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HomeMy WebLinkAbout06-14-2016 AgendaanCf 5 T HOME OF PELICAN ISLAND PUBLIC NOTICE POLICE PENSION BOARD June 14, 2016 The Police Pension Board will hold its quarterly meeting Tuesday, June 14, 2016 at 10:00 a.m. in the City Council Chambers, City Hall, 1225 Main St. Sebastian, Florida. Agenda Approval of Payment to Christiansen & Delmer Call to Begin Steve Marcinik, Chairman Vote to Excuse Absent Board Members Steve Marcinik, Chairman Public Comment Steve Marcinik, Chairman Approval of Minutes from March 15, 2016 Steve Marcinik, Chairman Old Business Scott Owens, Morgan Stanley A. Election of New Officers Steve Marcinik, Chairman B. Board Review of Fiduciary Insurance Policy Steve Marcinik, Chairman C. Review of Proposed Changes to Operating Rules Steve Marcinik, Chairman New Business 1. Status of Actions on Forfeiture of Pension D. Approval of Payment to Highland Capital $14,331.16 to 03/31/16 Steve Marcinik, Chairman E. Approval of Payment to Christiansen & Delmer Steve Marcinik, Chairman $4,331.41 for Travel and Attendance at March 15, 2016 Meeting F. Approval of Payment to Morgan Stanley $3,375.00 to 03/31/16 Steve Marcinik, Chairman G. Review of Investment Portfolio & Asset Allocation Strategy Scott Owens, Morgan Stanley H. Fund Review Grant McMurry, Highland Capital 1. Legal Updates: Lee Debater, Pension Attorney 1. Status of Actions on Forfeiture of Pension 2. Reminder to File Financial Disclosure Statements 3. Other Legal Matters J. Board Member Comments Steve Marcinik, Chairman K. Next Quarterly Meeting: September 20, 2016 Steve Marcinik, Chairman Ken Killgore Administrative Services Director/Pension Board Member City of Sebastian Please note: In accordance with Florida Statue 286.0105: any person who desires to appeal any decision at this meeting will need a record of the proceedings and for this purpose may need to ensure that a verbatim record of the proceedings is made which includes the testimony and evidence upon which the appeal is based. In accordance with Florida Statute 286.26: Persons with disabilities needing assistance to participate in any of these proceedings should contact the Administrative Services Department at 1225 Main Street, Sebastian, Florida 32958, or telephone 772-388-8205. Draft 03/15/2016 Minutes Sebastian Police Pension Board Minutes March 15,2016 10:00 a.m. Sebastian City Council Chambers TYPE OF MEETING: Regular ATTENDEES: Board Members: Robert Zomok, Secretary Bruce Hoffman Ken Killgore Richard Snell EXCUSED Steve Marcinik, Chair CONSULTANTS: Doug Lozen, Scott Owens, Grant McMurry, Jed, Miller, Mindy Johnson, Lee Delmer, Cindy Watson SUBJECT CALL TO ORDER 10:00 a.m. In the excused absence of Steve Marcinik, Chairman, Richard Snell called the meeting to order. Richard had to leave to attend a trial. Bruce Hoffman moved to have Bob Zomok, Secretary, chair this meeting. The motion seconded by Ken Killgore and was unanimously. Public Comment Steve Marcinik, Chairman None APPROVAL OF MINUTES 10:05 a.m. Lee Delmer noted a correction to the minutes. Ken Killgore motioned the revised minutes of the January 12, 2016 Board Meeting be approved. Motioned seconded by Bruce Hoffman and passed unanimously. Old Business A. Election of New Officers Bob Zomok, Acting Chair Tabled until the next meeting when the full Board will be available B. Board Review of Fiduciary Insurance Policy Bob Zomok, Acting chair Tabled until the next meeting when the full Board will be available. Draft 03/15/2016 Minutes C. Review of Proposed Changes to Operating Rules Bob Zomok, Acting Chair Lee Delmer is to provide a revised copy of the Operating Rules for consideration at the next Board Meeting. New Business D. Introduction of New Relationship Manager Bob Zomok, Acting Chair Mindy Rae Johnson, Salem Trust Company was introduced. She presented a new service for Board consideration. Salem Trust has a working agreement with GlobeTax. This firm recovers applicable portions of taxes paid in foreign countries for stock trades conducted on behalf of the Board in those countries. GlobeTax reviews investments and determines the amount due to out Plan. The amount recovered is reimbursed to the Plan minus fess and percentage reductions. Lee Delmer assured the Board that he had reviewed the documents relative to this program and was satisfied with them as presented. Bruce Hoffman moved to participate in the GlobeTax program and Ken Killgore Seconded the motion. The motion passed unanimously. E. Approval of Payment to Christiansen & Delmer Bob Zomok, Acting Chair $2,639.20 for Travel and Attendance at January 12, 2016 Meeting Bob Zomok moved to approve the payment. The motion was seconded by Bruce Hoffman and passed unanimously. F. Approval of the October 1, 2015 Actuarial Report Doug Lozen updated the Board on the impact of the required pension processing requirements enacted by the State of Florida. Ken Killgore moved to accept the Actuarial Report as presented. Bruce Hoffman seconded the motion and it passed unanimously. G. Approval of Expected Annual Rate of Return at 7.60% Scott Owens advised the Board that the 7.60% Expected Annual Rate of Return was a reasonable assumption. Bruce Hoffman moved to approve the 7.60%. The motion was seconded by Ken Killgore and passed unanimously. Ken Killgore can file the required report with the State. H. Review of Investment Portfolio & Asset Allocation Strategy Scott Owens reviewed the various influences causing the volatility in the stock market. The two primary influences are activities in and by China and the ever -fluctuating oil industry. 2 Draft 03/15/2016 Minutes I. Fund Review and other Matters. Grant McMurry and Jed Miller a. Report on Downgraded Fixed Income Bonds The Board had approved using "Investment Grade" bonds as part of our portfolio b. Discussion of Current Bond Environment Jed Miller reviewed the current status of the bond market. J. Legal Updates: Lee Delmer, Pension Attorney 1. Status of Ordinance Amendment for Share Plan The current City Ordinance must be revised to include the State mandated Share Plan. There are two alternatives that Lee discussed, one of which will be determined by the upcoming Collective Bargaining process. 2. Status of Actions on Forfeiture of Pension Lee Delmer received material from Richard Snell relative to this case. Depending upon a multitude of factors, the Board may have to convene a formal review process. Lee will continue to update the Board on this case. 3. Other Legal Matters The State laws passed between one and two years ago are now having impact on the Plan by requiring additional reporting resulting in additional costs to the Plan. The required reporting has been met including additional information from our actuary. Lee reminded the Board that Financial Disclosure Statements are due on or before July 1, 2016. The State Conference is planned for May 2016 in Tallahassee. K. Board Member Comments Bob Zomok, Acting Chair Ken Killgore reviewed the questions he had concerning the State Report that is now due. The questions were resolved and Ken will proceed with filing the report. L. Next Quarterly Meeting: June 14, 2016 Bob Zomok, Acting Chair M. There being no further business, the meeting was adjourned at 12:10 PM. Respectfully Submitted, Bob Zomok, Secretary Kenneth Killgore From: Kenneth Killgore Sent: Friday, April 15, 2016 2:48 PM To: 'stcdrfldops@salemtrust.com' Subject: Invoice Payment Attachments: MX-4140N_20160415_132747.pdf Attached is an invoice from Highland Capital that needs to be paid from the Sebastian Police Pension Plan Account #3040031435 in the amount of $14,331.16. Thank you. Ken Killgore Administrative Services Director City of Sebastian 1 i_9Wand Capital MANAGEMENT, LLC April 7, 2016 Invoice Number: 12109 MANAGEMENT FEE: SEBASTIAN POLICE OFFICERS' RETIREMENT 3/31/2016 Portfolio Value: $ 11,962,281.63 Exclude Dividend Accrual - 9,048.25 Billable Value $ 11,953,233.38 Quarterly Fee Based On $ 10,000,000 @ 0.50% per annum $ 12,500.00 $ 1,953,233 @ 0.375% per annum $ 1,831.16 Quarterly Fee: $ 14,331.16 For the Period 4/1/2016 through 6/30/2016 Paid by Debit Direct ($0.00) Please Remit $ 14,331.16 Account Account Value Quarterly Fee (sebast0l) SEBASTIAN POLICE OFFICERS' RETIREMENT VALUE $ 6,033,909.49 $ 7,234.28 (sebastO) SEBASTIAN POLICE OFFICERS' RETIREMENT GROWTH $ 1,141,842.80 $ 1,368.99 (sebasti4) SEBASTIAN POLICE OFFICERS' RETIREMENT ADR $ 1,091,168.88 $ 1,308.24 (sebasti8) SEBASTIAN POLICE OFFICERS' RETIREMENT FIXED INCOME $ 3,686,312.21 $ 4,419.65 Total $ 11,953,233.38 $ 14,331.16 Wiring Instructions: First Tennessee Bank ABA# 084000026 Acct# 31-0251313 For Credit to: Highland Capital Management, LLC. Mailing Check: Highland Capital Management, LLC 6075 Poplar Ave, Suite 703 Memphis, TN 38119 Kenneth Killgore From: Kenneth Killgore Sent: Monday, May 16, 2016 9:27 AM To: 'stcdrfldops@salemtrust.com' Subject: Payment of Sebastian Police Pension Plan Invoices Attachments: MX-4140N_20160516_074100.pdf Attached are two invoices that should be paid from the Sebastian Police Pension Plan Account #3040031435. Please process these payments to Christiansen & Dehner, P.A. for $4,331.41 and Morgan Stanley Smith Barney for $3,375.00. Thank you. Ken Killgore Administrative Services Director City of Sebastian Investment Advisory Services Client Fee Invoice City Of Sebastian Police Officers' Retirement System ATTN: Ken Killgore 1225 Main St. Sebastian, FL 32958 Morgan Stanley Date April 19, 2016 Billing Period 2016-01-01 thru 2016-03-31 This service fee for the period indicated is due upon receipt of this notice. Please forward your check for this amount to: Morgan Stanley Smith Barney 100 N. Tampa St. Ste. 3000 Tampa, FL 33602 Attn: Charlie Mulfinger Account Name Account Number Amount Due City Of Sebastian Police Officers' Retirement System 745-038962 $3,375.00 Morgan Stanley Smith Barney LLC. Member SIPC. Consulting Group and Investment Advisory Services are businesses of Morgan Stanley Smith Barney LLC. Christiansen & Dehner, P. A. 63 Sarasota Center Boulevard Suite 107 Sarasota, FL 34240- 941-377-2200 941-377-4848 Phone Fax City of Sebastian Police Pension Fund ATTN: Ken Killgore 1225 Main Street Sebastian, FL 32958 April 30, 2016 Invoice Number In Reference To: Police Pension Fund 0049 26741 Previous balance Balance due Amount $4,331.41 $4,331.41 Please note that the "Balance Due" figure at the end of this bill reflects both "Total New Charges - Current Period" and any previous balances due. In most cases, if the previous balance(s) have already been approved for payment but not yet received in our office, you should be paying only the 'Total New Charges - for services and/or expenses". Thank you. Current 30 Days 60 Days 90 Days 120+ Days $1,692.21 $0.00 $2,639.20 $0.00 $0.00 Please indicate account number(s) with payment. (Please Deduct any payments not reflected in Balance due) I Christiansen & Dehner, P. A. 63 Sarasota Center Boulevard Suite 107 Sarasota, FL 34240- 941-377-2200 Phone City of Sebastian Police Pension Fund ATTN: Ken Killgore 1225 Main Street Sebastian, FL 32958 941-377-4848 Fax March 31, 2016 Invoice Number In Reference To; Police Pension Fund 0049 28069 11.75 Professional Services 1 75.06 Food Expense Hours Amount 3/15/2016 Preparation and attendance at Board Meeting. 2.40 945.60 Travel Time 2.60 512.20 For professional services rendered 5.00 $1,457.80 Additional Charges : Qty 3/11/2016 Copies 47 11.75 3/15/2016 Car Expense 1 75.06 Food Expense 1 18.00 Hotel Charge 1 103.60 3/29/2016 Copies 104 26.00 Total additional charges $234.41 Total amount of this bill $1,692.21 Previous balance $2,639.20 Balance due $4,331.41 City of Sebastian Police Pension Fund March 31, 2016 *' Please note that the "Balance Due" figure at the end of this bill reflects both 'Total New Charges - Current Period" and any previous balances due. In most cases, if the previous balance(s) have already been approved for payment but not yet received in our office, you should be paying only the 'Total New Charges - for services and/or expenses" . Thank you. Current 30 Days 60 Days 90 Days 120+ Days $1,692.21 $2,639.20 $0.00 $0.00 $0.00 Please indicate account number(s) with payment. (Please Deduct any payments not reflected in Balance due) OPERATING RULES AND PROCEDURES For The CITY OF SEBASTIAN POLICE OFFICERS' RETIREMENT SYSTEM Approved by the Board on: Julv 8. 2003 CITY OF SEBASTIAN POLICE OFFICERS' RETIREMENT SYSTEM OPERATING RULES AND PROCEDURES TABLE OF CONTENTS SECTION Rule 1 - Board of Trustees PAGE NUMBER 1.1 Definition of Functions 1 1.2 Definition of Fiduciary 1 1.3 Summary 1 1.4 Establishment of Offices 1 1.5 Conflicts of Interest and Gifts 2 1.6 Per Diem and Reimbursement 2 1.7 Election Procedures 2 1.8 Succession of Persons to Vacant Positions 3 1.9 Education Requirements 3 1.10 Disclosure of Financial Interests 4 Rule 2 - Meetings 2.1 Attendance at Board Meetings 4 2.2 Agendas and Other Meeting Materials 4 2.3 Rules of Order 5 2.4 Appearance Before the Board 5 2.5 Public Records 5 2.6 Government in the Sunshine 6 2.7 Committee Meetings 6 2.8 Workshops 6 2.9 Minutes 6 Rule 3 - Rules of Procedure 3.1 Legal Effect 3.2 Adoption Procedures Rule 4 - Office Personnel 7 7 4.1 Board Employees 7 4.2 Selection Standards 7 4.3 Evaluation and Compensation 7 4.4 Decision Making Authority 8 Rule 5 - Internal Procedures and Controls 5.1 Mail 8 5.2 Expense Payments from the Fund 8 5.3 Processing of Payments for Early or Normal Retirement and Return of Contributions 9 5.4 Review of Custodial Statements 10 5.5 Rollovers to and from the Fund 11 Table of Contents Page 2 Rule 6 - Insurance 6.1 Fiduciary Insurance 6.2 Travel Coverage Rule 7 - Relations With The City 7.1 Authority of the Board 11 7.2 Contractual Services 12 7.3 Use of the City Finance Department 12 7.4 Use of Independent Custodians 12 Rule 8 - Ordinance Changes 8.1 Form of Ordinance 12 8.2 Collective Bargaining 13 8.3 Appearance at City Council Meetings 13 8.4 Actuarial Impact Studies 13 Rule 9 - Judicial Proceedings 9.1 Process 13 9.2 Dissolution of Marriage 13 Rule 10 - Investments 10.1 Hiring Investment Managers 14 10.2 Hiring Performance Monitors 14 10.3 Performance Goals and Objectives 14 10.4 Investment Standards 15 10.5 Decision Making Authority 15 10.6 Written Contracts 15 10.7 Reporting 16 10.8 Presentations by Prospective Consultants and Professionals 16 10.9 Divestiture 17 10.10 Proxy Voting 17 10.11 Declaration of Expected Annual Rate of Return 18 10.12 Investment Reports to the City 18 Rule 11 - Actuarial Services 11.1 Selection 18 11.2 Conflicts of Interest 19 11.3 Reporting 19 11.4 Setting Contribution Rates 19 11.5 Credited Service 19 11.6 Actuarial Studies for Individual Plan Members 19 Table of Contents Page 3 Rule 12 - Accounting Services 12.1 Audits 20 12.2 Conflicts of Interest 20' 12.3 Review of Internal Controls 20 Rule 13 - Legal Services 13.1 Selection 21 13.2 Conflicts of Interest 21 13.3 City of Sebastian City Attorney 21 13.4 Privileged Communications 21 13.5 Authority to Direct 21 Rule 14 - Claims Procedures 14.1 Claims of Affected Persons 22 14.2 Initial Hearing 22 14.3 Full Hearing 23 14.4 Conduct of the Full Hearing 25 14.5 Disability Claims - Additional Procedures 26 Rule 15 - Confidentiality 15.1 Extent of Confidentiality Permitted 27 15.2 Requirement for Maintenance of Confidentiality 27 15.3 Confidentiality of Medical Records 27 Rule 16 - Interest Calculations 16.1 Interest Calculations 28 Rule 17 - Disability Review Procedure 17.1 Procedure 28 Rule 18 - Surveillance 18.1 Surveillance 29 RULE 1 BOARD OF TRUSTEES 1.1 DEFINITION OF FUNCTIONS The Board of Trustees shall act as the named fiduciary of the Fund as defined by Florida law. The Board shall have the exclusive authority to operate, maintain and interpret the provisions of the state laws and local ordinances establishing and executing the investment policy of the Fund. The Trustees shall be solely responsible for the selection and retention of professional advisors to the Fund including but not limited to investment managers, performance monitors, plan administrators, attorneys, accountants, actuaries, and clerical staff. 1.2 DEFINITION OF FIDUCIARY A fiduciary shall be defined as a person responsible for the discharge of his duties with respect to the Pension Plan solely in the interest of the participants and beneficiaries for the exclusive purpose of providing benefits to participants and their beneficiaries and defraying the reasonable expenses of administering the Plan. 1.3 SUACMIARY Trustees shall be responsible for the investment and reinvestment of the assets of the Fund; for determining all claims for retirement benefits; for exercising the sole and exclusive adminis- tration of and the proper operation of the Plan; to perform such actuarial and accounting fumctions as are required by law; to prepare and distribute a Summary Plan Description as provided in § 112.66, Florida Statutes, to the Members of the Fund upon employment and every other year thereafter; and to fulfill all other such duties as may be required by law. 1.4 ESTABLISHMENT OF OFFICES The Board of Trustees shall elect a Chairman and Secretary every two years. The officers shall be Trustees of the Board. The Chairman shall be responsible for the conduct of all meetings of the Board and shall have voting rights the same as any other Trustee of the Board. The Chairman shall perform such other duties as the Trustees may assign. The Secretary shall be responsible for the keeping of minutes of the transactions of the Board and shall be the official custodian of records -1- of the Board. The Secretary, together with the Chairman, shall execute all official contracts of the Board. 1.5 CONFLICTS OF INTEREST AND GIFTS A. Conflicts of interest in voting shall be governed by the provisions of Section 112.3143, Florida Statutes, the Code of Ethics for Public Officials. Notwithstanding any other provision of law, no Trustee shall vote or participate in a determination of any matter in which that Trustee shall receive a special private gain except in the case of employee Trustees voting on benefits applicable to all Members of the Plan. B. No Trustee (or his or her spouse or minor child) shall, at any time, solicit or accept any gift (including but not limited to, food, beverages and transportation), loan, reward, promise of future employment, favor, service, compensation, payment, or thing of value when the Trustee understands, knows or should have known that it was given to influence a vote or other action .in which the Trustee was expected to participate in his official capacity. Gifts provided directly or indirectly by a state, regional or national organization which promotes the exchange of ideas between, or the professional development of, members of that organization or staff of a governmental agency that is a member of that organization, are permitted. 1.6 PER DIEM AND REIMBURSEMENT All Trustees shall be entitled to receive a per diem allowance and reimbursement for reasonable expenses incurred in conducting the business of the Fund. The Board shall establish reasonable reimbursement rates in accordance with policies of the City of Sebastian. 1.7 ELECTION PROCEDURES The Board of Trustees shall consist of five persons, two of whom shall be Police Officers, two of whom shall be legal residents of the City appointed by the City Council and the fifth Trustee shall be a person selected by the other four Trustees and appointed as a ministerial act by the City Council . A. Police Officer Trustees. The Police Officer Trustees shall be elected from among the Members of the Fund in the Police Department . Elections shall be by a majority vote. If no -2- candidate receives a majority vote, a run-off election between the two top vote recipients shall be held at the earliest practical date. Elections shall be every year, with one seat elected in alternating years in the November preceding the expiration of the second year of the term. Trustees shall take office at the first meeting the following January. Employees shall be permitted to nominate themselves for office and elections may be conducted by mail -in ballot. The election shall be conducted by placement of a ballot box in the Police Department Headquarters for a period of 72 hours beginning on a date to be selected by the Board. Ballots shall be counted by the Board and the winners certified by the Board. B. Resident Trustees. The two resident Trustees shall be legal residents of the City and shall be appointed for two year terms in alternating years by the City Council in November or December prior to the expiration of a Trustee's term. C. Fifth Trustee. The fifth Trustee of the Board shall be chosen for a two year term every other year at the first meeting in January following the selection of the other Trustees. The fifth Trustee may or may not be a legal resident of Sebastian and may or may not be an employee of the City. The name of the person selected by a majority of the other Trustees shall be certified to the City Council which shall, in accordance with state law, ratify the appointment of that person as a sterial act. 1.8 SUCCESSION OF PERSONS TO VACANT POSITIONS Vacancies on the Board of Trustees of employee members shall be filled by special election to be conducted in the same manner as any other election. Vacancies among the resident Trustees shall be filled by the City Council . The person selected to fill a vacancy shall fulfill only the remaining term of the vacant office. In the event of a vacancy in the fifth Trustee of the Board, the Board shall appoint a successor in the same manner as the initial selection. 1.9 EDUCATION REQUIREMENTS Each Trustee is re aired to attend a seminar or conference regarding Trustee duties and responsibilities and matters relating to the investment program of the Plan at least once each term. Trustees are encouraged to attend seminars or conferences more frequently in order to remain -3- informed regarding pension issues. New Trustees are encouraged to attend within the first six months of their term. 1.10 DISCLOSURE OF FINANCIAL INTERESTS Trustees must file a statement of financial interests (Form 1) with the supervisor of elections of the county in which they permanently reside within 30 days from the date of appointment and no later than July 1 of each year thereafter. Trustees must file a final statement (Form 1F) within 60 days after leaving their office as Trustee. The final statement shall cover the period between January 1 of the year in which the Trustee leaves office and the last day of office. If a Trustee has not filed by July 1, the supervisor of elections is required to notify such Trustee of a grace period to file by September 1. If a statement is not filed by September 1, a fine of $25.00 per day will be imposed up to a maximum of $1500.00. Fines cannot be paid from the pension plan. The Trustee may also be subject to additional penalties provided for in §112.317, Florida Statutes. RULE 2 MEETINGS 2.1 ATTENDANCE AT BOARD MEETINGS The Board shall set its own schedule of meetings. Special meetings may be called by the Chairman or by a majority of Trustees. The Board shall meet at least once each quarter. In recognition of the importance of the work of the Board, regular attendance at Board meetings is expected of all Trustees. Any Trustee who fails to attend two consecutive meetings of the Board without an excuse acceptable to the other Trustees shall be deemed to have resigned from the Board. Employee Members of the Fund who are called into the active service of the City at the time of a Board meeting shall automatically be deemed excused. 2.2 AGENDAS .AND OTHER MEETING MATERIALS A published Notice of Meeting and Agenda shall be prepared for each regular and special meeting of the Board. The Notice of Meeting and Agenda shall set forth those items upon which the -A- Board anticipates taking action or discussing. Each agenda item shall have attached to it backup material necessary for discussion or action by the Board. Each Notice of Meeting and Agenda shall inform members of the public that should they wish to appeal any decision made by the Board that they will need a record of the proceedings and that they may need to ensure a verbatim record is taken, which includes testimony and evidence upon which the appeal is based. In addition, the Notice of Meeting and Agenda shall also include a notice to members of the public offering to provide assistance to those who are disabled, should they need assistance in order to attend the meeting. A copy of the Notice of Meeting and Agenda shall be posted in a location in the Sebastian City Hall and the Police Department where notices of public meetings are customarily posted. The Board must provide and post reasonable notice of all meetings. All agendas and meeting materials are public records as defined in Chapter 119, Florida Statutes. 2.3 RULES OF ORDER In recognition of the importance of accomplishing the objectives of the Board in a most orderly fashion, the Board may establish rules of order for the conduct of its meetings. The Board shall not, however, be bound by strict observance of the rules of parliamentary procedure unless the Board deems it in its best interest to do so. 2.4 APPEARANCE BEFORE THE BOARD As a public body, the Board has a responsibility to accommodate members of the public and Members of the Fund who wish to appear before the Board. All appearances before the Board shall be scheduled through the Secretary and time limits for presentations may be established by the Board. Appearances before the Board may be in person or through a representative. All communications with the Board shall either be in writing or by personal appearance at a Board meeting. 2.5 PUBLIC RECORDS The records of the Fund are public records as set forth in Chapter 119, Florida Statutes, except for medical records of the Fund. The Board shall maintain the confidentiality of medical records as required by law. All medical records of Members of the Fund shall be maintained -5- separately from other records of the Board so as to ensure security of the privileged information to which the Board is privy. 2.6 GOVERNMENT IN THE SUNSHINE All meetings of the Board shall be conducted in accordance with the provisions of Section 286.011, Florida Statutes, the Government in the Sunshine Act. No Trustee shall engage in communications with another Trustee outside of a public meeting on any matter which shall ultimately be the subject of a Board action. All meetings of Trustees at which official business of the Board shall be discussed shall be publicly noticed and open to the public in accordance with the law. All meetings of the Board shall be held in a location where public access is reasonably available. Regular meetings of the Board shall be held in Indian River County, Florida. 2.7 COMMITTEE MEETINGS The Board, in the conduct of its business, may choose to establish committees consisting of a lesser number of Trustees. Committees shall be appointed by the Chairman. Committees consisting of two or more Trustees shall be conducted in accordance with the Government in the Sunshine Law. Committees consisting of one Trustee shall maintain records in accordance with the Public Records Act but need not conduct its business pursuant to a publicly noticed meeting. All reports of committees shall be reduced to writing and made a part of the official records of the Board. 2.8 WORKSHOPS The Board may from time to time wish to conduct workshop meetings for the purposes of developing policies or procedures of the Board or for the review of investment data of the Board. Workshops shall be conducted in a public forum the same as any other meeting and shall have a published agenda in advance of the workshop. 2.9 MINUTES Complete minutes of all meetings of the Board or a Committee shall be promptly prepared following the meeting and all minutes shall be submitted to the Board for approval following their preparation. All minutes shall be open for public inspection. sm RULE 3 RULES OF PROCEDURE 3.1 LEGAL EFFECT The Board of Trustees is authorized by law to establish rules of procedure for the operation of the Fund. No rule or regulation of the Fund may conflict with any lawful ordinance, charter provision or state law. 3.2 ADOPTION PROCEDURES All rules to be adopted by the Fund shall be in writing and shall be adopted by a majority vote of the Board. The Board shall review its rules and regulations on a periodic basis but not less than once a year. The rules and regulations of the Fund may be reproduced and shall be made available to each member of the Fund requesting a copy. A copy of said rules shall also be maintained at the -offices of the Pension Fund and at each Police Department station maintained by the City of Sebastian. RULE 4 OFFICE PERSONNEL 4.1 BOARD EMPLOYEES The Board shall establish specific job descriptions for each classification of employee ofthe Board. New employees of the Board shall not, by virtue of their employment by the Board, be civil servants of the City of Sebastian and shall serve at the pleasure of the Board. 4.2 SELECTION STANDARDS The Board shall establish for each classification of employee, standards of education, experience and skills necessary for the execution of the duties of the position. The Board may delegate the initial screening process for applicants to a committee of the Board. The final decision for the employment of any person shall be determined by the Board of Trustees acting as a whole. 4.3 EVALUATION AND COMPENSATION All employees of the Board shall be evaluated periodically. Compensation shall be established by the Board of Trustees. IM 4.4 DECISION AL41ONG AUTHORITY No employee of the Board shall have the authority to bind the Board of Trustees in any contract or endeavor without the express authority of the Board. RULE 5 INTERNAL PROCEDURES AND CONTROLS 5.1 MAIL A designee of the Board shall be responsible for opening, dating and transmitting mail. All mail received by the Board shall be dated, stamped and reviewed for any time limitations or response dates. The mail shall be placed in folders bearing the names of the recipient of the mail. Mail addressed to the Board in general and to no specific person shall be directed to a person designated by the Board. All official decisions of the Board shall be sent by mail. A "reading file" of all correspondence coming into and emanating from the Board shall be maintained on a monthly basis together with copies in any specific files as may be established. In all respects, the provisions of Chapter 119, Florida Statutes, the Public Records Act, shall be observed. 5.2 EXTENSE PAYMENTS FROM THE FUND A. Payments to professionals performing services previously authorized by the Board or for other expenses authorized by the Board shall routinely be made prior to Board approval as follows: (1) Statements received for services or expenses which are not pursuant to a written agreement shall be paid, but only if such statements do not exceed $250.00: (2) Statements received for services or expenses which are rendered pursuant to a written agreement shall be paid if deemed to be in accordance with the agreement. All payments made pursuant to paragraphs (1) and (2) above shall be considered by the Board at the first meeting following such payment and approved and ratified, if appropriate. Im B. Any other payments from the Fund not described in subsection A. above shall be approved by the Board prior to such payment. C. Authorization for payments from the Fund shall be in writing and signed by at least two trustees of the Board. 5.3 PROCESSING OFPAYMENTS FOR EARLY OR NORMAL RETIREMENT AND RETURN OF CONTRIBUTIONS A. Upon receipt of an application for early or normal retirement, the Board's Plan Administrator or other Board designee shall process the application as follows: (1) The application shall be reviewed for accuracy and completeness and for eligibility for benefits. (2) A copy of the application and any necessary records from the City shall be forwarded to the actuary for calculation of the benefit amounts payable for the normal form and all optional forms of benefits. (3) Upon receipt of the actuary's calculations, the calculations shall be presented to the Retiree and the Retiree shall make his election. (4) The application shall be approved by any Trustee and shall then be provided to the Custodian along with any necessary supporting documents in order to begin payments. (5) Copies of the Retiree's election form and the actuary's calculations shall be provided to the Board of Trustees prior to the commencement of payments or at the next meeting immediately following the commencement of payments, and the Board shall review and approve the retirement benefits. B. Upon the termination of employment of a Member prior to his early or normal retirement date, the Board's Plan Administrator or other Board designee shall: (1) Determine whether the Member is vested or not vested and determine the amount of the Member's contributions. (2) Inform the Member of his right to leave his contributions in the plan or withdraw his contributions. If the Member desires to withdraw his contributions, provide the Member with the necessary forms, including the appropriate Return of Contributions form, the Special Tax Notice Regarding Plan Payments and the Certification of Receipt of the Special Tax Notice and the Lump Sum Distribution Election Form; (3) Recommend that the Member study and complete the appropriate forms and seek tax and/or legal advice regarding his choice. (4) Direct the Member to return the completed forms to the Plan Administrator or Board designee; (5) Upon receipt of the properly completed forms, prepare and submit a payment request signed by any Trustee and copies of any necessary documents to the Custodian to authorize the requested payment or rollover; (6) Provide copies of all documents to the Board of Trustees prior to payment or at the next meeting immediately following the payment, for the Board to approve the payment. C. Pension payments should only be made as provided above. 1099-R reporting forms to Retirees must contain the proper information and codes to ensure that Retirees report the proper amounts on their personal income tax returns. In -line -of duty disability benefits shall be reported as "taxability undetermined" on 1099-R forms. 5.4 REVIEW OF CUSTODL4L STATEMENTS A. Custodial reports should be monitored by the Board or its designee for disclosure of all asset inflows such as City and Member contributions, state excise tax payments, if applicable, miscellaneous citizen donations, and investment income. All errors, including those involving the misclassifications ofPlan revenues, e.g., recording Member contributions as City contributions, must be corrected. -10- B. Custodial reports should also be monitored for all asset outflows. Asset outflows must be properly approved and verified on audit. Expenses shall be approved as provided in Rule 5.2 and Retirements and Returns of Contributions in accordance with Rule 5.3. Letters of authorization for the expenditure of funds must be issued by the Board and copies must be maintained in orderly files. 5.5 ROLLOVERS TO AND FROM THE FUND The Fund will accept and transfer eligible cash rollover distributions to and from the Fund as permitted by local, State and Federal law. The Board may adopt appropriate forms to facilitate such rollovers. RULE 6 INSURANCE 6.1 FIDUCIARY INSURANCE The Trustees are authorized by law to purchase fiduciary insurance to insure members of the Board for errors and omissions at the expense of the Fund, but the Fund shall not pay to waive recourse against Trustees. A rider waiving recourse may be purchased and paid for by the City or by a Trustee. 6.2 TRAVEL COVERAGE The fund may purchase, at its expense, life and accidental death and dismemberment insurance for each Trustee who shall travel outside of Indian River County for the purpose of Board related business. RULE 7 RELATIONS WITH THE CITY 7.1 AUTHORITY OF THE BOARD The Board of Trustees is an independent entity established by state law, city charter and local ordinance. The Board of Trustees shall not be considered a component part of nor subordinate to the City of Sebastian government. The Board shall have exclusive control of the operation of the -11- Fund; however, no change to the retirement ordinance may be made except by action of the State Legislature or the City Council . 7.2 CONTRACTUAL SERVICES In the selection of contractual services, the Board shall pay particular attention to the existence of conflicts of interest when contractors are to be employed by the Board for services similar to services which the contractor also provides to the City of Sebastian. 7.3 USE OF THE CITY FINANCE DEPARTMENT The Board shall be authorized to utilize the services of the City for the performance of banking functions of the Board. The City shall have no discretionary authority with regard to the utilization or direction of funds of the Board. The precise duties of the City shall be reduced to writing, the same as any other contract for services entered into by the Board. 7.4 USE OF INDEPENDENT CUSTODIANS The Board shall be authorized to use the services of any duly qualified custodian in lieu of the City Finance Department for the performance of banking functions of the Board. The custodian shall be duly licensed, insured and bonded and shall meet all of the depository requirements of Chapter 280, Florida Statutes. RULE 8 ORDINANCE CHANGES 8.1 FORM OF ORDINANCE No ordinance change affecting the Pension Fund shall be presented for a vote to the City Council unless first reviewed and approved by a majority of the Trustees in accordance with the existing law governing the Fund. All proposed ordinances shall be reviewed by the General Counsel to the Fund who shall pass on the form and correctness of the ordinance. All proposed ordinance changes carrying an economic benefit shall be reviewed by the actuary to determine the cost as required by law. -12- 8.2 COLLECTIVE BARGAINING The Board of Trustees acknowledges that it is neither an employee organization nor an employer as defined by Chapter 447, Part II, Florida Statutes. Therefore, the Board shall not engage in collective bargaining on behalf of the City of Sebastian or on behalf of any employee organization. TheBoard shall make itself available as a resource to labor organizations and the City for all matters relating to pension and retirement, if any. 8.3 APPEARANCE AT CITY COUNCIL MEETINGS The Board of Trustees shall, through one of its members, its designee or its General Counsel, be present at all City Council meetings where a discussion of matters of interest to the Board shall occur. The Board shall, prior to said meeting, designate an official spokesperson on behalf of the Fund. 8.4 ACTUARIAL IMPACT STUDIES No benefit change shall occur without an actuarial impact study as required by state law. All such actuarial impact studies shall be.at the expense of the Fund. RULE 9 JUDICIAL PROCEEDINGS 9.1 PROCESS All process issued by federal or state courts to the City of Sebastian concerning the Pension Fund or to the City of Sebastian Police Officers' Retirement System shall immediately upon receipt, be forwarded to the General Counsel for the Fund who shall respond thereto. 9.2 DISSOLUTION OF NLARRIAGE Upon entering into a Dissolution of Marriage, a Plan Member shall notify a Trustee of the Member's attorney's name, address and telephone number. The Trustee shall then promptly provide that information to the General Counsel to the Fund. -13- RULE 10 INVESTMENTS 10.1 HIRING INVESTMENT MANAGERS In recognition of the importance of professional guidance in the investment of the assets of the Fund, all investments shall be performed by qualified, professional investment managers. The investment managers shall be selected at a regular or special meeting of the Board of Trustees by a majority vote of the Board. The Board may delegate the initial screening of investment managers to a committee of the Board but no final decision shall be made except at a meeting of the Board. All proposals for investment manager services shall be presented in writing to the Board and shall be made a part of the records of the Board. 10.2 FIRING PERFORMANCE MONITORS The Board shall engage at all times, at least one performance monitor who shall be responsible for reviewing the performance of the various investment managers of the Fund. The performance monitor shall report to the Board on such time schedules as the Board shall establish but not less than annually. The performance monitor shall advise the Board as to the relative performance of each investment manager as compared to the various stock, bond and cash indices as are generally accepted in the investment market place as reflective of satisfactory investment performance. The performance monitor shall recommend in writing to the Board the retention or discharge of investment managers and the reasons supporting its recommendation. At the request of the Board, the performance monitor may perform evaluation and searches for investment managers and such other services as the Board shall request be performed. 10.3 PERFORMANCE GOALS AND OBJECTIVES The Board shall establish performance goals and objectives for each investment manager in each class of investment and shall establish expected rates of return. The investment policy shall comply with the minimum requirements set forth in Section 112.661, Florida Statutes. The perform- ance goals and objectives shall be reduced to writing in an Investment Policy Statement and shall be referred to in the contract between the Board and the manager. The performance goals and -14- objectives shall be reviewed on not less than an annual basis and shall be compared to the actual performance of an investment manager to determine compliance with the goals and objectives set by the Board. All Investment Policy Statements and amendments thereto shall immediately be provided to the City, the Department of Management Services and to the Board's actuary. 1.0.4 INVESTMENT STANDARDS The Board shall establish written investment standards in the Investment Policy Statement. The standards shall set forth the distribution of the Fund between equities, fixed income, cash and cash equivalents and other forms of lawful investment. The standards shall set forth the relative percentages of the Fund to be distributed to each investment vehicle and shall establish permissible risk factors. Each investment manager shall subscribe to the investment Policy Statement setting forth the written investment standards and performance goals and objectives of the Fund and the Investment Policy Statement shall be incorporated into each investment manager contract by reference. 10.5 DECISION MAKING AUTHORITY The Board of Trustees shall determine the retention or discharge of any investment manager or performance monitor. The Board shall also establish the amount of funds to be entrusted to any investment manager and shall determine when funds shall be withdrawn and investments terminated. The Trustees shall not, however, participate in the selection of individual stocks, bonds or cash funds as that shall be the responsibility of the investment manager within the context of the performance goals and objectives and investment standards established by the Board. 10.6 WRITTEN CONTRACTS Each investment manager shall enter into a written contract with the Board. Each contract shall include an acknowledgment by the investment manager that it is familiar with the ordinances of the City of Sebastian and the provisions of Chapters 112 and 185, Florida Statutes. The contracts shall also provide that the investment manager shall make no purchases which are prohibited by law and in the event such purchase is made, shall make the Fund whole for any loss incurred in the divestiture of said investment. The contract shall also -15- provide that the laws of Florida shall govern and that venue for any legal action shall be in Indian River County, Florida. In no event shall any contract be terminable by the investment manager on less than 45 days' written notice, unless otherwise agreed to by the Board. Each contract shall set forth with specificity the fees charged by the investment manager to the Fund. All investment manager contracts shall further set forth that the investment manager is registered as an investment advisor and is otherwise qualified by law to engage in the management of the assets which are the subj ect of the contract. All written contracts shall be reviewed by the General Counsel to the Fund who shall approve the form and correctness of each such contract. All written contracts shall be executed by the Chairman and Secretary of the Board. 10.7 REPORTING All investment managers and.performance monitors of the Fund shall report on not less than an annual basis. The investment managers and monitors may, however, be directed by the Trustees to report on a more frequent basis. All such reports shall be in writing and shall be presented in person by a representative of the investment manager or performance monitor who has authority to make discretionary decisions with regard to the Trust's account and to settle claims and disputes arising from the contract. All such investment managers and performance monitors shall make these presentations in person at a regular meeting of the Board and shall bear their own costs and expenses in traveling to Board meetings. The performance monitors shall attend at least an annual meeting of the Board and shall report, in writing, the progress of each investment manager. The performance monitor shall also make written recommendations regarding retention of investment managers and changes in investment policy. 10.8 PRESENTATIONS BY PROSPECTWE CONSULTANTS AND PROFESSIONALS In recognition of the limited time resources of the Board, presentations of prospective investment managers, performance monitors, custodians or other prospective professional advisors shall only be by written invitation of the Board. The Board shall maintain records of such prospective managers, monitors, custodians and other professionals to be reviewed by the Board in -16- the event the Board wishes to consider adding or making a change in its current manager, monitor, custodian or other professional. In the eventthe Board elects to consider retaining anewmanager, monitor, custodian or other professional, prospective applicants, including those applicants who had previously provided information to the Board, may be contacted and provided with a Request for Proposal. The Board or a committee appointed by the Board may conduct the initial screening of applicants by reviewing the proposals received in response to the Requests for Proposals. The Board may then schedule personal presentations by a "short-list" of qualified applicants. The Board may also decide to retain managers, monitors, custodians and other professionals by utilizing any other method which the Board deems to be prudent under the circumstances. 10.9 DIVJESTITURIE No divestiture of any asset of the Fund shall be made for any reason other than fulfillment of the fiduciary obligations of the Fund. 10.10 PROXY VOTING The Trustees shall be responsible for exercising all proxies on equities held by the Fund. The Trustees shall comply on a voluntary basis with the standards of the Employee Retirement income Security Act of 1974 in the voting of proxies. The Board shall, by contract or other written agree- ment, give all investment managers proxy voting responsibility and the Trustees shall monitor the voting of the managers. The Trustees (along with the United States Department of Labor) do not consider the following practices by investment management firms with proxy voting responsibility to be consist- ent with their fiduciary responsibility: A. Declining to vote proxies; B. Voting proxies exclusively for management without analysis of the underlying issues; C. Permitting negligent or inaccurate record-keeping regarding proxy voting; D. Accepting directions from other parties; -17- E. Permitting the absence of policies or procedures to assure the proper exercise of this fiduciary responsibility. Any significant proxy items and the vote by an investment manager shall be reported in writing to the Trustees. Records of all proxy votes shall be maintained and made available to the Trustees or any agents acting in their behalf. All such records shall be maintained in accordance with the Florida Public Records Act. It shall be the primary responsibility of investment managers acting on behalf of the Board to vote all proxies to enhance the value of the Fund assets. All tender offers shall be treated in the same manner with regard to record-keeping and asset enhancement. 10.11 DECLARATION OF EXPECTED ANNUAL RATE OF RETURN For each actuarial valuation, the Board shall seek the advice of its investment professionals and the actuary and then the Board shall determine the total expected annual rate of investment return for the current year, for each of the next several years and for the long term thereafter. This determination must be filed promptly with the Department of Management Services, with the City and with the Board's actuary. 10.12 INVESTMENT REPORTS TO THE CITY The Board shall prepare annual fiscal year end reports for submission to the City, City Council, which shall include the investments in the portfolio by class or type, book value, income earned and market value as of the end of the fiscal year. RULE 11 ACTUARIAL SERVICES 11.1 SELECTION The Board of Trustees shall retain at all times the services of an enrolled actuary. An enrolled actuary shall mean an actuary who is enrolled under Subtitle C of Title III of the Employment Retirement Income Security Act of 1974 and who is a member of the Society of Actuaries or the American Academy of Actuaries. Competitive bidding shall not be required in the selection of actuaries. 11..2 CONFLICTS OF INTEREST In order to avoid conflicts of interest in the delivery of actuarial services, the Board shall not retain actuaries who are employed by the City of Sebastian, unless the Board is determined to be the client by a separate engagement letter or contract. 11.3 REPORTING The actuary shall report to the Board on not less than an annual basis so that the Board may establish the adequacy of employer and employee contribution rates. Valuations shall be done at least every three years. No proposed change in retirement benefits shall be made without an actuarial determination of the cost impact of the change. All actuarial reports shall be in accordance with the provisions of Section 112.63, Florida Statutes. 11.4 SETTING CONTRIBUTION RATES Pursuant to the ordinances of the City of Sebastian, the Board is solely responsible for establishing the contribution rates of the City. The City contribution rate shall be established following an analysis of the adequacy of employee contributions, contributions from the State of Florida Insurance Rebate Program and investment earnings of the Fund. The amount of the City contribution shall be certified in writing to the City Council in accordance with the provisions of local ordinance. 11.5 CREDITED SERVICE For purposes of actuarial calculations involving credited service, fractional parts of years shall be defined as completed months. 11.6 ACTUARIAL STUDIES FOR INDIVIDUAL PLAN MEMBERS Each vested Plan Member shall be entitled, at the Fund's expense, to receive two actuarial studies to estimate his or her retirement benefits. Any additional studies shall be provided only at the Member's expense. Benefit calculations for terminated vested persons shall be performed by the actuary immediately upon termination. -19- RULE 12 ACCOUNTING SERVICES 12.1 AUDITS The Fund shall cause to be made not less than on an annual basis an audit of the assets and liabilities of the Fund. Financial reporting should be made in accordance with generally accepted accounting standards. A. All postings from the custodial statements to the Plan's working trial balance should be in accordance with the Board's general and/or specific authorizations. B . All transactions recorded in the custodial statements should be analyzed, summarized and accurately posted to the correct trial balance accounts in the correct time period. C. All adjustments, deductions or write-offs of account balances should be calculated, summarized and recorded in the correct period. D. All postings to the working trial balance should be supported by and reference to adequate, authorized documentation. 12.2 CONFLICTS OF INTEREST In order to avoid conflicts of interest, the Board shall not retain auditors who are employed by the City of Sebastian unless the Board shall be determined to be the client by separate engagement letter or contract. 12.3 REVEEW OF INTERNAL CONTROLS The policies and procedures provided for in these Operating Rules and Procedures shall be reviewed by the independent certified public accountant as part of the financial audit to determine the effectiveness of such controls to prevent losses of funds which might arise from fraud, error, misrepresentation by third parties, or imprudent actions by the Board or employees of the City. -20- RULE 13 LEGAL SERVICES 13.1 SELECTION The Board shall select and appoint a General Counsel who shall be licensed to practice law in the State of Florida. The General Counsel shall have demonstrated competence in the area of public employee retirement systems in the State of Florida and shall have been practicing law for not less than ten years. Competitive bidding is not required in the selection of legal services. 13.2 CONFLICTS OF INTEREST In recognition of the requirement that attorneys be independent in their judgment as set forth in the Code of Professional Responsibility, no attorney may serve as General Counsel who is also performing legal services on the part of the City of Sebastian or who otherwise engages in any legal services which the Board deems to be in conflict with its interests. 13.3 CITY OF SEBASTIAN CITY ATTORNEY In recognition of the responsibilities of the City Attorney to the City of Sebastian and the potential for representing competing interests, the office of the City Attorney may not serve in any legal capacity on the pari of the Trust. 13.4 PRIVILEGED COMMUNICATIONS In all dealings between its General Counsel and the Board, the Board shall be deemed the client rather than any individual Trustee of the Board. All communications between the Board and its General Counsel shall be privileged communications except where otherwise governed by the Government in the Sunshine Law. 13.5 AUTHORITY TO DIRECT The General Counsel shall take direction from the Board of Trustees as may be given at the various meetings of the.Board. In between meetings of the Board, direction to the General Counsel shall be given by the Chairman or other person directed by the Board. All files of the General Counsel to the Fund shall be open for inspection by any Trustee. -21- RULE 14 CLAIMS PROCEDURES 1.4.1 CLAIMS OF AFFECTED PERSONS A. The Board of Trustees shall grant an initial hearing upon receipt of a written request ("Claim"), on matters which affect the substantial rights of any person ("Claimant"), including Members, Retirees, Beneficiaries, or any person affected by a decision of the Board of Trustees. B. The Board shall review the Claim at an initial hearing and enter an order within 90 days from the date of receipt of the Claim and, in the case of disability claims, receipt by the Board of a written medical release authorization in a form approved by the General Counsel and a completed set of interrogatories prepared by the General Counsel and provided to the Claimant. The Board may extend the time for entering the order at an initial hearing for an additional 90 days if it determines such time is necessary for full discovery and adequate review. The General Counsel and the Claimant may stipulate to further extensions of time. C. It shall be the function of the General Counsel, throughout the claims procedure, to assist the Board in the discovery and presentation of evidence in order to assure that the Board receives all relevant information prior to the Board's decision. D. The Claimant shall have the right to be represented by counsel at any or all times throughout the claims procedure. 14.2 INITIAL HEARING A. At the initial hearing, the only evidence to be considered by the Board shall be documentary evidence contained in the pension file, including but not limited to, correspondence, medical records and reports of treating physicians and/or examining physicians and evidence received pursuant to paragraph B. B. Other than questions from the Trustees, there will be no taking of additional evidence at the initial hearing, except that the Claimant will be afforded 15 minutes to make a presentation, which shall be limited to comments and/or arguments as to the evidence or information already contained in the pension file, including the report of the examining physician. IW*Z C. Upon completion of the review of the Claim at the initial hearing, the Board shall enter an order setting forth its findings and conclusions on the Claim. The written order shall be provided to the Claimant. The order shall include: (1) The specific findings and conclusions of the Board, including specific references to pertinent provisions of the Plan on which such conclusions are based; (2) A description of any additional material or information that the Board may deem necessary for the Claimant to perfect his Claim, together with the reasons why such material or information is necessary; and (3) An explanation of the right to a full hearing on the Claim and the time limit in which a full hearing must be requested in writing. D. - The decision of the Board at the initial hearing shall not be final until after the time has expired to request a full hearing or, if a full hearing is requested, until the Board makes a decision at the conclusion of the full hearing. 14.3 FULL HEARING A. Any Claimant may request a full hearing on the issues presented to the Board at an initial hearing and upon which the Board has entered an order as provided in subsection 2.C. above. B. A full hearing must be requested by the Claimant within 90 days of the receipt of the Board's order. The order will be deemed received three days following the date it is mailed to Claimant at the address provided to the Board by Claimant. C. Upon receipt of the request for a full hearing and considering the amount of discovery which might be conducted, the Board shall establish a date for the full hearing and cause notice to be given to the Claimant. The full hearing shall be held within 90 days from the receipt of the request from the Claimant. The full hearing may be postponed, if necessary and with the consent of the Claimant, to permit full discovery of the facts. D. Copies of all documents to be offered into evidence at the full hearing, including depositions, and a complete witness list with names and addresses of witnesses expected to be called, shall be furnished to the Board and the General Counsel by the Claimant at least 20 days prior to the -23- full hearing. Documents not furnished to the Board within the prescribed time limit maybe excluded from evidence at the full hearing if a reasonable explanation is not provided for the delay in providing the documents. E. A Claimant or the General Counsel may obtain discovery by deposition and/or interrogatories prior to the full hearing. Written notice of any depositions and/or interrogatories shall be. given to the General Counsel and the Claimant. F. The costs of any discovery, except discovery requested by the Board or the General Counsel, the appearance of witnesses at the hearing, and the making of a verbatim record of the proceedings shall be the responsibility of the Claimant. G. The Claimant shall be responsible for the appearance of any witnesses which he wishes to have testify at the hearing. The Board shall, however, have the power to subpoena and require the attendance of witnesses and the production of documents for discovery prior to and at the proceedings provided for herein. The Claimant may request in writing the issuance of subpoenas by the Board. A reasonable fee may be charged for the issuance of any subpoenas not to exceed the fees set forth in Florida Statutes. H. Testimony at the full hearing may be submitted in the form of a deposition. Depositions timely submitted will be part of the record before the Board at the full hearing and will not be read in totality at the full hearing; provided however, that this does not preclude the Claimant or the General Counsel from reading parts of depositions in an opening or closing statement. I. irrelevant and unduly repetitious evidence shall be excluded. J. Any person who knowingly gives false testimony is guilty of a misdemeanor of the first degree, punishable as provided in Section 775.082 or 775.083, Florida Statutes. K. The file maintained by the Board, including but not limited to various medical reports therein, is part of the record before the Board at the full hearing L. All proceedings of the Board shall be conducted in public. -24- M. In cases concerning an application for pension benefits, including applications for disability retirement benefits, the burden of proof, except as otherwise provided by law, shall be on the Claimant seeking to show entitlement to such benefits. N. In cases concerning termination of pension benefits, including re-examination of Retirees receiving disability retirement benefits, the burden of proof shall be on the Board. O. Except as to those records which are exempted from the provisions of Chapter 119, Florida Statutes, Florida's Public Record Law, records maintained by the Board are open for inspection and/or copying during normal business hours at a reasonable cost for the copying. P. Should a Claimant requesting an initial or full hearing decide to appeal any decision made by the Board, with respect to any matter considered at such hearing, the Claimant requesting an initial or full hearing will need a record of the proceedings and may need to assure that a verbatim record of the proceeding is made. The Claimant requesting an initial or full hearing will be responsible for obtaining a court reporter or otherwise making a record of the proceedings before the Board. Q. The decisions of the Board after the requested full hearing shall be final and binding. R. Within 15 days after making a decision at the full hearing, the Board shall enter a final order setting forth its findings and conclusions and a copy of the order shall be provided to the Claimant. S. Judicial review of decisions of the Board shall be sought by the filing of a timely petition for writ of certiorari with the Clerk of the Circuit Court, in the appropriate county. 14.4 CONDUCT OF THE FULL HEARING A. The Chairman shall preside over the hearing and shall rule on all evidentiary, procedural, and other legal questions that arise during the hearing. The Chairman's rulings shall stand unless overruled by a majority of the Trustees present. The Chairman shall open the full hearing by explaining the procedures to be followed. B. The Claimant shall have the right to be represented by counsel or be self -represented. The General Counsel shall advise the Board. -25- C. The Claimant shall be allowed to make an opening statement not to exceed ten minutes. D. Testimony of witnesses shall be under oath or affirmation. Depositions and affidavits shall be admissible. E. The Chairman, any Trustee, the General Counsel, the Claimant or the Claimant's counsel, upon recognition by the Chairman, may direct questions to any witness during the proceedings. F. Either the Claimant or the General Counsel shall have the right to present evidence relevant to the issues, to cross-examine witnesses, to impeach witnesses and to respond to the evidence presented. G. The Claimant shall be permitted a closing argument not to exceed 15 minutes. H. The Board shall deliberate and make a decision following closing argument and thereafter enter an order as provided herein. 14.5 DISABILITY CLAIMS - ADDITIONAL PROCEDURES A. All applications for disability pensions shall be in writing. Forms for such applications. may be provided by the Board. B. Upon receipt of the application for disability, the General Counsel will provide the Claimant with a set of interrogatories or questions to be answered under oath and a medical release authorization. Both documents will be completed by the Claimant and returned to the General Counsel. C. Upon receipt of the properly completed interrogatories and medical release authorization, the General Counsel will request medical records from all relevanttreatingphysicians; personnel records from the employer, copies of relevant workers' compensation records, and copies of other records deemed to be relevant to the Claim. The Board shall pay, from the Fund, the cost of any medical examinations required by the Board and for copies of medical records. D. The General Counsel will, if authorized by the Board, upon receipt of the. medical records from the treating physicians, schedule an independent medical examination (IME) or -26- examinations with an appropriate independent examining physician or physicians who will be asked to render an opinion about Claimant's physical condition as it relates to the claimed disability. E. Upon receipt of the EVIE report or reports from the examining physician or physicians, the General Counsel will provide all records of treating physicians, relevant workers' compensation claims records, the independent medical evaluation, and all other relevant documents to the Board for inclusion in the pension file and the Board shall then schedule the initial hearing. RULE 15 CONFIDEN'T'IALITY 15.1 EXTENT OF CONFIDENTIALITY PERMITTED § 119.07(3)(k) L, Florida Statutes, provides that the home addresses, telephone numbers, and photographs of active or former law enforcement personnel and; the home addresses, telephone numbers, photographs, and places of employment of the spouses and children of such personnel; and the names and locations of schools and day care facilities attended by the children of such personnel are exempt from the public records provisions of Section 11 9.07(l), Florida Statutes. 15.2 REQUIREMENT FOR MAINTENANCE OF CONFIDENTIALITY The Board will maintain the information specified in 15.1 as confidential, if it receives from a Member or the City of Sebastian a written request to maintain confidentiality. 15.3 CONFIDENTIALITY OF MEDICAL RECORDS A. § 112.08(7), Florida Statutes is an exemption of medical records and medical claims records from the public records requirements of § 119.07(1), Florida Statutes and such records are thus confidential. B. This exemption provides that the Board shall not furnish such records to any person except the employee or his legal representative without written authorization from the employee or, unless otherwise prohibited by law, it receives a subpoena issued in a civil or criminal action from a court of competent jurisdiction where the party seeking the records gave proper notice to the employee or his legal representative. _27_ C. Since, under Government in the Sunshine, trustees can only discuss issues involving medical records of an employee in a public meeting, such an authorization should be signed. by an employee prior to discussion by the Board. Upon consideration of the medical records at a public Board meeting, such records then become subject to disclosure in the same manner as any other public record. RULE 16 INTEREST CALCULATIONS 16.1 INTEREST CALCULATION To the extent permitted by law, the interest calculation for the purchase of Credited Service, if not otherwise provided for in the ordinance, shall be the greater of the actual interest earned on plan investments or the actuarially assumed rate of investment return. RULE 17 DISABILITY REVIEW PROCEDURE 17.1 PROCEDURE The Board shall periodically review the status of disability Retirees who may be eligible. to return to employment with the City of Sebastian as a Police Officer in accordance with the following: A. A disability affidavit on a form adopted by the Board shall be filed with the Board at least once each year. Failure to file the affidavit shall result in a suspension of disability benefits. B. Upon receipt of the affidavit, the Board shall determine whether the disability Retiree continues to be entitled to receive disability benefits pursuant to the terms of the pension plan. C. If the Board determines that the disability Retiree is still disabled, then disability benefits shall continue to be paid. D. If, after review of the affidavit, the Board is unable to determine whether the disability Retiree continues to be disabled, the Board shall make further inquiry as necessary. E. Such inquiry may include job availability and medical ability to perform duty. If the Board determines that a Police Officer position appropriate for assignment may be available, and the MMM disability Retiree may be able to perform duty in such position, an independent medical examination or examinations shall be performed at the Board's expense by a physician or physicians selected by the Board. A job description and physical or psychological requirements necessary to perform the position shall be provided to the independent medical examiner(s). F. After receipt of the report or reports of the independent medical examiner(s), other medical evidence and determination of j ob availability, the Board shall determine whether disability benefits shall continue. RULE 18 SURVEILLANCE 18.1 SURVEILLANCE Any Trustee who has reason to believe that a disability Retiree may be recovered from his disability and again able to perform useful and efficient service as a Police Officer and who further reasonably believes that surveillance of the Retiree, including the production of video tapes of the Retiree, will help to establish the fact of the recovery, may authorize the Board's General Counsel to arrange for such surveillance. Surveillance of disability applicants may also be authorized by any Trustee who reasonably believes that such surveillance will assist the Board in determining an applicant's ability to perform useful and efficient service as a Police Officer. The cost of any surveillance authorized by any Trustee shall not exceed $10,000.00. bm/sebas/07-14-03.ru1 _29_ TRAVELERS) Wra p,I-® for Governmental Plans DESIGNATED BENEFIT PLAN FIDUCIARY• DECLARA TIONS r ^' �;= r*� k a r� rev �xv4 1 ,.,5" «, F� x; y - �., .• • �. Travelers Casualty and Surety Company of America Hartford, Connecticut (A Stock Insurance Company, herein called the Company) THIS LIABILITY COVERAGE IS WRITTEN ON A CLAIMS -MADE BASIS. THIS LIABILITY COVERAGE COVERS ONLY CLAIMS FIRST MADE AGAINST INSUREDS DURING THE POLICY PERIOD. THE LIMIT OF LIABILITY AVAILABLE TO PAY SETTLEMENTS OR JUDGMENTS WILL BE REDUCED BY DEFENSE EXPENSES, AND DEFENSE EXPENSES WILL BE APPLIED AGAINST THE RETENTION. THE COMPANY HAS NO DUTY TO DEFEND ANY CLAIM UNLESS DUTY -TO -DEFEND COVERAGE HAS BEEN SPECIFICALLY PROVIDED HEREIN. ITEM 1 BENEFIT PLAN: CITY OF SEBASTIAN POLICE OFFICERS' RETIREMENT SYSTEM Principal Address: 1225 MAIN STREET SEBASTIAN, FL 32958 ITEM 2 INSURANCE REPRESENTATIVE: Kenneth W. Killgore D/B/A: Principal Address: 1225 Main Street SEBASTIAN, FL 32958 ITEM 3 POLICY PERIOD: Inception Date: November 01, 2014 Expiration Date: November 01, 2017 12:01 A.M. standard time both dates at the Principal Address stated in ITEM 1. ITEM 4 ALL NOTICES OF CLAIM OR LOSS MUST BE SENT TO THE COMPANY BY EMAIL, FACSIMILE, OR MAIL AS SET FORTH BELOW: DBP -15001 Ed. 11-12 Page 1 of 3 ©2012 The Travelers Indemnity Company. All Rights Reserved DBP -15001 Ed. 11-12 Page 2 of 3 02012 The Travelers Indemnity Company. All Rights Reserved Email:bfpclaims@travelers.com FAX:(888) 460-6622 Mail:Travelers Bond & Specialty Insurance Claim 385 Washington St. — Mail Code 9275-NB03F St Paul, MN 55102 ITEM 5 Only those coverage features marked "® Applicable" are included in this Policy. DESIGNATED BENEFIT PLAN FIDUCIARY LIABILITY COVERAGE Limit of Liability: $1,000,000 for all Claims Settlement Program Limit of Liability $100,000 for each Settlement Program Notice, which amount is included within, and not in addition to, any applicable limit of liability HIPAA Limit of Liability $100,000 which amount is included within, and not in addition to, any applicable limit of liability 502(c) Penalties Limit of Liability $100,000 which amount is included within, and not in addition to, any applicable limit of liability Additional Defense ❑ Applicable ® Not Applicable Coverage: Additional Defense Limit of Liability: Not Covered for all Claims Retention: $1,000 for each Claim under Insuring Agreement A Prior and Pending Proceeding Date: November 01, 2014 Continuity Date: November 01, 2014 ITEM 6 PREMIUM FOR THE POLICY PERIOD: $9,243.00 Policy Premium $3,081.00 Annual Installment Premium ITEM 7 TYPE OF CLAIM DEFENSE: ❑ Reimbursement ® Duty -to -Defend Only the type of coverage marked "0" is included in this Policy. ITEM 8 EXTENDED REPORTING PERIOD: Additional Premium Percentage: 75% Additional Months: 12 DBP -15001 Ed. 11-12 Page 2 of 3 02012 The Travelers Indemnity Company. All Rights Reserved (If exercised in accordance with section V. CONDITIONS, M. EXTENDED REPORTING PERIOD, of the Designated Benefit Plan Fiduciary Liability Coverage) ITEM 9 1 RUN-OFF EXTENDED REPORTING PERIOD: Additional Premium Percentage: Not Applicable Additional Months: Not Applicable (If exercised in accordance with section V. CONDITIONS, K. CHANGE OF CONTROL, of the Designated Benefit Plan Fiduciary Liability Coverage) ITEM 10 1 ANNUAL REINSTATEMENT OF THE LIMIT OF LIABILITY: ® Applicable ❑ Not Applicable Only those coverage features marked ® Applicable" are included in this Policy. ITEM 11 1 FORMS AND ENDORSEMENTS ATTACHED AT ISSUANCE: DBP -16001-1112; DBP -17009-1112; DBP -17055-1112; DBP -19001-1112; DBP -1 9002-1112; DBP -19003-1112; DBP -19071-1112 THE DECLARATIONS, THE APPLICATION, THE DESIGNATED BENEFIT PLAN FIDUCIARY LIABILITY COVERAGE, AND ANY ENDORSEMENTS ATTACHED THERETO, CONSTITUTE THE ENTIRE AGREEMENT BETWEEN THE COMPANY AND THE INSURED. Countersigned By IN WITNESS WHEREOF, the Company has caused this Policy to be signed by its authorized officers. President, Bond & Financial Products DBP -15001 Ed. 11-12 02012 The Travelers Indemnity Company. All Rights Reserved Corporate Secretary Page 3 of 3 TRAVELERS ,. DESIGNATED BENEFIT PLAN FIDUCIARY LIABILITY COVERAGE THIS IS A CLAIMS MADE COVERAGE WITH DEFENSE EXPENSES INCLUDED /N THE LIMIT OF LIABILITY. PLEASE READ ALL TERMS CAREFULLY. INSURING AGREEMENTS A. The Company will pay on behalf of the Insured, Loss for any Claim first made during the Policy Period, or if exercised, during the Extended Reporting Period or Run -Off Extended Reporting Period, for a Wrongful Act. B. The Company will pay on behalf of the Insured, Settlement Fees and Defense Expenses incurred by the Insured in connection with any Settlement Program Notice; provided that participation by the Insured in any Settlement Program commences during the Policy Period or, if exercised, during the Extended Reporting Period or Run -Off Extended Reporting Period. /I. DEFINITIONS Wherever appearing in this Policy, the following words and phrases appearing in bold type will have the meanings set forth in this section If. DEFINITIONS: A. Additional Defense Limit of Liability means the amount set forth in ITEM 5 of the Declarations. If "Not Applicable" is selected for the Additional Defense Limit of Liability, then any reference to the Additional Defense Limit of Liability will be deemed to be deleted from this Policy. B. Administration means: 1, giving counsel, advice, or notice to participants or beneficiaries with respect to a Benefit Plan; 2. interpreting a Benefit Plan; 3. handling records in connection with a Benefit Plan; or 4. effecting enrollment, termination or cancellation of participants or beneficiaries under a Benefit Plan. C. Annual Reinstatement of the Limit of Liability means, if included in ITEM 10 of the Declarations, the reinstatement of each applicable limit of liability for each Policy Year during the Policy Period. D. Application means the application deemed to be attached to and forming a part of this Policy, including any materials submitted and statements made in connection with that application. If the Application uses terms or phrases that differ from the terms defined in this Policy, no inconsistency between any term or phrase used in the Application and any term defined in this Policy will waive or change any of the terms, conditions and limitations of this Policy. E. Benefit Plan means only those plans or trusts set forth in ITEM 1 of the Declarations or those plans or trusts designated within an endorsement to this Policy. Benefit Plan Committee means any committee of the Benefit Plan, including any Benefit Plan investment or administration committee, that is established by the Benefit Plan and that is comprised entirely of Insured Persons. DBP -16001 Ed. 11-12 Page 1 of 15 02012 The Travelers Indemnity Company. All rights reserved. G. Benefit Plan Official means a natural person officer, including any executive director or functional equivalent thereof, member of the board of trustees; in-house risk manager; or in-house general counsel of the Benefit Plan. H. Change of Control means: 1. the full assumption of fiduciary responsibilities or Administration, with respect to a Benefit Plan by one or more other persons or entities; or 2. the acquisition of a Benefit Plan, or of all or substantially all of its assets, by another entity, or the merger or consolidation of a Benefit Plan into or with another entity or employee benefit plan such that the Benefit Plan is not the surviving entity. I. Claim means: 1. a written demand for monetary damages or non -monetary relief; 2. a civil proceeding commenced by service of a complaint or similar pleading; 3. a criminal proceeding commenced by filing of charges; 4. a formal administrative or regulatory proceeding commenced by filing of a notice of charges, formal investigative order, service of summons or similar document, including a fact-finding investigation by the Department of Labor or the Pension Benefit Guaranty Corporation; 5. an arbitration, mediation or similar alternative dispute resolution proceeding if the Insured is obligated to participate in such proceeding or if the Insured agrees to participate in -such proceeding, with the Company's written consent, such consent not to be unreasonably withheld; or 6. a written request to toll or waive a statute of limitations relating to a potential civil or administrative proceeding, against an Insured for a Wrongful Act. A Claim will be deemed to have been made on the earliest date written notice thereof is received by an Insured. J. Defense Expenses means reasonable and necessary legal .fees and expenses incurred by the Company or the Insured, with the Company's consent, in the investigation, defense, settlement and appeal of a Claim, including cost of expert consultants and witnesses, premiums for appeal, injunction, attachment or supersedeas bonds (without the obligation to furnish such bonds) regarding such Claim; provided that Defense Expenses will not include the salaries, wages, benefits or overhead of, or paid to, any Insured or any employee of such Insured. K. HIPAA means the Health Insurance Portability and Accountability Act of 1996, as amended. L. Insurance Representative means the entity or person so designated by endorsement to this Policy . M. Insured means: 1 the Insured Persons; 2. any Benefit Plan; and 3. any Benefit Plan Committee in its capacity as a fiduciary or trustee of a Benefit Plan, or in its Administration of a Benefit Plan. DBP -16001 Ed. 11-12 Page 2 of 15 ©2012 The Travelers Indemnity Company. All rights reserved. N. Insured Person means any natural person who was, is now or becomes a trustee; committee member; officer; in-house general counsel; or employee of a Benefit Plan, but only while acting in his or her capacity as a fiduciary of a Benefit Plan or as a person performing Administration. In the event of the death, incapacity or bankruptcy of an Insured Person, any Claim against the estate, heirs, legal representatives or assigns of such Insured Person for a Wrongful Act of such Insured Person will be deemed to be a Claim against such Insured Person. O. Loss means Defense Expenses and money which an Insured is legally obligated to pay as a result of a Claim, including settlements; judgments; compensatory damages; punitive or exemplary damages or the multiple portion of any multiplied damage award if insurable under the applicable law most favorable to the insurability of punitive, exemplary, or multiplied damages; prejudgment and post judgment interest; and legal fees and expenses awarded pursuant to a court order or judgment; and solely with respect to section I. INSURING AGREEMENTS B. of this Policy, Settlement Fees. Loss does not include: 1. civil or criminal fines (except Settlement Fees pursuant to Insuring Agreement B.; Section 502(c) Penalties; civil penalties under Sections 502(i) and 502(1) of the Employee Retirement Income Security Act of 1974, as amended; or civil penalties under the privacy provisions of HIPAA); sanctions; liquidated damages; payroll or other taxes; or damages or types of relief deemed uninsurable under applicable law; 2. payment of medical benefits, pension benefits, severance, or any other benefit provided under a Benefit Plan which are or may become due, except to the extent that such sums are payable as a personal obligation of an Insured Person, because of such Insured Person's Wrongful Act; provided that this exclusion will not apply to: a. the Company's obligation to defend any Claim, if applicable, or to pay, advance or reimburse Defense Expenses, regarding a Claim seeking such benefits; or b. that portion of any damage, settlement or judgment covered as Loss under this Policy that represents a loss to any Benefit Plan, or loss to any account of a participant in any Benefit Plan, by reason of a change in value of any investments held by such Benefit Plan or such account, notwithstanding that such portion of any such damage, settlement or judgment has been characterized by plaintiffs, or held by a court of law, to be "benefits"; or 3. any amount allocated to non -covered loss pursuant to section V. CONDITIONS, R. ALLOCATION, of this Policy. P. Policy means, collectively, the Declarations, the Application, this Designated Benefit Plan Fiduciary Liability Coverage, and any endorsements attached hereto. Q. Policy Period means the period from the Inception Date to the Expiration Date set forth in ITEM 3 of the Declarations. In no event will the Policy Period continue past the effective date of cancellation or termination of this Policy. R. Policy Year means: 1. the period of one year following the Inception Date set forth in ITEM 3 of the Declarations or any anniversary thereof; and 2. the time between the Inception Date set forth in ITEM 3 of the Declarations or any anniversary thereof and the effective date of cancellation or termination of this Policy if such time period is less than one year. S. Pollutant means any solid, liquid, gaseous, or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed. DBP -16001 Ed. 11-12 Page 3 of 15 ©2012 The Travelers Indemnity Company. All rights reserved. T. Potential Claim means any Wrongful Act that may subsequently give rise to a Claim. U. Related Wrongful Act means all Wrongful Acts that have as a common nexus, or are causally connected by reason of, any fact, circumstance, situation, event or decision. V. Section 502(c) Penalties means civil penalties imposed on any Insured pursuant to Section 502(c) of the Employee Retirement Income Security Act of 1974, as amended. W. Settlement Fees mean any fees, penalties or sanctions imposed by law under a Settlement Program that any Insured becomes legally obligated to pay as a result of a Wrongful Act. Settlement Fees will not include any costs or expenses other than such fees, penalties or sanctions. X. Settlement Program means any voluntary compliance resolution program or similar voluntary settlement program, administered by the Internal Revenue Service or Department of Labor of the United States, including the Employee Plans Compliance Resolution System, the Self Correction Program, the Audit Closing Agreement Plan, the Delinquent Filer Voluntary Compliance program, and the Voluntary Fiduciary Correction program, entered into by a Benefit Plan. Y. Settlement Program Notice means a prior written notice to the Company by the Insured of the Insured's intent to enter into a Settlement Program. Z. Wrongful Act means: 1. any actual or alleged breach of fiduciary duty by or on behalf of the Insured with respect to any Benefit Plan, including: a. any actual or alleged breach of duties, obligations and responsibilities imposed by the Employee Retirement Income Security Act of 1974, as amended, COBRA, H1PAA, or by any similar or related federal, state, local, or foreign law or regulation, in the discharge of the Insured's duties with respect to a Benefit Plan; or b. any other matter claimed against an Insured solely because of the Insured's status as a fiduciary of a Benefit Plan; or 2. any actual or alleged negligent act, error or omission by or on behalf of the Insured in the Administration of a Benefit Plan. All Related Wrongful Acts are a single Wrongful Act for purposes of this Policy, and all Related Wrongful Acts will be deemed to have occurred at the time the first of such Related Wrongful Acts occurred whether prior to or during the Policy Period. 111. EXCLUSIONS A. EXCLUSIONS APPLICABLE TO ALL LOSS The Company will not be liable for Loss for any Claim for any damage to, or destruction of, loss of, or loss of use of, any tangible property including damage to, destruction of, loss of, or loss of use of, tangible property that results from inadequate or insufficient protection from soil or ground water movement, soil subsidence, mold, toxic mold, spores, mildew, fungus, or wet or dry rot. 2. The Company will not be liable for Loss for any Claim for any bodily injury, sickness, disease, death, loss of consortium, emotional distress, mental anguish, or humiliation. 3. The Company will not be liable for Loss for any Claim: a. based upon or arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of any Pollutant; DBP -16001 Ed. 11-12 Page 4 of 15 02012 The Travelers Indemnity Company. All rights reserved. b. based upon or arising out of any request, demand, order, or statutory or regulatory requirement that any Insured or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of, any Pollutant, or C. brought by or on behalf of any governmental authority because of testing for, monitoring, cleaning up, removing, containing, treating, detoxifying or neutralizing, or in any way responding to, or assessing the effects of, any Pollutant; provided this exclusion will not apply to any Claim by or on behalf of a beneficiary of, or participant in, any Benefit Plan based upon, arising from or in consequence of the diminution in value of any securities owned by the Benefit Plan in any organization if such diminution in value is allegedly as a result of a Pollutant. 4. The Company will not be liable for Loss for any Claim for any liability of others assumed by an Insured under any contract or agreement, whether oral or written, other than a Benefit Plan, except to the extent that the Insured would have been liable in the absence of such contract or agreement. 5. The Company will not be liable for Loss for any Claim for any violation of responsibilities, duties or obligations under any law concerning Social Security, unemployment insurance, workers' compensation, disability insurance, or any similar or related federal, state or local law or regulation other than COBRA, HIPAA or the Employee Retirement Income Security Act of 1974, including amendments thereto and regulations promulgated thereunder or any similar common or statutory law. 6. The Company will not be liable for Loss for any Claim based upon or arising out of any fact, circumstance, situation, event or Wrongful Act underlying or alleged in any prior or pending civil, criminal, administrative or regulatory proceeding against any Insured as of or prior to the applicable Prior and Pending Proceeding Date set forth in ITEM 5 of the Declarations for this Policy. 7. The Company will not be liable for Loss for any Claim for any fact, circumstance, situation or event that is or reasonably would be regarded as the basis for a claim about which any Benefit Plan Official had knowledge prior to the applicable Continuity Date set forth in ITEM 5 of the Declarations for this Policy. 8. The Company will not be liable for Loss for any Claim based upon or arising out of any fact, circumstance, situation, event, or Wrongful Act which, before the Inception Date set forth in ITEM 3 of the Declarations, was the subject of any notice of claim or potential claim given by or on behalf of any Insured under any policy of insurance of which this Policy is a direct renewal or replacement or which it succeeds in time. B. EXCLUSIONS APPLICABLE TO LOSS, OTHER THAN DEFENSE EXPENSES 1. The Company will not be liable for Loss, other than Defense Expenses, for any Claim based upon or arising out of any Insured: a. committing any intentionally dishonest or fraudulent act or omission; b. committing any willful violation of any statute, rule, or law; or C. gaining any profit, remuneration or advantage to which such Insured was not legally entitled; provided that this exclusion will not apply unless a final adjudication establishes that such Insured committed such intentionally dishonest or fraudulent act or omission, willful violation of any DBP -16001 Ed. 11-12 Page 5 of 15 02012 The Travelers Indemnity Company. All rights reserved. statute, rule or law, or gained such profit, remuneration or advantage to which such Insured was not legally entitled. 2. The Company will not be liable for Loss, other than Defense Expenses, for any Claim seeking costs and expenses incurred or to be incurred to comply with an order, judgment or award of injunctive or other equitable relief of any kind, or that portion of a settlement encompassing injunctive or other equitable relief, including actual or anticipated costs and expenses associated with or arising from an Insured's obligation to provide reasonable accommodation under, or otherwise comply with, the Americans With Disabilities Act or the Rehabilitation Act of 1973, including amendments thereto and regulations promulgated thereunder, or any similar or related federal, state or local law or regulation. 3. The Company will not be liable for Loss, other than Defense Expenses, for any Claim: a. based upon or arising out of the failure to collect from employers any contributions owed to a Benefit Plan, unless the failure is the result of a negligence by any Insured; or b. for the return of any contributions to any employer if such amounts are or could be chargeable to a Benefit Plan. C. EXCLUSIONS APPLICABLE TO INSURING AGREEMENT B The Company will pay no Settlement Fees or Defense Expenses with respect to any Claim or investigation in connection with a Settlement Program, of which any Insured first became aware or received notice prior to the applicable Prior and Pending Proceeding Date set forth in ITEM 5 of the Declarations for this Policy. 1V. SEVERABILITY OF EXCLUSIONS No conduct of any Insured will be imputed to any other Insured to determine the application of any of the exclusions set forth in section III. EXCLUSIONS above. V. CONDITIONS A. TERRITORY This Policy applies to Claims made or Wrongful Acts occurring anywhere in the world, where legally permissible. B. RETENTION The Insured shall bear uninsured at its own risk the amount of any applicable Retention, which amount must be paid in satisfaction of Loss. If any Claim gives rise to coverage under this Policy, the Company has no obligation to pay Loss, including Defense Expenses, until the applicable Retention amount set forth in ITEM 5 of the Declarations has been paid by the Insured. If any Claim is subject to different Retentions under this Policy, the applicable Retentions will be applied separately to each part of such Claim, but the sum of such Retentions will not exceed the largest applicable Retention under this Policy. The Company, at its sole discretion, may pay all or part of the Retention amount on behalf of any Insured, and in such event, the Insureds agree to repay the Company any amounts so paid. However, none of the Retention amounts set forth in ITEM 5 of the Declarations will apply to: 1. Settlement Fees under section I. INSURING AGREEMENTS, B., of this Policy; DBP -16001 Ed. 11-12 Page 6 of 15 ©2012 The Travelers Indemnity Company. All rights reserved. 2. 502(c) Penalties; or 3. civil penalties under the privacy provisions of HIPAA. C. LIMIT OF LIABILITY 1. Limit of Liability Regardless of the number of persons or entities bringing Claims or the number of persons or entities who are Insureds, and regardless of when payment is made by the Company or when an Insured's legal obligation with regard thereto arises or is established, and further subject to any applicable Annual Reinstatement of the Limit of Liability, the Company's maximum limit of liability for all Loss, including Defense Expenses, for all Claims under this Policy will not exceed the remaining Limit of Liability stated in ITEM 5 of the Declarations. 2. Settlement Program Limit of Liability The Company's maximum limit of liability for all Settlement Fees and Defense Expenses in connection with each Settlement Program Notice will not exceed the amount set forth in ITEM 5 of the Declarations as the Settlement Program Limit of Liability for each Settlement Program Notice, which amount is included within, and not in addition to, any applicable limit of liability. However, if ITEM 5 of the Declarations indicates that Additional Defense Coverage is applicable, Defense Expenses incurred in connection with a Settlement Program Notice will apply first to and reduce the remaining Additional Defense Limit of Liability; provided that the Settlement Program Limit of Liability will be reduced and may be exhausted by payment of such Defense Expenses under the Additional Defense Limit of Liability. Furthermore, in the event a Claim covered under Insuring Agreement A. and a Settlement Program Notice covered under Insuring Agreement B. arise from the same facts, circumstances, situations, or events, the Company's maximum limit of liability under Insuring Agreement B. for the Settlement Program Notice will not exceed the amount set forth in ITEM 5 of the Declarations as the Settlement Program Limit of Liability for each Settlement Program Notice, but such limit will apply only to all Settlement Fees in connection with such Settlement Program Notice. In such an event, Defense Expenses incurred in connection with the Claim and the Settlement Program Notice will be subject to the Limit of Liability for each Claim stated in ITEM 5 of the Declarations. 3. HIPAA Limit of Liability The Company's maximum limit of liability for all civil money penalties under the privacy provisions of HIPAA will not exceed the amount set forth in ITEM 5 of the Declarations as the HIPAA Limit of Liability, which amount is included within, and not in addition to, any applicable limit of liability. 4. 502(c) Penalties Limit of Liability The Company's maximum limit of liability for all Section 502(c) Penalties will not exceed the amount set forth in ITEM 5 of the Declarations as the Section 502(c) Penalties Limit of Liability, which amount is included within, and not in addition to, any applicable limit of liability. 5. Annual Reinstatement of the Limit of Liability Regardless of the number of persons or entities bringing Claims or the number of persons or entities who are Insureds, and regardless of when payment is made by the Company or when an Insured's legal obligation with regard thereto arises or is established, if ITEM 10 of the Declarations includes an Annual Reinstatement of the Lim it of Liability: a. the Company's maximum limit of liability for all Loss, including Defense Expenses, for all Claims made during each Policy Year will not exceed the remaining limit of liability stated in ITEM 5 of the Declarations; and DBP -16001 Ed. 11-12 Page 7 of 15 02012 The Travelers Indemnity Company. All rights reserved. b. with regard to the Extended Reporting Period or the Run -Off Extended Reporting Period, if applicable, the Company's maximum limit of liability for all Claims made during the Extended Reporting Period or the Run -Off Extended Reporting Period will not exceed the remaining limit of liability for the last Policy Year in effect at the time of the termination or cancellation of this Policy or the Change of Control. 6. Other Provisions Payment of Defense Expenses will reduce and may exhaust all applicable limits of liability. In the event the amount of Loss exceeds the portion of the applicable limit of liability remaining after prior payments of Loss, the Company's liability will not exceed the remaining amount of the applicable limit of liability. In no event will the Company be obligated to make any payment for Loss, including Defense Expenses, with regard to a Claim after the applicable limit of liability has been exhausted by payment or tender of payment of Loss. If the limit of liability is exhausted by the payment of amounts covered under this Policy, the premium for this Policy will be fully earned, all obligations of the Company under this Policy will be completely fulfilled and exhausted, including any duty to defend, and the Company will have no further obligations of any kind or nature whatsoever under this Policy. D. ADDITIONAL DEFENSE COVERAGE Regardless of the number of persons or entities bringing Claims or the number of persons or entities who are Insureds, and regardless of when payment is made by the Company or when an Insured's legal obligation with regard thereto arises or is established, if ITEM 5 of the Declarations indicates that this Policy includes Additional Defense Coverage, Defense Expenses incurred by the Company or the Insured, with the Company's consent, in the defense of any Claim made during the Policy Period under this Policy will apply first to and reduce the Additional Defense Limit of Liability. The Additional Defense Limit of Liability will be in addition to, and not part of, the Limit of Liability. The Additional Defense Limit of Liability is applicable to Defense Expenses only. If the Annual Reinstatement of the Limit of Liability is applicable, the Additional Defense Limit of Liability will be reinstated for each Policy Year. Upon exhaustion of the Additional Defense Limit of Liability: 1. Defense Expenses incurred by the Company or the Insured, with the Company's consent, in the defense of a Claim are part of and not in addition to any applicable limit of liability; and 2. payment by the Company or the Insured, with the Company's consent, of Defense Expenses reduces any applicable limit of liability. E. CLAIM DEFENSE 1. If Duty -to -Defend coverage is provided with respect to this Policy as indicated in ITEM 7 of the Declarations, the Company will have the right and duty to defend any Claim covered by this Policy, even if the allegations are groundless, false or fraudulent, including the right to select defense counsel with respect to such Claim; provided that the Company will not be obligated to defend or to continue to defend any Claim after the applicable limit of liability has been exhausted by payment of Loss. 2. If Reimbursement coverage is provided with respect to this Policy as indicated in ITEM 7 of the Declarations: a• the Company will have no duty to defend any Claim covered by this Policy. It will be the duty of the Insured to defend such Claims; and the Company will have the right to participate with the Insured in the investigation, defense and settlement, including the negotiation of a settlement of any Claim that appears reasonably likely to be covered in whole or in part by this Policy and the selection of appropriate defense counsel; and DBP -16001 Ed. 11-12 Page 8 of 15 02012 The Travelers Indemnity Company. All rights reserved. b. upon written request, the Company will advance Defense Expenses with respect to such Claim. Such advanced payments by the Company will be repaid to the Company by the Insureds severally according to their respective interests in the event and to the extent that the Insureds are not entitled to payment of such Defense Expenses under this Policy. As a condition of any payment of Defense Expenses under this subsection, the Company may require a written undertaking on terms and conditions satisfactory to the Company guaranteeing the repayment of any Defense Expenses paid to or on behalf of any Insured if it is finally determined that any such Claim or portion of any Claim is not covered under this Policy. 3. The Insured agrees to cooperate with the Company and, upon the Company's request, assist in making settlements and in the defense of Claims and in enforcing rights of contribution or indemnity against any person or entity which may be liable to the Insured because of an act or omission insured under this Policy, will attend hearings and trials and assist in securing and giving evidence and obtaining the attendance of witnesses. F. INSURED'S DUTIES IN THE EVENT OF A CLAIM OR SETTLEMENT PROGRAM NOTICE The Insured's duty to report a Claim commences on the earliest date a written notice thereof is received by a Benefit Plan Official. If a Benefit Plan Official becomes aware that a Claim has been made against any Insured, the Insured, as a condition precedent to any rights under this Policy, must give to the Company written notice of the particulars of such Claim, including all facts related to any alleged Wrongful Act, the identity of each person allegedly involved in or affected by such Wrongful Act, and the dates of the alleged events, as soon as practicable. The Insured agrees to give the Company such information, assistance and cooperation as it may reasonably require. All notices of Claims and Settlement Program Notices must be sent to the Company by email, facsimile, or mail as set forth in ITEM 4 of the Declarations and will be effective upon receipt. The Insured agrees not to voluntarily settle any Claim or enter into a Settlement Program, make any settlement offer, assume or admit any liability or, except at the Insured's own cost, voluntarily make any payment, pay or incur any Defense Expenses or Settlement Fees, or assume any obligation or incur any other expense, without the Company's prior written consent, such consent not to be unreasonably withheld. The Company is not liable for any settlement, Defense Expenses, Settlement Fees, assumed obligation or admission to which it has not consented. G. NOTICE OF POTENTIAL CLAIMS If an Insured first becomes aware of a Potential Claim during the Policy Period, and gives the Company written notice of the particulars of such Potential Claim, including all facts related to the Wrongful Act, the identity of each person allegedly involved in or affected by such Wrongful Act, the dates of the alleged events, and the reasons for anticipating a Claim, as soon as practicable during the Policy Period, or if exercised, during the Extended Reporting Period or Run -Off Extended Reporting Period, any Claim subsequently made against any Insured arising out of such Wrongful Act will be deemed to have been made during the Policy Period. All notices under this subsection must be sent to the Company by email, facsimile, or mail as set forth in ITEM 4 of the Declarations and will be effective upon receipt. H. RELATED CLAIMS All Claims or Potential Claims for Related Wrongful Acts will be considered as a single Claim or Potential Claim, whichever is applicable, for purposes of this Policy. All Claims or Potential Claims for Related Wrongful Acts will be deemed to have been made at the time the first of such Claims or Potential Claims for Related Wrongful Acts was made whether prior to or during the Policy Period, or if exercised, during the Extended Reporting Period or Run -Off Extended Reporting Period. I. SETTLEMENT The Company may, with the written consent of the Insured, make such settlement or compromise of any Claim as the Company deems expedient. In the event that the Company recommends an offer of DBP -16001 Ed. 11-12 Page 9 of 15 02012 The Travelers Indemnity Company. All rights reserved. settlement of any Claim which is acceptable to the claimant(s) (a "Settlement Offer"), and if the Insured refuses to consent to such Settlement Offer, the Insured will be solely responsible for 30% of all Defense Expenses incurred or paid by the Insured after the date the Insured refused to consent to the Settlement Offer, and the Insured will also be responsible for 30% of all Loss, other than Defense Expenses, in excess of the Settlement Offer, provided that the Company's liability under this Policy for such Claim will not exceed the remaining applicable limit of liability. J. MERGER OF PLANS If, during the Policy Period, a Benefit Plan is merged with another Benefit Plan, this Policy will continue to provide coverage for both plans, subject to all other terms and conditions of this Policy and only for so long as this Policy remains in effect as to the Insureds. If, during the Policy Period, a Benefit Plan ("Covered Plan") is merged with another benefit plan for which coverage is not provided under this Policy ("Uncovered Plan"), this Policy will continue to provide coverage for only the Covered Plan, subject to all other terms and conditions of this Policy and only for so long as this Policy remains in effect as to the Insureds, but only for Claims for Wrongful Acts which occurred prior to the date of such merger. K. CHANGE OF CONTROL If, during the Policy Period, a Change of Control occurs, coverage will continue in full force and effect with respect to Claims for Wrongful Acts committed before such event, but coverage will cease with respect to Claims for Wrongful Acts committed after such event. No coverage will be available hereunder for Loss, including Defense Expenses, for any Claim based upon, alleging, arising out of, or in any way relating to, directly or indirectly any Wrongful Act committed or allegedly committed after such event. After any such event, the Policy may not be canceled by or on behalf of any Insured and the entire premium for the Policy will be deemed fully earned. Upon the occurrence of any Change of Control, the Insurance Representative will have the right to give the Company notice that the Insured desires to purchase a Run -Off Extended Reporting Period for this Policy for the period set forth in ITEM 9 of the Declarations following the effective date of such Change of Control, regarding Claims made during such Run -Off Extended Reporting Period against persons or entities who at the effective date of the Change of Control are Insureds, but only for Wrongful Acts occurring wholly prior to such Change of Control and which otherwise would be covered by this Policy, subject to the following provisions: such Run -Off Extended Reporting Period will not provide new, additional or renewed limits of liability; 2. the Company's total liability for all Claims made during such Run -Off Extended Reporting Period will be only the remaining portion of the applicable limit of liability set forth in the Declarations as of the effective date of the Change of Control; and 3. for purposes of coverage under section 1. INSURING AGREEMENTS, B., the Run -Off Extended Reporting Period will apply only to Settlement Fees and Defense Expenses incurred by the Insured in connection with any Settlement Program Notice as a result of the Insured's participation during the Run -Off Extended Reporting Period in a Settlement Program, but only if such participation commences during the Run -Off Extended Reporting Period and involves a Benefit Plan's actual or alleged inadvertent noncompliance with any statute, rule or regulation before the effective date of the Change of Control. The premium due for the Run -Off Extended Reporting Period will equal the percentage set forth in ITEM 9 of the Declarations of the annualized premium of this Policy, including the fully annualized amount of any additional premiums charged by the Company during the Policy Period prior to the Change of Control. The entire premium for the Run -Off Extended Reporting Period will be deemed fully earned at the commencement of such Run -Off Extended Reporting Period. The right to elect the Run -Off Extended Reporting Period will terminate unless written notice of such election, together with payment of the additional premium due, is received by the Company within thirty DBP -16001 Ed. 11-12 Page 10 of 15 ©2012 The Travelers Indemnity Company. All rights reserved. (30) days of the Change of Control. In the event the Run -Off Extended Reporting Period is purchased, the option to purchase the Extended Reporting Period in section V. CONDITIONS M. EXTENDED REPORTING PERIOD of this Policy will terminate. In the event the Run -Off Extended Reporting Period is not purchased, the Insured will have the right to purchase the Extended Reporting Period under the terms of section V. CONDITIONS M. EXTENDED REPORTING PERIOD of this Policy. L. TERMINATION OF PLAN If before or during the Policy Period any Benefit Plan is terminated, this Policy will provide coverage for such plan, subject to all other terms, conditions and limitations of this Policy for so long as this Policy remains in effect as to the Insureds. M. EXTENDED REPORTING PERIOD At any time prior to or within 60 days after the effective date of termination or cancellation of this Policy for any reason other than nonpayment of premium, the Insurance Representative may give the Company written notice that the Insured desires to purchase an Extended Reporting Period for the period set forth in ITEM 8 of the Declarations following the effective date of such termination or cancellation, regarding Claims made during such Extended Reporting Period against persons or entities who at or prior to the effective date of termination or cancellation are Insureds, but only for Wrongful Acts occurring wholly prior to the effective date of the termination or cancellation and which otherwise would be covered by this Policy, subject to the following provisions: 1. such Extended Reporting Period will not provide a new, additional or renewed limit(s) of liability; 2. the Company's maximum limit of liability for all Claims made during such Extended Reporting Period will be only the remaining portion of the applicable limit of liaOility set forth in the Declarations as of the effective date of the termination or cancellation; and 3. for purposes of coverage under section I. INSURING AGREEMENTS, B., the Extended Reporting Period will apply only to Settlement Fees and Defense Expenses incurred by the Insured in connection with any Settlement Program Notice as a result of the Insured's participation during the Extended Reporting Period in a Settlement Program, but only if such participation commences during the Extended Reporting Period and involves a Benefit Plan's actual or alleged inadvertent noncompliance with any statute, rule or regulation before the effective date of such termination or nonrenewal. The premium due for the Extended Reporting Period will equal the percentage set forth in ITEM 8 of the Declarations of the annualized premium of this Policy, including the fully annualized amount of any additional premiums charged by the Company during the Policy Year prior to such termination or cancellation. The entire premium for the Extended Reporting Period will be deemed to have been fully earned at the commencement of such Extended Reporting Period. The right to elect the Extended Reporting Period will terminate unless written notice of such election, together with payment of the additional premium due, is received by the Company within 60 days of the effective date of the termination or cancellation. N. SUBROGATION In the event of payment under this Policy, the Company is subrogated to all of the Insured's rights of recovery against any person or organization to the extent of such payment and the Insured agrees to execute and deliver instruments and papers and do whatever else is necessary to secure such rights. The Insured will do nothing to prejudice such rights. O. RECOURSE Unless such right is waived by an endorsement to this Policy, the Company will have the right of recourse pursuant to Section 410(b)(1) of the Employee Retirement Income Security Act of 1974, as amended, against any Insured that breaches a fiduciary obligation if this Policy is purchased using assets of the Benefit Plan. DBP -16001 Ed. 11-12 Page 11 of 15 ©2012 The Travelers Indemnity Company. All rights reserved. P. RECOVERIES All recoveries from third parties for payments made under this Policy will be applied, after first deducting the costs and expenses incurred in obtaining such recovery, in the following order of priority: 1. first, to the Company to reimburse the Company for any Retention amount it has paid on behalf of any Insured; 2. second, to the Insured to reimburse the Insured for the amount it has paid which would have been paid hereunder but for the fact that it is in excess of the applicable limits of liability hereunder; 3. third, to the Company to reimburse the Company for the amount paid hereunder; and 4. fourth, to the Insured in satisfaction of any applicable Retention; provided, recoveries do not include any recovery from insurance, suretyship, reinsurance, security or indemnity taken for the Company's benefit. Q. SPOUSAL AND DOMESTIC PARTNER LIABILITY COVERAGE This Policy will, subject to all of its terms, conditions, and limitations, be extended to apply to Loss resulting from a Claim made against a person who, at the time the Claim is made, is a lawful spouse or a person qualifying as a domestic partner under the provisions of any applicable federal, state or local law (a "Domestic Partner") of an Insured Person, but only if and so long as: the Claim against such spouse or Domestic Partner results from a Wrongful Act actually or allegedly committed by the Insured Person, to whom the spouse is married, or who is joined with the Domestic Partner; and 2. such Insured Person and his or her spouse or Domestic Partner are represented by the same counsel in connection with such Claim. No spouse or Domestic Partner of an Insured Person will, by reason of this subsection have any greater right to coverage under this Policy than the Insured Person to whom such spouse is married, or to whom such Domestic Partner is joined. The Company has no obligation to make any payment for Loss in connection with any Claim against a spouse or Domestic Partner of an Insured Person for any actual or alleged act, error, omission, misstatement, misleading statement, neglect or breach of duty by such spouse or Domestic Partner. R. ALLOCATION 1. If Duty -to -Defend coverage is indicated in ITEM 7 of the Declarations and there is a Claim under this Policy in which the Insureds who are afforded coverage for such Claim incur an amount consisting of both Loss that is covered by this Policy and also loss that is not covered by this Policy because such Claim includes both covered and uncovered matters, then such covered Loss and uncovered loss will be allocated as follows: a. one hundred percent (100°/x) of Defense Expenses incurred by and on behalf of the Insureds who are afforded coverage for such Claim will be allocated to covered Loss; and b• all loss other than Defense Expense will be allocated between covered Loss and uncovered loss based upon the relative legal and financial exposures of, and relative benefits obtained in connection with the defense and settlement of the Claim by the Insureds and others not insured under this Policy. In making such a determination, the Insureds and the Company agree to use their best efforts to determine a fair and proper allocation of all such amounts. In the event that an allocation cannot be agreed to, then DBP -16001 Ed. 11-12 Page 12 of 15 02012 The Travelers Indemnity Company. All rights reserved. the Company will be obligated to make an interim payment of the amount of Loss which the parties agree is not in dispute until a final amount is agreed upon or determined pursuant to the provisions of this Policy and applicable law. 2. If Reimbursement coverage is indicated in ITEM 7 of the Declarations and there is a Claim under this Policy in which the Insureds who are afforded coverage for such Claim incur an amount consisting of both Loss that is covered by this Policy and also loss that is not covered by this Policy because such Claim includes both covered and uncovered matters or covered and uncovered parties, the Insureds and the Company agree to use their best efforts to determine a fair and proper allocation of all such amounts. In making such a determination, the parties will take into account the relative legal and financial exposures of, and relative benefits obtained in connection with the defense and settlement of the Claim by the Insureds and others not insured under this Policy. In the event that an allocation cannot be agreed to, then the Company will be obligated to make an interim payment of the amount of Loss which the parties agree is not in dispute until a final amount is agreed upon or determined pursuant to the provisions of this Policy and applicable law. S. CANCELLATION The Company may cancel this Policy for failure to pay a premium when due, in which case twenty (20) days written notice will be given to the Insurance Representative, unless payment in full is received within twenty (20) days of the Insurance Representative's receipt of such notice of cancellation. The Company has the right to the premium amount for the portion of the Policy Period during which this Policy was in effect. Subject to the provisions set forth in section III. CONDITIONS, K. CHANGE OF CONTROL, the Insurance Representative on behalf of the Insured may cancel this Policy by mailing the Company written notice stating when thereafter, but not later than the Expiration Date set forth in ITEM 3 of the Declarations, such cancellation will be effective. In the event the Insurance Representative cancels, the earned premium will be computed on a pro -rata basis. Premium adjustment may be made either at the time cancellation is effective or as soon as practicable after cancellation becomes effective, but payment or tender of unearned premium is not a condition of cancellation. The Company will not be required to renew this Policy upon its expiration. If the Company elects not to renew, it will provide to the Insurance Representative written notice to that effect at least thirty (30) days before the Expiration Date set forth in ITEM 3 of the Declarations. T. OTHER INSURANCE This Policy will apply only as excess insurance over, and will not contribute with any other valid and collectible insurance available to the Insured, including any insurance under which there is a duty to defend, unless such insurance is written specifically excess of this Policy by reference in such other policy to the Policy Number of this Policy. This Policy will not be subject to the terms of any other insurance. U. ACTION AGAINST THE COMPANY No action will lie against the Company unless there has been full compliance with all of the terms of this Policy. No person or organization has any right under this Policy to join the Company as a party to any action against the Insured to determine the Insured's liability, nor may the Company be impleaded by an Insured or said Insured's legal representative. Bankruptcy or insolvency of any Insured or an Insured's estate does not relieve the Company of any of its obligations hereunder. V. CHANGES Only the Insurance Representative is authorized to make changes in the terms of this Policy and solely with the Company's prior written consent. This Policy's terms can be changed, amended or waived only by endorsement issued by the Company and made a part of this Policy. Notice to any representative of the Insured o r knowledge possessed by any agent or by any other person will not effect a waiver or DBP -16001 Ed. 11-12 Page 13 of 15 02012 The Travelers Indemnity Company. All rights reserved. change to any part of this Policy, or estop the Company from asserting any right under the terms, conditions and limitations of this Policy, nor may the terms, conditions and limitations hereunder be waived or changed, except by a written endorsement to this Policy issued by the Company. W. ASSIGNMENT This Policy may not be assigned or transferred, and any such attempted assignment or transfer is void and without effect unless the Company has provided its prior written consent to such assignment or transfer. X. REPRESENTATIONS By acceptance of the terms set forth in this Policy, each Insured represents and agrees that the statements contained in the Application, which is deemed to be attached hereto, incorporated herein, and forming a part hereof, are said Insured's agreements and representations, that such representations are material to the Company's acceptance of this risk, that this Policy is issued in reliance upon the truth of such representations, and embodies all agreements existing between said Insured and the Company or any of its agents. If any statement or representation in the Application is untrue, this Policy is void and of no effect whatsoever, but only with respect to: 1. any Insured Person who knew, as of the Inception Date set forth in ITEM 3 of the Declarations, that the statement or representation was untrue; 2. any Benefit Plan, with respect to its indemnification coverage, to the extent it indemnifies any Insured Person referenced in 1. above; and 3. any Benefit Plan, if the person who signed the Application knew that the statement or representation was untrue. Whether an Insured Person had such knowledge will be determined without regard to whether the Insured Person actually knew the Application, or any other application completed for this Policy, contained any such untrue statement or representation. Y. LIBERALIZATION If, during the Policy Period, the Company is required, by law or by insurance supervisory authorities of the state in which this Policy was issued, to make any changes in the form of this Policy, by which the insurance afforded by this Policy could be extended or broadened without increased premium charge by endorsement or substitution of form, then such extended or broadened insurance will inure to the benefit of the Insured as of the date the revision or change is approved for general use by the applicable department of insurance. Z. AUTHORIZATION By acceptance of the terms herein, the Insurance Representative agrees to act on behalf of all Insureds with respect to the payment of premiums, the receiving of any return premiums that may become due hereunder, and the receiving of notices of cancellation, nonrenewal, or change of coverage, and the Insureds each agree that they have, individually and collectively, delegated such authority exclusively to the Insurance Representative; provided, that nothing herein will relieve the Insureds from giving any notice to the Company that is required under this Policy. AA. ENTIRE AGREEMENT This Policy, including the Declarations, the Application, and any endorsements attached hereto, constitutes the entire agreement between the Company and the Insured. DBP -16001 Ed. 11-12 Page 14 of 15 02012 The Travelers Indemnity Company. All rights reserved. BB. HEADINGS The titles of the various paragraphs of this Policy and its endorsements are inserted solely for convenience or reference and are not to be deemed in any way to limit or affect the provision to which they relate. DBP -16001 Ed. 11-12 Page 15 of 15 02012 The Travelers Indemnity Company. All rights reserved. THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY. FLORIDA CHANGES ENDORSEMENT This endorsement changes the following: Designated Benefit Plan Fiduciary Liability Coverage It is agreed that: 1. The following replaces section 11. DEFINITIONS, O. Loss: O. Loss means Defense Expenses and money which an Insured is legally obligated to pay as a result of a Claim, including settlements; judgments; compensatory damages; punitive or exemplary damages or the multiple portion of any multiplied damage award, for which an Insured is vicariously liable; prejudgment and post judgment interest; and legal fees and expenses awarded pursuant to a court order or judgment; and solely with respect to section I. INSURING AGREEMENTS B. of this Policy, Settlement Fees, but only to the extent that this Policy is construed by a court of competent jurisdiction, or an arbitration panel, under the laws of any jurisdiction other than Florida and such Settlement Fees are insurable under the laws of that jurisdiction. Loss does not include: 1, civil or criminal fines (except Settlement Fees pursuant to Insuring Agreement B.; Section 502(c) Penalties; civil penalties under Sections 502(i) and 502(1) of the Employee Retirement Income Security Act of 1974, as amended; or civil penalties under the privacy provisions of HIPAA, but only to the extent that this Policy is construed by a court of competent jurisdiction, or an arbitration panel, under the laws of any jurisdiction other than Florida and such Settlement Fees or civil penalties are insurable under the laws of that jurisdiction; provided that the funds or assets of the pension scheme will not be used to fund, pay or reimburse the premium for this coverage or any portion thereof); sanctions; liquidated damages; payroll or other taxes; or damages or types of relief deemed uninsurable under applicable law; 2. payment of medical benefits, pension benefits, severance, or any other benefit provided under a Benefit Plan which are or may become due, except to the extent that such sums are payable as a personal obligation of an Insured Person, because of such Insured Person's Wrongful Act; provided that this exclusion will not apply to: a. the Company's obligation to defend any Claim, if applicable, or to pay, advance or reimburse Defense Expenses, regarding a Claim seeking such benefits; or b. that portion of any damage, settlement or judgment covered as Loss under this Policy that represents a loss to any Benefit Plan, or loss to any account of a participant in any Benefit Plan, by reason of a change in value of any investments held by such Benefit Plan or such account, notwithstanding that such portion of any such damage, settlement or judgment has been characterized by plaintiffs, or held by a court of law, to be "benefits"; or 3. any amount allocated to non -covered loss pursuant to section V. CONDITIONS, R. ALLOCATION, of this Policy. To the extent that this Policy is construed by a court of competent jurisdiction, or an arbitration panel, under the laws of any jurisdiction other than Florida, Loss includes coverage for direct or vicarious Issuing Company: Travelers Casualty and Surety Company of America Policy Number: 106195885 DBP -17009 Ed. 11-12 Page 1 of 2 0 2012 The Travelers Indemnity Company. All rights reserved. punitive or exemplary damages, or the multiple portion of any multiplied damage award, incurred by the Insureds, if such damages are insurable under the laws of that jurisdiction. 2. The following is deleted from the third paragraph of section V. CONDITIONS, K. CHANGE OF CONTROL: The entire premium for the Run -Off Extended Reporting Period will be deemed fully earned at the commencement of such Run -Off Extended Reporting Period. 3. The following is deleted from the second paragraph of section V. CONDITIONS, M. EXTENDED REPORTING PERIOD: The entire premium for the Extended Reporting Period will be deemed to have been fully earned at the commencement of such Extended Reporting Period. 4. The following replaces section V. CONDITIONS, S. CANCELLATION: S. CANCELLATION The Company may cancel this Policy for failure to pay a premium when due, in which case written notice, including the reason for cancellation, will be given to the Insurance Representative at least 20 days before the effective date of such cancellation, unless payment in full is received within 20 days of the Insurance Representative's receipt of such notice of cancellation. The Company shall have the right to the premium amount for the portion of the Policy Period during which this Policy was in effect. Subject to the provisions set forth in section V. CONDITIONS, K. CHANGE OF CONTROL, the Insurance Representative on behalf of the Insureds may cancel this Policy by mailing the Company written notice stating when thereafter, but not later than the Expiration Date set forth in ITEM 3 of the Declarations, such cancellation will be effective. The Company will refund any unearned premium computed on a pro -rata basis if this Policy is canceled by the Insurance Representative on behalf of the Insureds. Premium adjustment may be made either at the time cancellation is effective or as soon as practicable after cancellation becomes effective, but payment or tender of unearned premium is not a condition of cancellation. The Company will mail any unearned premium within 15 working days after the effective date of termination. The Company will not be required to renew this Policy upon its expiration. If the Company elects not to renew, it will provide to the Insurance Representative written notice to that effect, including the reason for nonrenewal, at least 45 days before the Expiration Date set forth in ITEM 3 of the Declarations. Nothing herein contained shall be held to vary, alter, waive or extend any of the terms, conditions, exclusions or limitations of the above-mentioned policy, except as expressly stated herein. This endorsement is part of such policy and incorporated therein. DBP -17009 Ed. 11-12 Page 2 of 2 © 2012 The Travelers Indemnity Company. All rights reserved. THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY. TABLE OF CONTENTS — FLORIDA This endorsement changes the following: Designated Benefit Plan Fiduciary Liability It is agreed that: The following is added to the Policy: 1. INSURING AGREEMENTS 1 11. DEFINITIONS 1 111. EXCLUSIONS A. EXCLUSIONS APPLICABLE TO ALL LOSS 4 B. EXCLUSIONS APPLICABLE TO ALL LOSS, OTHER THAN DEFENSE EXPENSES 5 IV. SEVERABILITY OF EXCLUSIONS V. CONDITIONS 6 Nothing herein contained shall be held to vary, alter, waive or extend any of the terms, conditions, exclusions or limitations of the above-mentioned policy, except as expressly stated herein. This endorsement is part of such policy and incorporated therein. Issuing Company: Travelers Casualty and Surety Company of America Policy Number: 106195885 DBP -17055 Ed. 11-12 Page 1 of 1 0 2012 The Travelers Indemnity Company. All rights reserved. THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY. DESIGNATION OF INSURANCE REPRESENTATIVE ENDORSEMENT This endorsement changes the following: Designated Benefit Plan Fiduciary Liability Coverage It is agreed that: For all relevant purposes under the Policy, the Insurance Representative is Kenneth W. Killgore. Nothing herein contained shall be held to vary, alter, waive or extend any of the terms, conditions, exclusions or limitations of the above-mentioned policy, except as expressly stated herein. This endorsement is part of such policy and incorporated therein. Issuing Company: Travelers Casualty and Surety Company of America Policy Number: 106195885 DBP -19001 Ed. 11-12 Page 1 of 1 0 2011 The Travelers Indemnity Company. All rights reserved. THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY. WAIVER OF RECOURSE ENDORSEMENT This endorsement changes the following: Designated Benefit Plan Fiduciary Liability Coverage It is agreed that: In consideration of a separate premium paid to the Company from funds other than from assets of a Benefit Plan, the Company waives the right of recourse provided by section V. CONDITIONS, O. RECOURSE, of the Policy. Nothing herein contained shall be held to vary, alter, waive or extend any of the terms, conditions, exclusions or limitations of the above-mentioned policy, except as expressly stated herein. This endorsement is part of such policy and incorporated therein. Issuing Company: Travelers Casualty and Surety Company of America Policy Number: 106195885 DBP -19002 Ed. 11-12 Page 1 of 1 0 2012 The Travelers Indemnity Company. All rights reserved. THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY. GOVERNMENTAL PLAN ENDORSEMENT This endorsement changes the following: Designated Benefit Plan Fiduciary Liability Coverage It is agreed that: 1. The following replaces section Il. DEFINITIONS, I. Claim: I. Claim means: 1. a written demand for monetary damages or non -monetary relief; 2. a civil proceeding commenced by service of a complaint or similar pleading; 3. a criminal proceeding commenced by filing of charges; 4. a formal administrative or regulatory proceeding commenced by filing of a notice of charges, formal investigative order, service of summons or similar document; 5. an arbitration, mediation or similar alternative dispute resolution proceeding if the Insured is obligated to participate in such proceeding or if the Insured agrees to participate in such proceeding, with the Company's written consent, such consent not to be unreasonably withheld; or 6. a written request to toll or waive a statute of limitations relating to a potential civil or administrative proceeding; against an Insured for a Wrongful Act. A Claim will be deemed to have been made when such Claim is first commenced as set forth in this definition or, in the case of a written demand, when such written demand is first received by an Insured. 2. The following is added to section /it. EXCLUSIONS, A. EXCLUSIONS APPLICABLE TO ALL LOSS: The Company will not be liable for Loss for any Claim based upon or arising out of: a. any investment in debt obligations of the state set forth in ITEM 1 of the Declarations, or in debt obligations of any political or governmental agency in such state; or b. the inadequate funding of the Benefit Plan. 3. Section V. CONDITIONS, O. RECOURSE, is deleted. Nothing herein contained shall be held to vary, alter, waive or extend any of the terms, conditions, exclusions or limitations of the above-mentioned policy, except as expressly stated herein. This endorsement is part of such policy and incorporated therein. Issuing Company: Travelers Casualty and Surety Company of America Policy Number: 106195885 DBP -19003 Ed. 11-12 Page 1 of 1 0 2012 The Travelers Indemnity Company. All rights reserved. THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY. CAP ON LOSSES FROM CERTIFIED ACTS OF TERRORISM ENDORSEMENT This endorsement modifies the following: Designated Benefit Plan Fiduciary Liability Coverage It is agreed that: 1. The following is added to section 11. DEFINITIONS: Certited Act of Terrorism means an act that is certified by the Secretary of the Treasury, in concurrence with the Secretary of State and the Attorney General of the United States, to be an act of terrorism pursuant to the federal Terrorism Risk Insurance Act. The criteria contained in the Terrorism Risk Insurance Act for a Certified Act of Terrorism include the following: 1. the act resulted in insured losses in excess of $5 million in the aggregate, attributable to all types of insurance subject to the Terrorism Risk Insurance Act; and 2. the act is a violent act or an act that is dangerous to human life, property or infrastructure and is committed by an individual or individuals as part of an effort to coerce the civilian population of the United States or to influence the policy or affect the conduct of the United States Government by coercion. 2. The following is added to section V. CONDITIONS: CAP ON LOSSES FROM CERTIFIED ACTS OF TERRORISM If aggregate insured losses attributable to Certified Acts of Terrorism exceed $100 billion in a program year (January 1 through December 31) and the Company has met the deductible under the Terrorism Risk Insurance Act: 1. the Company will not be responsible for the payment of any portion of the amount of such losses that exceeds $100 billion; and 2. insured losses up to $100 billion will be subject to pro rata allocation in accordance with procedures established by the Secretary of the Treasury. The terms and limitations of any terrorism exclusion, or the inapplicability or omission of a terrorism exclusion, do not serve to create coverage for any loss which would otherwise be excluded. Nothing herein contained shall be held to vary, alter, waive or extend any of the terms, conditions, exclusions or limitations of the above-mentioned policy, except as expressly stated herein. This endorsement is part of such policy and incorporated therein. Issuing Company: Travelers Casualty and Surety Company of America Policy Number: 106195885 DBP -19071 Ed. 11-12 Page 1 of 1 02012 The Travelers Indemnity Company. All Rights Reserved