together with related Administrative Expenses. Thereafter, the Board shall levy one or more additional Discretionary General Assessments in whatever amounts the Board shall determine are necessary to pay the Fund’s liabilities and obligations under the SIA and the costs of winding up the Risk Pool’s affairs as they become due. Any Assessments levied pursuant to this paragraph shall be based on the applicable General Assessment Formula in effect as of the Dissolution Date, and shall be paid in accordance with the terms of ¶¶ 13.4 through 13.6; provided, however, that the Annual Assessment Limit shall not apply. The applicable Actual Risk Pool Balance may be raised in excess of the Designated Risk Pool Balance by any Discretionary General Assessment levied pursuant to this paragraph with only a Two-Thirds Vote.

21.4.2 Post-Dissolution Assessment for H&W Pool. Subject to ¶ 21.2.2 above, after the Dissolution Date for the H&W Pool, Members shall continue to pay Monthly H&W Assessments determined and calculated and paid in the same manner as if the H&W Pool was not Dissolved; provided, that the Formula Components for the H&W General Assessment Formula and the underlying information of each Member with respect thereto in effect in the last month preceding the Dissolution Date shall thereafter be used to calculate all Monthly H&W Assessments; provided further, that the H&W Pool and the Members shall retain their respective Stop Loss Points in effect on the Dissolution Date, but, subject to the Board’s Majority Vote otherwise, each Member’s H&W Claims payments accrued toward its respective Stop Loss Points on the Dissolution Date shall be reset to zero for H&W Assessments levied after the Dissolution Date; and provided further, the Board for the H&W Pool shall have authority to levy one

or more Discretionary General Assessments and deemed necessary in accordance with ¶ 13.4.3.2.

21.5 Distribution of Assets.

21.5.1 Distribution of Assets of Liability and/or Property Pools. If any assets generated by a dissolved Risk Pool remain in the Fund after payment of all of the Fund’s Incurred Liability Exposure for such Risk Pool as of the Dissolution Date and all Administrative Expenses and professional fees incurred in winding up the Risk Pool’s affairs, the remaining assets shall be distributed to the Members of the dissolved Risk Pool as of the Dissolution Date; provided, however, with respect to Dissolution of the Property Pool, all Members thereof on the Date of Dissolution shall be entitled to receive the total amount of their Property Pool Investments, if any, before all Property Pool Members share in the distribution of any remaining assets. Each Member’s share of the distribution shall be calculated according to the applicable Formula for General Assessments in effect as of the Dissolution Date; provided, however, that the Annual Assessment Limit shall not be applied to limit the distributive share of any Member. The Fund’s Incurred Liability Exposure for the Risk Pool shall be considered to have been paid at such time as the Administrative Committee determines and the Board agrees by Super-Majority Vote that: (a) there are no known Covered Claims pending against or by any Member or Employee; (b) no Member is aware of any Loss Event which took place prior to the Dissolution Date for which there is a reasonable possibility that a Covered Claim will be asserted; and (c) a sufficient time has passed since the Risk Pool’s dissolution that there is no reasonable possibility that a Covered Claim will be made arising out of an unknown Loss Event which took place prior to the Dissolution Date.

21.5.2 Distribution of Assets of H&W Pool. After expiration of the H&W Claims Cutoff Period established for the H&W Pool pursuant to ¶ 21.2.2 above, the remaining assets of the H&W Pool shall be distributed to the Members of the H&W Pool on the Dissolution Date based on the proportion that the amount of each Member’s Initial Deposit or Adjusted Initial Deposit on the Dissolution Date is to the total amount of all Members’ Initial Deposits or Adjusted Initial Deposits.

21.6 Post-Distribution Claims. After distribution of a Risk Pool’s assets as provided in ¶ 21.5, the Fund shall have no further liability to any Member or Employee under the Coverages previously provided by the Risk Pool, and thereafter each Member or Employee shall have sole responsibility for any claims that, but for the dissolution, would have been Covered Claims.

21.7 Court Supervision of Dissolution of Fund. At any time following the Dissolution Vote for the Fund, a majority of Members may petition the King County Superior Court to supervise the winding up of the Fund’s affairs. In any such proceedings, the Court shall have power to issue injunctions, to appoint a receiver or receivers pendente lite, with such powers and duties as the Court, from time to time, may direct, and to take such other measures as may be necessary to preserve the Fund’s assets wherever situated, and carry on the business of the Fund until a full hearing can be had. After a hearing had upon such notice as the Court may direct to be given to all Members, the Court may appoint a receiver or receivers with authority to collect all Assessments levied against the Members; to handle Defense of Covered Claims asserted against Members or their Employees pursuant to § VII., ¶ 5, or to appoint, at the Fund’s expense, professional adjusters to handle such Defense; to pay the amount of any judgment entered or settlement made with respect to any Covered Liability Claim; to adjust and pay for any outstanding Covered Property Claims to pay for any H&W Claim; and to distribute any assets remaining in the Fund to the Members after all of the Fund’s Incurred Liability Exposure and all Administrative Expenses and professional fees incurred in winding up the Fund’s affairs have been paid. The order appointing such liquidating receiver or receivers shall state their powers and duties. Such powers and duties may be increased or diminished at any time during the proceedings.

22 Prohibited Remuneration and Conflicts of Interest.

22.1 Member’s Officers and Employees Serving the Fund. No Employee of a Member may directly or indirectly receive anything of value from the Fund for services rendered in connection with the operation or management of the Fund other than the salary and benefits otherwise normally provided by his or her Member employer; provided, however, that such persons may be reimbursed for the expenses reasonably incurred in furtherance of the operation or management of the Fund. No Director of the Fund, nor any member of the Executive, Administrative or Operations Committees, may accept or solicit anything of value for personal benefit or for the benefit of others under circumstances from which it can be reasonably inferred that such person’s independent judgment is impaired with respect to operation and management of the Fund.

22.2 Prohibited Interests in Transactions. No Director of the Fund, nor any member of the Executive, Administrative or Operations Committees, nor the Auditor, Administrator, Broker or General Counsel, shall;

(a) Receive directly or individually or be pecuniarily interested in any fee, commission, compensation, or endorsement arising out of any transaction to which the Fund is or is expected to be a party; provided, however, that the Administrator, Broker and General Counsel may receive such compensation as agreed upon with the Fund for professional services regularly rendered to the Fund;

(b) Receive compensation as a consultant to the Fund while at the same time acting as a Director, member of the Executive or Administrative Committees, or as Administrator;

(d) Directly or indirectly receive or be pecuniarily interested in any commission or other compensation arising out of any contract or transaction between the Fund and any insurer.

Notwithstanding subsections (a) through (d) above, the Broker may receive commissions for insurance transactions performed within the scope of its license, provided such commissions are first disclosed to and approved by the Administrative Committee.

23 Fund Indemnifications. No indemnifications by the Fund pursuant to ¶¶ 23.1 through 23.3 below shall exceed the amount of $1,000,000 per indemnitee without approval by a Super-Majority Vote.

23.1 Mandatory Indemnification. Upon request, The Fund shall indemnify and hold harmless its Directors, the Fund Officers, members of the Operations and Administrative Committees, and Fund Employees, if any (collectively, “Indemnitees”), for all Claims based on culpability standards of negligence or less, including strict liability, asserted against one or more of them arising out of their performance or failure of performance of duties for the Fund, and the Fund may, by a Two-Thirds Vote of the Board, indemnify Indemnitees for Claims based on culpability standards of gross negligence or higher; provided, however, that no indemnification under this paragraph shall apply with respect to any Claim where the Board determines the Indemnitee was not acting in good faith or was not acting within the scope of his/her duties for the Fund.

23.2 Discretionary Indemnification of the Administrator, Broker and General Counsel. The Fund may, upon request at any time, and by Majority Vote, indemnify and hold harmless the Administrator, Broker and/or General Counsel for all Claims based on culpability standards of negligence or less, including strict liability, asserted against one or more of them arising out of their performance or failure of performance of duties for the Fund; provided, however, that such indemnification shall not apply (a) with respect to any Claim where the Board determines that the Administrator, Broker or General Counsel was not acting in good faith or was not acting within the scope of its duties to or for the Fund; and (b) with respect to any Claim brought by the Fund arising from a breach of the Administrator’s, Broker’s or General Counsel’s contracts with the Fund or duties owed to the Fund.

23.3 Discretionary Indemnification of Agents and Volunteers. The Fund may also, upon request at any time, by Majority Vote, agree to indemnify and hold harmless one or more specified Agents of the Fund for any Claims made against one or more of them arising out of their performance or failure of performance of duties for the Fund; provided, however, that such indemnifications shall not apply unless the same conditions set forth in ¶ 23.2 above for indemnification of the Administrator, Broker and General Counsel are satisfied.

24 Miscellaneous Provisions.

24.1 Other Insurance and Third Party Indemnifications. The Coverage provided by the Fund under the SIA shall interface with any Other Insurance and Third Party Indemnifications available to the Insured involved in a Covered Claim as provided in § III, ¶ 2.7; § IV, ¶ 2.5; § V, ¶ 2.5; § VI, ¶ 2.1; § X, ¶ 18; and § XI, ¶ 16; and §XIV, ¶2.7.

24.2 Agreement Not a Substitute for Bonds. The Coverage provided to the Members and Employees pursuant to this Agreement is not a substitute for and shall not be construed to supplement the protection provided by any bond required to be obtained by the Members by the laws of the State of Washington, including, but not limited to, any bond required by RCW 54.24.010.

24.3 Entire Agreement. The SIA, Sections I through XIV, and the Operational Rules as now appearing or as amended by the Board from time to time, constitute the entire agreement among the Members, and each Member hereby acknowledges and agrees that it is not relying on any promises or representations other than as set forth in these Program Documents.

24.4 Mandatory Binding Arbitration and Venue.

24.4.1 “Disputes” Subject to Mandatory Binding Arbitration. Except as otherwise provided in ¶ 24.4.7 below, any Disputes among the parties to this Interlocal Agreement, or between one or more such parties and the Fund, arising out of or relating to the SIA, the Operational Rules or other Program Documents, or breach thereof, or arising out of any action or inaction by the Board or Executive, Operations or Administrative Committees, shall be subject to this ¶ 24.4. Venue for the arbitration proceedings and hearing shall be in Seattle, Washington.

24.4.2 Required Exhaustion of Appeal Procedures. No party to the SIA, including the Fund, shall have the right to submit any Dispute to arbitration hereunder until all Appeal Procedures have been exhausted through the Board level, or the Board has otherwise considered and voted a decision on the Dispute; provided, however that resort to proceedings in a court may occur as permitted in ¶ 24.4.7(b) and (e).

24.4.3 Demand for Arbitration and Establishment of Arbitrator(s). Any parties to the Dispute, the Fund, and any Members affected by the Board Decision, may invoke arbitration of the Dispute under this ¶ 24.4 by filing a written Demand for Arbitration with the other parties involved and with the American Arbitration Association. The Demand for Arbitration shall be made within a reasonable time after the Dispute arose, but, no Demand shall be filed prior to Board consideration of and vote upon such Dispute, except as permitted by ¶ 24.4.2, and in no event shall the Demand for Arbitration be recognized after the date when institution of legal or equitable proceedings based on such Dispute would be barred by the applicable statutes of limitations of repose. Resolution of the Dispute shall be in accordance with the rules of the American Arbitration Association currently in effect unless the parties mutually agree otherwise. The Arbitration shall take place before a single arbitrator if the aggregate value of claims and counter-claims is less than $250,000, exclusive of costs and attorneys fees. For claims and counterclaims having an aggregate value of $250,000 or more, the American Arbitration Association shall appoint a panel of three (3) arbitrators, one of whom shall be designated as the chairman and shall be a lawyer. The other two members of the Arbitration Panel shall, to the extent reasonably possible, have knowledge regarding matters of insurance and Washington law governing public entities.

24.4.4 Discovery. Following the filing of a Demand for Arbitration, the parties involved shall cooperate in the exchange of information relating to the Dispute being guided by the scope of the applicable rules of discovery under the Federal Rules of Civil Procedure. Discovery shall not include interrogatories or requests for admission. The parties shall freely exchange documents relevant to the Dispute and depositions shall be limited to those reasonably necessary for each party to prepare for, or defend against, such Dispute. Subpoenas for the production of documents and depositions of persons or entities not parties to the Dispute should be authorized by the Arbitrator or Arbitration Panel where reasonably necessary for a party to prepare its case. Disagreements regarding discovery shall be resolved by the Arbitrator or, where there is an arbitration panel of three Arbitrators, by the chairman of the Arbitration Panel.

24.4.5 Mandatory Mediation. Mediation is an express condition precedent to the hearing of any Arbitration demanded hereunder. Mediation shall be conducted pursuant to the Mediation Rules of the American Arbitration Association. Such mediation shall take place no later than thirty (30) days prior to the date scheduled for the Arbitration hearing. Representatives of all parties involved in the Dispute shall attend the mediation and each party’s representative shall have full, unrestricted authority to enter into a binding settlement agreement on behalf of that party. The mediation proceedings shall be confidential and privileged to the extent permitted by law.

24.4.6 Hearing Standards/Arbitration Award/Costs and Attorneys’ Fees. The arbitration hearing shall be de novo on all issues except issues relating to the number of occurrences involved in a Covered Claim, which shall be governed by the standards set forth in § III, ¶ 2.9; § IV, ¶ 2.7; § V, ¶ 2.7; § VI, ¶ 2.1; § X, ¶ 16; and § XI, ¶ 15. In addition to the powers of the Arbitrator(s) as set forth in the Rules of the American Arbitration Association, the Arbitrator(s) shall also have the power to award the prevailing party its reasonable attorneys’ fees and costs (including the costs of arbitration and fees of the Arbitrator(s)). The award rendered by the Arbitrator(s) shall be final, and judgment may be entered upon it in the Superior Court for the State of Washington in King County.

24.4.7 Resort to Proceedings in Court/Costs and Attorneys’ Fees. Any Disputes otherwise subject to submission for decision to the mandatory binding arbitration provisions of this ¶ 24.4, instead may be submitted, by any party having a legal interest therein, to the jurisdiction of either the Superior Court for King County, State of Washington, or United States District Court for the Western District of Washington at Seattle, as follows:

(a) As necessary to secure the value of or to enforce any arbitration award rendered under ¶ 24.4;

(b) If, and only to the extent necessary, to secure injunctive relief reasonably necessary under the circumstances;

(c) For Disputes relating to Coverage by the Fund or to a Member’s Assessment obligations, so long as the amount in controversy is greater than $250,000;

(d) For Disputes relating to the termination of a Member’s membership in a Risk Pool or in the Fund, or a Member’s withdrawal from the Fund, regardless of the amount in controversy;

(e) In connection with Dissolution of the Fund as provided in ¶ 21.7; and

(f) As permitted by the Board by Super-Majority Vote;

provided, however, that no party to any Dispute may submit the Dispute to resolution by a court under subparagraphs (c) and (d) above without first completing mandatory mediation as provided in ¶ 24.4.5. The prevailing party in any Dispute submitted to a court under this ¶ 24.4.7 shall be awarded its costs and reasonable attorney’s fees incurred in connection with the judicial resolution of such Dispute, including any appeals thereof and any prior arbitration proceedings.

24.5 Notices. Any notice required to be given under this Agreement may be delivered in person, or sent by mail or by facsimile. Any notice sent by mail shall be deemed received on the third day after it is mailed. Unless otherwise provided in the SIA or in the Operational Rules, any notice given to the Fund shall be delivered to the Administrator, and any notice to a Member shall be delivered to a Director or the Manager for the Member.

24.6 Construction. The SIA shall be construed pursuant to the laws of the State of Washington. Any controversy over the construction of this Agreement shall be decided neutrally and without regard to which party drafted the Agreement.

24.7 Paragraph Headings. The paragraph headings in the SIA are provided for the convenience of the parties and shall not modify or alter the substance of this Agreement.

DATED as of the 7^th day of December, 2001.

ASOTIN COUNTY PUD BENTON COUNTY PUD