Exhibit 10.6

 

RLI CORP. EXECUTIVES

 

DEFERRED COMPENSATION PLAN

 

(Restated as of January 1, 2009)

 

 

12/12/2008

 

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RLI CORP. EXECUTIVES

DEFERRED COMPENSATION PLAN

 

TABLE OF CONTENTS

 

 

 

 

 

Page

 

 

 

 

 

ARTICLE 1

INTRODUCTION

1

 

1.1.

Establishment

1

 

1.2.

Purpose

1

 

1.3.

Definitions

1

 

 

1.3.1.

Account

1

 

 

1.3.2.

Affiliate

1

 

 

1.3.3.

Base Salary

1

 

 

1.3.4.

Beneficiary

2

 

 

1.3.5.

Board

2

 

 

1.3.6.

Chief Executive Officer

2

 

 

1.3.7.

Code

2

 

 

1.3.8.

Committee

2

 

 

1.3.9.

Deferral Eligible Amounts

2

 

 

1.3.10.

Employee

2

 

 

1.3.11.

ERISA

2

 

 

1.3.12.

Incentive Compensation

2

 

 

1.3.13.

Participant

2

 

 

1.3.14.

Performance-Based Compensation

2

 

 

1.3.15.

Plan

3

 

 

1.3.16.

Prior Agreement

3

 

 

1.3.17.

RLI

3

 

 

1.3.18.

RLI Stock

3

 

 

1.3.19.

Specified Employee

3

 

 

1.3.20.

Successor Corporation

3

 

 

1.3.21.

Termination of Employment

3

 

 

1.3.22.

Vested

4

 

 

1.3.23.

Year

4

 

1.4.

“Top-Hat” Plan

4

 

 

 

ARTICLE 2

PARTICIPATION

4

 

2.1.

Eligibility and Selection

4

 

2.2.

Notification

4

 

2.3.

Enrollment

4

 

2.4.

Elective Deferrals

5

 

 

2.4.1.

Elections

5

 

 

2.4.2.

Elections Relate to Services Performed After the Election and Are Irrevocable

5

 

 

2.4.3.

Limits

6

 

 

 

ARTICLE 3

ACCOUNTS

6

 

3.1.

Accounts

6

 

3.2.

Credits to Accounts

6

 

 

3.2.1.

Elective Deferrals

6

 

 

3.2.2.

Dividends and Other Adjustments

6

 

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3.3.

Charges to Accounts

6

 

 

 

ARTICLE 4

BENEFITS

6

 

4.1.

Vesting

6

 

4.2.

Payment of Plan Benefits on Termination of Employment - General Rule

7

 

4.3.

Changing Payment Elections

7

 

 

4.3.1.

General Rule

7

 

 

4.3.2.

Election upon Initial Plan Enrollment

7

 

 

4.3.3.

Subsequent Election

7

 

4.4.

Special Rules

7

 

 

4.4.1.

Specified Employee Exception

7

 

 

4.4.2.

Cash-Out of Small Amounts

8

 

4.5.

Medium of Payments

8

 

4.6.

Delay in Distributions

8

 

4.7

Acceleration of Distributions

8

 

4.8

When a Payment is Deemed to be Made

10

 

 

 

ARTICLE 5

DEATH BENEFITS

10

 

5.1.

Death Benefits

10

 

 

5.1.1.

Benefits When Participant Dies Before Commencement of Payments

10

 

 

5.1.2.

Benefits When Participant Dies After Commencement of Payments

10

 

 

5.1.3.

Medium of Payments

10

 

 

5.1.4.

Cash-Out of Small Amounts

10

 

5.2.

Designation of Beneficiary

10

 

 

5.2.1.

Persons Eligible to Designate

10

 

 

5.2.2.

Form and Method of Designation

11

 

 

5.2.3.

No Effective Designation

11

 

 

5.2.4.

Successor Beneficiary

11

 

 

 

ARTICLE 6

CLAIMS AND REVIEW PROCEDURES

12

 

6.1.

Application for Benefits

12

 

6.2.

Claims and Review Procedures

12

 

 

6.2.1.

Initial Claim

12

 

 

6.2.2.

Notice of Initial Adverse Determination

12

 

 

6.2.3.

Request for Review

12

 

 

6.2.4.

Claim on Review

13

 

 

6.2.5.

Notice of Adverse Determination for Claim on Review

13

 

6.3.

Claims Rules

13

 

6.4.

Deadline to File Claim

14

 

6.5.

Exhaustion of Administrative Remedies

14

 

6.6.

Arbitration

14

 

6.7.

Deadline to File an Arbitration Action

15

 

6.8.

Knowledge of Fact by Participant Imputed to Beneficiary

15

 

6.9.

Deferral of Payment

15

 

 

 

ARTICLE 7

ADMINISTRATION

15

 

7.1.

Administrator

15

 

 

7.1.1.

Delegation

15

 

 

7.1.2.

Automatic Removal

15

 

 

7.1.3.

Conflict of Interest

16

 

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7.1.4.

Binding Effect

16

 

 

7.1.5.

Third-Party Service Providers

16

 

7.2.

Benefits Not Transferable

16

 

7.3.

Benefits Not Secured

16

 

7.4.

RLI’s Obligations

16

 

7.5.

Withholding Taxes

16

 

7.6.

Service of Process

16

 

7.7.

Limitation on Liability

16

 

 

 

ARTICLE 8

AMENDMENT AND TERMINATION

17

 

8.1.

Amendment

17

 

8.2.

Termination

17

 

 

 

ARTICLE 9

MISCELLANEOUS

17

 

9.1.

Effect on Other Plans

17

 

9.2.

Effect on Employment

17

 

9.3.

Disqualification

17

 

9.4.

Rules of Document Construction

17

 

9.5.

References to Laws

18

 

9.6.

Choice of Law

18

 

9.7.

Binding Effect

18

 

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RLI CORP. EXECUTIVES

DEFERRED COMPENSATION PLAN

 

ARTICLE 1

 

INTRODUCTION

 

1.1.                            Establishment.  RLI  established the RLI Corp.
Executives Deferred Compensation Plan effective January 1, 2005.  Prior to that
date, RLI provided similar deferred compensation opportunities to a select group
of executives under certain Prior Agreements.  All obligations under the Prior
Agreements (including any predecessor arrangements) will be satisfied under the
Prior Agreements, rather than under this Plan.  RLI hereby restates the Plan,
effective January 1, 2009, to comply with the requirements of the final
regulations issued under Section 409A of the Code (“Section 409A”) on April 10,
2007.

 

This restatement applies, to amounts deferred under the Plan on or after
January 1, 2009 (the “Restatement Date”), and to the payment of all amounts
deferred under the Plan (whether such amounts were deferred before, on, or after
the Restatement Date) that have not yet been distributed as of the Restatement
Date.  Except as set forth in Article 6, no amount deferred under the Plan is
intended to be “grandfathered” under Section 409A.

 

The obligation of RLI to make payments under the Plan constitutes an unsecured
(but legally enforceable) promise of RLI to make such payments and no person,
including any Participant or Beneficiary, shall have any lien, prior claim or
other security interest in any property of RLI as a result of the Plan.

 

1.2.                            PURPOSE.  THE PURPOSE OF THE PLAN IS TO ATTRACT
AND RETAIN QUALIFIED EXECUTIVES AND TO PROVIDE THEM WITH AN OPPORTUNITY TO SAVE
ON A PRE-TAX BASIS AND ACCUMULATE TAX-DEFERRED INCOME TO ACHIEVE THEIR FINANCIAL
GOALS.

 

1.3.                            DEFINITIONS.  WHEN THE FOLLOWING TERMS ARE USED
HEREIN WITH INITIAL CAPITAL LETTERS, THEY SHALL HAVE THE FOLLOWING MEANINGS:

 

1.3.1.                  Account — the separate recordkeeping account (unfunded
and unsecured) maintained for each Participant in connection with the
Participant’s participation in the Plan.

 

1.3.2.                  Affiliate — a business entity which is under a “common
control” with RLI or which is a member of an “affiliated service group” that
includes RLI, as those terms are defined in Code § 414(b), (c) and (m).

 

1.3.3                     Base Salary — the Participant’s total salary and wages
from all Affiliates, including any amount that would be included in the
definition of Base Salary but for the individual’s election to defer some of
such Participant’s salary pursuant to the Plan or any other deferred
compensation plan established by an Affiliate; but excluding disability pay and
any other remuneration paid by Affiliates, such as overtime, incentive
compensation, stock options, distributions of compensation previously deferred,
restricted stock, allowances for expenses (including moving, travel expenses,
and automobile allowances), and fringe benefits whether payable in cash or in a
form other than cash.  In the case of an individual in a plan sponsored by an
Affiliate that is described in Section 401(k), 125 or 132(f) of the Code, the
term Base Salary shall include any amount that would be included in the
definition of Base

 

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Salary but for the individual’s election to reduce such individual’s salary and
have the amount of the reduction contributed to or used to purchase benefits
under such plan.

 

1.3.4.                  Beneficiary — the person or persons designated as such
under Sec. 5.2.

 

1.3.5.                  Board — the Board of Directors of RLI.

 

1.3.6.                  Chief Executive Officer — the Chief Executive Officer of
RLI.

 

1.3.7.                  Code — the Internal Revenue Code of 1986, as the same
may be amended from time to time.

 

1.3.8.                  Committee — the Executive Resources Committee of the
Board.

 

1.3.9.                  Deferral Eligible Amounts —with respect to a Participant
for any period, means the sum of such Participant’s Base Salary and Incentive
Compensation for such period.

 

1.3.10.           Employee — a common-law employee of RLI or an Affiliate (while
it is an Affiliate).

 

1.3.11.           ERISA — the Employee Retirement Income Security Act of 1974,
as the same may be amended from time to time.

 

1.3.12.           Incentive Compensation — the total remuneration of the
Participant of the Participant from all Affiliates under the various incentive
compensation programs maintained by Affiliates, including, but not limited to,
amounts received under the Market Value Potential (“MVP”) Executive Incentive
Program and the Underwriting Profit Program (“UPP”), but excluding any other
type of remuneration paid by Affiliates, such as Base Salary, overtime, stock
options, distributions of compensation previously deferred, restricted stock,
allowances for expenses, and fringe benefits.  The Committee, from time to time,
shall designate those items of a Participant’s Compensation deemed to be
Incentive Compensation.

 

1.3.13.           Participant — an eligible Employee who enrolls as a
Participant in the Plan under Sec. 2.3.  An Employee who becomes a Participant
shall remain a Participant in the Plan until the earlier of the following:

 

(a)                                  The complete payment of the Participant’s
Account balance after the Participant’s Termination of Employment; or

 

(b)                                 The Participant’s death.

 

1.3.14.           Performance-Based Compensation —the Incentive Compensation of
the Participant for a period where the amount of, or entitlement to, the
Incentive Compensation is contingent on the satisfaction of pre-established
organizational or individual performance criteria relating to a performance
period of at least 12 consecutive months.  Organizational or individual
performance criteria are considered pre-established if established in writing by
no later than 90 days of the commencement period of service to which the
criteria relate, provided that the outcome is substantially uncertain at the
time the criteria are established.  Performance-Based Compensation may include
payment based on performance criteria that are not approved by the Board or the
Compensation Committee of the Board or by the stockholders of the Company. 
Performance-Based Compensation does not include any amount or portion

 

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of any amount that will be paid either regardless of performance, or based upon
a level of performance that is substantially certain to be met at the time the
criteria are established.

 

1.3.15.           Plan — the unfunded deferred compensation plan that is set
forth in this document, as the same may be amended from time to time.  The name
of the Plan is the “RLI Corp. Executives Deferred Compensation Plan.”

 

1.3.16.           Prior Agreement — an individual agreement entered into by an
Employee and RLI to provide deferred compensation opportunities to the Employee.

 

1.3.17.           RLI — RLI Corp. and any Successor Corporation.

 

1.3.18.           RLI Stock — the common stock of RLI.

 

1.3.19.           Specified Employee — means an employee of an Affiliate who is
subject to the six-month delay rule described in Section 409A(2)(B)(i) of the
Code.  RLI shall establish a written policy for identifying Specified Employees
in a manner consistent with Section 409A, which policy may be amended by RLI
from time to time as permitted by Section 409A.

 

1.3.20.           Successor Corporation — any entity that succeeds to the
business of RLI through merger, consolidation, acquisition of all or
substantially all of its assets, or any other means and which elects before or
within a reasonable time after such succession, by appropriate action evidenced
in writing, to continue the Plan.

 

1.3.21.           Termination of Employment —with respect to a Participant,
means the Participant’s separation from service with all Affiliates, within the
meaning of Section 409A(a)(2)(A)(i) of the Code and the regulations under such
section.  Solely for this purpose, a Participant who is an eligible Employee
will be considered to have a Termination of Employment when the Participant
dies, retires, or otherwise has a termination of employment with all
Affiliates.  The employment relationship is treated as continuing intact while
the Participant is on military leave, sick leave, or other bona fide leave of
absence if the period of such leave does not exceed six months, or if longer, so
long as the individual retains a right to reemployment with an Affiliate under
an applicable statute or by contract.  For purposes hereof, a leave of absence
constitutes a bona fide leave of absence only if there is a reasonable
expectation that the Participant will return to perform services for an
Affiliate.  If the period of leave exceeds six months and the individual does
not retain a right to reemployment under an applicable statute or by contract,
the employment relationship is deemed to terminate on the first date immediately
following such six-month period.  Notwithstanding the foregoing, where a leave
of absence is due to any medically determinable physical or mental impairment
that can be expected to last for a continuous period of not less than six
months, where such impairment causes the employee to be unable to perform the
duties of such employee’s position of employment or any substantially similar
position of employment, RLI may substitute a 29-month period of absence for such
six-month period.

 

Whether a termination of employment has occurred is determined based on whether
the facts and circumstances indicate that the Affiliate and the Participant
reasonably anticipated that no further services will be performed after a
certain date or that the level of bona fide services the Participant will
perform after such date will permanently decrease to no more than 49 percent of
the average level of bona fide services performed over the immediately preceding
36-month period (or the full period of services if the Participant has been
providing services for less than 36 months).

 

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Notwithstanding anything in Section 1.3.2 to the contrary, in determining
whether a Participant has had a Termination of Employment with an Affiliate, an
entity’s status as an “Affiliate” shall be determined substituting “50 percent”
for “80 percent” each place it appears in Section 1563(a)(1),(2), and (3) and in
Treasury Regulation Section 1.414(c)-2.

 

RLI shall have discretion to determine whether a Participant has experienced a
Termination of Employment in connection with an asset sale transaction entered
into by RLI or an Affiliate, provided that such determination conforms to the
requirements of Section 409A and the regulations and other guidance issued under
such section, in which case RLI’s determination shall be binding on the
Participant.

 

1.3.22.           Vested — nonforfeitable.

 

1.3.23.           Year — the calendar year.

 

1.4.                            “TOP-HAT” PLAN.  THE PLAN IS INTENDED TO BE A
“TOP-HAT” PLAN — THAT IS, AN UNFUNDED PLAN MAINTAINED PRIMARILY FOR THE PURPOSE
OF PROVIDING DEFERRED COMPENSATION FOR A SELECT GROUP OF MANAGEMENT OR HIGHLY
COMPENSATED INDIVIDUALS WITHIN THE MEANING OF ERISA §§ 201(2), 301(A)(3) AND
401(A)(1), WHICH IS EXEMPT FROM PARTS 2, 3 AND 4 OF TITLE I OF ERISA.  THE PLAN
ALSO IS A NONQUALIFIED DEFERRED COMPENSATION PLAN SUBJECT TO CODE § 409A.  TO
THE EXTENT ANY PROVISION OF THE PLAN DOES NOT SATISFY THE REQUIREMENTS CONTAINED
IN CODE § 409A OR IN ANY REGULATIONS OR OTHER GUIDANCE ISSUED BY THE TREASURY
DEPARTMENT UNDER CODE § 409A, SUCH PROVISION WILL BE APPLIED IN A MANNER
CONSISTENT WITH SUCH REQUIREMENTS, REGULATIONS OR GUIDANCE, NOTWITHSTANDING ANY
CONTRARY PROVISION OF THE PLAN OR ANY INCONSISTENT ELECTION MADE BY A
PARTICIPANT.

 

ARTICLE 2

 

PARTICIPATION

 

2.1.                            Eligibility and Selection.  The following
Employees shall be eligible to enroll as Participants in the Plan:

 

(a)                                  Employees with the titles:  Chairman of the
Board, Chief Executive Officer, President and Senior Vice President; and

 

(b)                                 Such other Employees as the Committee, in
its sole discretion, shall determine from time to time, provided that each such
Employee must;

 

(1)                                  Have the title of Vice President or above,
and

 

(2)                                  Be expected to have compensation in excess
of the Code § 401(a)(17) limit in the Participant’s initial Year of eligibility.

 

2.2.                            Notification.  RLI shall provide each eligible
Employee with (i) written notification of the Employee’s eligibility to
participate in the Plan, and (ii) either copy of the Plan or written
notification that such a copy is available upon request.

 

2.3.                            Enrollment.  An eligible Employee will be
allowed to enroll in the Plan during the thirty (30) day period coinciding with
and following the date the Employee is notified of the Employee’s eligibility to
participate in accordance with Sec. 2.2.  Such an enrollment will be effective
as of the date it is made.

 

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Thereafter, an eligible Employee may elect to enroll for a Year during the
enrollment period established by RLI for such Year, which enrollment period will
be a period of not less than thirty (30) days that ends not later than the last
day of the prior Year.  Enrollment must be made in such manner and in accordance
with such rules as may be prescribed for this purpose by RLI (including by means
of a voice response or other electronic system under circumstances authorized by
RLI).

 

2.4.                            Elective Deferrals.

 

2.4.1.                  Elections.  A Participant may elect to reduce Deferral
Eligible Amounts by any dollar amount or whole percent, but not more than
one-hundred percent (100%).  A separate reduction amount or percentage may apply
to base compensation and to bonuses.  An election must be made in such manner
and in accordance with such rules as may be prescribed for this purpose by RLI
(including by means of a voice response or other electronic system under
circumstances authorized by RLI).  An election must be made as part of the
enrollment described in Sec. 2.3.

 

2.4.2.                  Elections Relate to Services Performed After the
Election and Are Irrevocable.  An election will apply to all Deferral Eligible
Amounts attributable to services performed in a given Year, regardless of when
such Deferral Eligible Amounts would otherwise be payable to the Participant
(for example, an election to defer a bonus attributable to services performed in
a given Year but payable in the next Year, must be made as part of the
enrollment election made prior to the Year in which the services are
performed).  However, an election will only be effective to defer Deferral
Eligible Amounts earned after the election is made, and not before.  For
example, an election made in connection with a mid-year enrollment under Sec.
2.3 will only be effective for Deferral Eligible Amounts attributable to
services performed on and after the effective date of the enrollment as provided
in Sec. 2.3.  An election will apply solely with respect to the given Year —
that is, an election will not automatically be carried over and applied to the
next Year.

 

Notwithstanding the foregoing, elections for Incentive Compensation that is
Performance-Based Compensation must be completed and submitted to the Company
not later than six months before the end of the performance period for the
Incentive Compensation; provided, however, that in order for such an election to
be valid, the a Participant must perform services continuously from the
beginning of the performance period (or the date the performance criteria are
established, if later) through the date the election is entered into, and
provided further, that in no event may an election be effective to defer
Incentive Compensation after the Incentive Compensation has become reasonably
ascertainable.  For purposes hereof, if Incentive Compensation is a specific or
calculable amount, the Incentive Compensation is readily ascertainable if and
when the amount is first substantially certain to be paid.  If Incentive
Compensation is not a specific or calculable amount, the Incentive Compensation,
or any portion thereof, is readily ascertainable when the amount is both
calculable and substantially certain to be paid.  Accordingly, in general, any
minimum amount that is both calculable and substantially certain to be paid will
be treated as readily ascertainable.

 

In general, an election shall become irrevocable as of the last day of the
enrollment period applicable to it.  However, if a Participant incurs an
“unforeseeable emergency,” as defined in Section 4.7(h), or becomes entitled to
receive a hardship distribution pursuant to Treas. Reg. Sec.
1.401(k)-1(d)(3) after the election otherwise becomes irrevocable, the election
shall be cancelled as of the date on which the Participant is determined to have
incurred the unforeseeable emergency or becomes eligible to receive the hardship
distribution and no further deferrals will be made under it.  In addition, if a
Participant becomes “disabled” (as defined below), RLI may, in its discretion,
cancel the Participant’s election then in effect, provided that such
cancellation is made no later than end of the Plan Year, or if later, the
15th day of the third month following the date on which the Participant becomes
disabled, and

 

5

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provided further that RLI does not allow the Participant a direct or indirect
election regarding the cancellation.  For purposes of the preceding sentence,
“disability” means any medically determinable physical or mental impairment
resulting in the Participant’s inability to perform the duties required by the
Participant’s position or any substantially similar position, where such
impairment can be expected to result in death or can be expected to last for a
continuous period of not less than six months.

 

                                                2.4.3.                  Limits. 
RLI may, in its sole discretion, limit the minimum or maximum amount of
deferrals that are allowed under the Plan by any Participant or any group of
Participants, provided that such limit is established prior to the beginning of
the Year or prior to enrollment of the affected Participant.

 

ARTICLE 3

 

ACCOUNTS

 

3.1.                            ACCOUNTS.  RLI SHALL ESTABLISH AND MAINTAIN A
SEPARATE ACCOUNT FOR EACH PARTICIPANT.  THE ACCOUNT SHALL BE FOR RECORDKEEPING
PURPOSES ONLY AND SHALL NOT REPRESENT A TRUST FUND OR OTHER SEGREGATION OF
ASSETS FOR THE BENEFIT OF THE PARTICIPANT.  THE BALANCE OF EACH PARTICIPANT’S
ACCOUNT WILL BE MAINTAINED IN FULL AND FRACTIONAL SHARES OF RLI STOCK.

 

3.2.                            CREDITS TO ACCOUNTS.  EACH PARTICIPANT’S ACCOUNT
SHALL BE CREDITED FROM TIME TO TIME AS PROVIDED IN THIS SECTION.

 

3.2.1.                  Elective Deferrals.  Each Deferral Eligible Amount which
the Participant has elected to defer under the Plan shall be credited to the
Participant’s Account on, or as soon as administratively practicable after, the
date it would otherwise be paid to the Participant.  The cash amount shall be
converted to RLI Stock credits, equal to the number of full and fractional
shares that could be purchased with such amount on, or as soon as
administratively feasible after, the date such amount is credited to the
Participant’s Account.

 

3.2.2.                  Dividends and Other Adjustments.  The Participant’s
Account shall be credited with additional RLI Stock credits, equal to the number
of full and fractional shares of RLI Stock that could be purchased with any cash
dividends which would be payable on the RLI Stock credited to the Participant’s
Account.  For this purposes, the share price on, or as soon as administratively
practicable after, the date the dividend is paid will be used.  The Account also
will be adjusted for any stock split, redemption or similar event, in a manner
determined to be reasonable by RLI.

 

3.3.                            Charges to Accounts.  As of the date any Plan
benefit measured by the Account is paid to the Participant or the Participant’s
Beneficiary, the Account shall be charged with the amount of such benefit
payment.

 

ARTICLE 4

 

BENEFITS

 

4.1.                            Vesting.  The Participant’s Account shall be
fully (100%) Vested.

 

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4.2.                            Payment of Plan Benefits on Termination of
Employment - General Rule.  If the Participant has an Account balance at
Termination of Employment, RLI shall pay that balance to the Participant in five
(5) annual installments, as follows:

 

(a)                                  Time.  The first installment shall be paid
on the January 1 following the Year in which the Participant’s Termination of
Employment occurs.  The remaining installments shall be paid on each subsequent
January 1.

 

(b)                                 Amount.  The amount of each installment
shall be determined using a “fractional” method — by multiplying the
Participant’s Account balance immediately before the installment payment date by
a fraction, the numerator of which is one and the denominator of which is the
number of installments remaining (including the installment in question).  The
result shall be rounded down to the next lower full share of RLI Stock, except
for the final installment, which shall be rounded up to the next higher full
share of RLI Stock.

 

4.3.                            Changing Payment Elections.

 

4.3.1.                  General Rule.  A Participant may elect to change the
number of annual installments the Participant receives under the Plan to ten
(10) or fifteen (15) installments, subject to the rules below.  Any such
election must be made in such manner and in accordance with such rules as may be
prescribed for this purpose by RLI (including by means of a voice response or
other electronic system under circumstances authorized by RLI).  The
installments shall commence on the date specified in Sec. 4.2(a), unless
otherwise postponed by this Article 4, and the amount of each installment shall
be determined under the fractional method described in Sec. 4.2(b).

 

4.3.2.                  Election upon Initial Plan Enrollment.  An election to
extend the number of installments may be made as part of the Participant’s
initial enrollment in the Plan, as described in Sec. 2.3.

 

4.3.3.                  Subsequent Election.  If a Participant did not elect to
extend the number of installments upon initial enrollment, or if the Participant
wants to further change the number of installments after becoming a Participant,
such individual may elect to change the number of installments in accordance
with the following rules:

 

(a)                                  The election must be received by RLI in
writing and in proper form and must not take effect for at least 12 months from
the date on which it is submitted to RLI;

 

(b)                                 The election must be submitted to RLI at
least 12 months prior to the specified date of distribution; and

 

(c)                                  The commencement of installments must be
delayed at least five (5) years from the date payments would otherwise commence
without this subsequent election.

 

4.4.                            Special Rules.

 

4.4.1.                  Specified Employee Exception.  If a Participant is a
Specified Employee, the Participant’s initial installment (or lump-sum payment,
if applicable) shall be delayed to the later of the January 1 following the Year
in which the Participant’s Termination of Employment occurs or the first

 

7

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day of the seventh month following the Participant’s Termination of Employment. 
This delay shall not apply in the event of the Participant’s death.  Any
remaining annual installments shall be paid as described in Sec. 4.2(a) and
Sec. 5.1.

 

4.4.2.                  Cash-Out of Small Amounts.  Any contrary provision or
election notwithstanding, if the Participant’s Account balance is less than one
hundred thousand dollars ($100,000) as of the date installments are to commence,
the Account shall be paid to the Participant in a single lump-sum, as full
settlement of all benefits due under the Plan; provided that, for purposes of
applying the one hundred thousand dollar ($100,000) cash-out limit, all
nonqualified deferred compensation amounts payable to the Participant by RLI and
its Affiliates shall be aggregated if and to the extent required under Code
§ 409A or any regulations or other guidance issued by the Treasury Department
thereunder.

 

4.5.                            Medium of Payments.  All payments to a
Participant shall be made in shares of RLI Stock.  Unless the shares have been
registered under the Securities Act of 1933 (the “Act”), are otherwise exempt
from the registration requirements of the Act, are the subject of a favorable no
action letter issued by the Securities and Exchange Commission, or are the
subject of an opinion of counsel acceptable to RLI to the effect that such
shares are exempt from the registration requirements of the Act, the
certificates representing such shares shall contain a legend precluding the
transfer of such shares except in accordance with the provisions of Rule 144 of
the Act, as the same may be amended from time to time.

 

4.6.                            Delay in Distributions.  A payment under the
Plan may be delayed by RLI under any of the following circumstances so long as
all payments to similarly situated Participants are treated on a reasonably
consistent basis:

 

(a)                                  RLI reasonably anticipates that if such
payment were made as scheduled, RLI’s deduction with respect to such payment
would not be permitted under Section 162(m) of the Code, provided that the
payment is made either during the first Plan Year in which RLI reasonably
anticipates, or should reasonably anticipate, that if the payment is made during
such year, the deduction of such payment will not be barred by application of
Section 162(m) or during the period beginning with the date of the Participant’s
Termination of Employment and ending on the later of the last day of RLI’s
fiscal year in which the Participant has a Termination of Employment or the
15th day of the third month following the Termination of Employment.

 

(b)                                 RLI reasonably anticipates that the making
of the payment will violate Federal securities laws or other applicable law,
provided that the payment is made at the earliest date at which RLI reasonably
anticipates that the making of the payment will not cause such violation.

 

(c)                                  Upon such other events as determined by RLI
and according to such terms as are consistent with Section 409A or are
prescribed by the Commissioner of Internal Revenue.

 

4.7                               Acceleration of Distributions.  RLI may, in
its discretion, distribute all or a portion of a Participant’s Accounts at an
earlier time and in a different form than specified as otherwise provided in
this Article 4, under the circumstances described below:

 

(a)                                  As may be necessary to fulfill a Domestic
Relations Order.  Distributions pursuant to a Domestic Relations Order shall be
made according to administrative procedures established by RLI.

 

(b)                                 To the extent reasonably necessary to avoid
the violation of ethics laws or conflict of interest laws pursuant to
Section 1.409A-3(j)(ii) of the Treasury regulations.

 

8

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(c)                                  To pay FICA on amounts deferred under the
Plan and the income tax resulting from such payment.

 

(d)                                 To pay the amount required to be included in
income as a result of the Plan’s failure to comply with Section 409A.

 

(e)                                  If RLI determines, in its discretion, that
it is advisable to liquidate the Plan in connection with a termination of the
Plan subject to the requirements of Section 409A.

 

(f)                                    As satisfaction of a debt of the
Participant to an Affiliate, where such debt is incurred in the ordinary course
of the service relationship between the Affiliate and the Participant, the
entire amount of the reduction in any Plan Year does not exceed $5,000, and the
reduction is made at the same time and in the same amount as the debt otherwise
would have been due and collected from the Participant.

 

(g)                                 To pay state, local or foreign tax
obligations that may arise with respect to amounts deferred under the Plan and
the income tax resulting from such payment.

 

(h)                                 If the Participant has an unforeseeable
emergency.  For these purposes an “unforeseeable emergency” is a severe
financial hardship to the Participant, resulting from an illness or accident of
the Participant, the Participant’s spouse, the Beneficiary, or the Participant’s
dependent (as defined in Section 152, without regard to Section 152(b)(1),
(b)(2), and (d)(1)(B) of the Code); loss of the Participant’s property due to
casualty (including the need to rebuild a home following damage to a home not
otherwise covered by insurance); or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of
the Participant.  For example, the imminent foreclosure of or eviction from the
Participant’s primary residence may constitute an unforeseeable emergency.  In
addition, the need to pay for medical expenses, including non-refundable
deductibles, as well as for the cost of prescription drug medication, may
constitute an unforeseeable emergency.  Finally, the need to pay for funeral
expenses of a spouse, Beneficiary, or a dependent (as defined in Section 152,
without regard to 152(b)(1), (b)(2), and (d)(1)(B) of the Code) may also
constitute an unforeseeable emergency.  Except as otherwise provided in this
paragraph (h), the purchase of a home and the payment of college tuition are not
unforeseeable emergencies.  Whether a Participant is faced with an unforeseeable
emergency permitting a distribution under this paragraph (h) is to be determined
based on the relevant facts and circumstances of each case, but, in any case a
distribution on account of an unforeseeable emergency may not be made to the
extent that such emergency is or may be relieved through reimbursement or
compensation from insurance or otherwise, by liquidation of the Participant’s
assets, to the extent the liquidation of such assets would not cause severe
financial hardship, or by cessation of Elective Deferrals.

 

Distributions because of an unforeseeable emergency must be limited to the
amount reasonably necessary to satisfy the emergency need (which may include
amounts necessary to pay any Federal, state, local, or foreign income taxes or
penalties reasonably anticipated to result from the distribution).  A
determination of the amounts reasonably necessary to satisfy the emergency need
must take into account any additional compensation that is available due to
cancellation of the Participant’s election as a result of this paragraph (h).

 

Notwithstanding anything in this Section 4.7 to the contrary, except for a
Participant’s election to request a distribution due to an unforeseeable
emergency under paragraph (h), above (which the Participant, in the
Participant’s discretion, may elect to make or not make), RLI shall

 

9

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not provide the Participant with discretion or a direct or indirect election
regarding whether a payment is accelerated pursuant to this Section 4.7.

 

4.8                               WHEN A PAYMENT IS DEEMED TO BE MADE.  ANY
PAYMENT THAT IS DUE TO BE DISTRIBUTED AS OF A PARTICULAR DATE PURSUANT TO THE
PROVISIONS OF THE PLAN, WILL BE DEEMED TO BE DISTRIBUTED AS OF THAT DATE IF IT
IS DISTRIBUTED ON SUCH DATE OR A LATER DATE WITHIN THE SAME CALENDAR YEAR, OR,
IF LATER, BY THE 15TH DAY OF THE THIRD CALENDAR MONTH FOLLOWING THE DATE, AND
THE PARTICIPANT IS NOT PERMITTED, DIRECTLY OR INDIRECTLY, TO DESIGNATE THE
CALENDAR YEAR OF PAYMENT.  FURTHER, A PAYMENT WILL BE TREATED AS MADE ON A DATE
IF IT IS MADE NO EARLIER THAN 30 DAYS BEFORE THE DATE, AND THE PARTICIPANT IS
NOT PERMITTED, DIRECTLY OR INDIRECTLY, TO DESIGNATE THE CALENDAR YEAR OF
PAYMENT.  FOR PURPOSES OF THE FOREGOING, IF THE PAYMENT IS REQUIRED TO BE MADE
DURING A PERIOD OF TIME, THE SPECIFIED DATE IS TREATED AS THE FIRST DAY OF THE
PERIOD OF TIME.

 

ARTICLE 5

 

DEATH BENEFITS

 

5.1.                            DEATH BENEFITS.

 

5.1.1.                  Benefits When Participant Dies Before Commencement of
Payments.  If the Participant dies before installments commence, the
Participant’s Account balance shall be paid to the Participant’s Beneficiary as
follows:

 

(a)                                  If the Participant has made a valid
election under Sec. 4.4, payments shall be made in ten (10) or fifteen (15)
annual installments, as elected by the Participant.

 

(b)                                 Otherwise, payments shall be made in five
(5) annual installments.

 

The first installment shall be paid on the January 1 following the Year in which
the Participant’s death occurs.  The remaining installments shall be paid on
each subsequent January 1.  The amount of each installment shall be determined
using the “fractional” method described in Sec. 4.3(b).

 

5.1.2.                  Benefits When Participant Dies After Commencement of
Payments.  If the Participant dies after installments commence and the
Participant has an Account balance at death, the remaining Account balance shall
be paid to the Participant’s Beneficiary in the same manner as if the
Participant were still living.

 

5.1.3.                  Medium of Payments.  All payments to a Beneficiary shall
be made in shares of RLI Stock, subject to any legend precluding transfer that
is required under Sec. 4.6.

 

5.1.4.                  Cash-Out of Small Amounts.  Any contrary provision or
election notwithstanding, if the amount payable to the Beneficiary is less than
one hundred thousand dollars ($100,000) as of the date installments are to
commence, the benefit shall be paid to the Beneficiary in a single lump-sum, as
full settlement of all benefits due under the Plan, subject, however, to any
limitation on such cash-out under Code § 409A or any regulations or other
guidance issued by the Treasury Department thereunder.

 

5.2.                            Designation of Beneficiary.

 

5.2.1.                  Persons Eligible to Designate.  Any Participant may
designate a Beneficiary to receive any amount payable under the Plan as a result
of the Participant’s death, provided that the Beneficiary

 

10

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survives the Participant.  The Beneficiary may be one or more persons, natural
or otherwise.  By way of illustration, but not by way of limitation, the
Beneficiary may be an individual, trustee, executor, or administrator.  A
Participant may also change or revoke a designation previously made, without the
consent of any Beneficiary named therein.

 

5.2.2.                  Form and Method of Designation.  Any designation or a
revocation of a prior designation of Beneficiary shall be in writing on a form
acceptable to RLI and shall be filed with RLI.  RLI and all other parties
involved in making payment to a Beneficiary may rely on the latest Beneficiary
designation on file with RLI at the time of payment or may make payment pursuant
to Sec. 5.2.3 if an effective designation is not on file, shall be fully
protected in doing so, and shall have no liability whatsoever to any person
making claim for such payment under a subsequently filed designation of
Beneficiary or for any other reason.

 

Notwithstanding any provision of this Sec. 5.2 to the contrary, any Beneficiary
designation made under the Prior Agreements will continue in effect under this
Plan until modified by the Participant pursuant to this Sec. 5.2.

 

5.2.3.                  No Effective Designation.  If there is not on file with
RLI an effective designation of Beneficiary by a deceased Participant, the
Beneficiary shall be the person or persons surviving the Participant in the
first of the following classes in which there is a survivor, share and share
alike:

 

(a)                                  The Participant’s spouse.  (A “spouse” is a
person of the opposite sex to whom the Participant is legally married, including
a common-law spouse if the marriage was entered into in a state that recognizes
common-law marriages and RLI has received acceptable proof and/or certification
of common-law married status.)

 

(b)                                 The Participant’s then living descendants,
per stirpes.

 

(c)                                  The Participant’s estate.

 

Determination of the identity of the Beneficiary in each case shall be made by
RLI.

 

5.2.4.                  Successor Beneficiary.  If a Beneficiary who survives
the Participant subsequently dies before receiving the complete payment to which
the Beneficiary was entitled, the successor Beneficiary, determined in
accordance with the provisions of this section, shall be entitled to the
payments remaining. The successor Beneficiary shall be the person or persons
surviving the Beneficiary in the first of the following classes in which there
is a survivor, share and share alike:

 

(a)                                  The Participant’s spouse.  (A “spouse” is a
person of the opposite sex to whom the Participant is legally married, including
a common-law spouse if the marriage was entered into in a state that recognizes
common-law marriages and RLI has received acceptable proof and/or certification
of common-law married status.)

 

(b)                                 The Participant’s then living descendants,
per stirpes.

 

(c)                                  The Participant’s estate.

 

11

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ARTICLE 6

 

CLAIMS AND REVIEW PROCEDURES

 

6.1.                            APPLICATION FOR BENEFITS.  BENEFITS SHALL BE
PAID TO PARTICIPANTS AUTOMATICALLY (WITHOUT A WRITTEN REQUEST) AT THE TIME AND
IN THE MANNER SPECIFIED IN THE PLAN.  BENEFITS SHALL BE PAID TO A BENEFICIARY
UPON RLI’S RECEIPT OF A WRITTEN REQUEST FOR THE BENEFITS, INCLUDING APPROPRIATE
PROOF OF THE PARTICIPANT’S DEATH AND THE BENEFICIARY’S IDENTITY AND RIGHT TO
PAYMENT.  THIS WRITTEN REQUEST SHALL BE CONSIDERED A CLAIM FOR THE PURPOSES OF
THIS ARTICLE.

 

6.2.                            CLAIMS AND REVIEW PROCEDURES.  THE CLAIMS AND
REVIEW PROCEDURES SET FORTH IN THIS ARTICLE SHALL BE THE MANDATORY CLAIMS AND
REVIEW PROCEDURES FOR THE RESOLUTION OF DISPUTES AND DISPOSITION OF CLAIMS FILED
UNDER THE PLAN.

 

6.2.1.                  Initial Claim.  An individual may, subject to any
applicable deadline, file with the Committee a written claim for benefits under
the Plan in a form and manner prescribed by RLI.

 

(a)                                  If the claim is denied in whole or in part,
the Committee shall notify the claimant of the adverse benefit determination
within ninety (90) days after receipt of the claim.

 

(b)                                 The ninety (90) day period for making the
claim determination may be extended for ninety (90) days if the Committee
determines that special circumstances require an extension of time for
determination of the claim, provided that the Committee notifies the claimant,
prior to the expiration of the initial ninety (90) day period, of the special
circumstances requiring an extension and the date by which a claim determination
is expected to be made.

 

6.2.2.                  Notice of Initial Adverse Determination.  A notice of an
adverse determination shall set forth in a manner calculated to be understood by
the claimant:

 

(a)                                  The specific reasons for the adverse
determination;

 

(b)                                 References to the specific provisions of the
Plan (or other applicable document) on which the adverse determination is based;

 

(c)                                  A description of any additional material or
information necessary to perfect the claim and an explanation of why such
material or information is necessary; and

 

(d)                                 A description of the claims review
procedures, including the time limits applicable to such procedures.

 

6.2.3.                  Request for Review.  Within ninety (90) days after
receipt of an initial adverse benefit determination notice, the claimant may
file with the Board a written request for a review of the adverse determination
and may, in connection therewith submit written comments, documents, records and
other information relating to the claim benefits.  Any request for review of the
initial adverse determination not filed within ninety (90) days after receipt of
the initial adverse determination notice shall be untimely.

 

12

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6.2.4.                  Claim on Review.  If the claim, upon review, is denied
in whole or in part, the Board shall notify the claimant of the adverse benefit
determination within sixty (60) days after receipt of such a request for review.

 

(a)                                  The sixty (60) day period for deciding the
claim on review may be extended for sixty (60) days if the Board determines that
special circumstances require an extension of time for determination of the
claim, provided that the Board notifies the claimant, prior to the expiration of
the initial sixty (60) day period, of the special circumstances requiring an
extension and the date by which a claim determination is expected to be made.

 

(b)                                 In the event that the time period is
extended due to a claimant’s failure to submit information necessary to decide a
claim on review, the claimant shall have sixty (60) days within which to provide
the necessary information and the period for making the claim determination on
review shall be tolled from the date on which the notification of the extension
is sent to the claimant until the date on which the claimant responds to the
request for additional information or, if earlier, the expiration of sixty (60)
days.

 

(c)                                  The Board’s review of a denied claim shall
take into account all comments, documents, records, and other information
submitted by the claimant relating to the claim, without regard to whether such
information was submitted or considered in the initial benefit determination.

 

6.2.5.                  Notice of Adverse Determination for Claim on Review.  A
notice of an adverse determination for a claim on review shall set forth in a
manner calculated to be understood by the claimant:

 

(a)                                  The specific reasons for the denial;

 

(b)                                 References to the specific provisions of the
Plan (or other applicable document) on which the adverse determination is based;
and

 

(c)                                  A statement that the claimant is entitled
to receive, upon request and free of charge, reasonable access to, and copies
of, all documents, records, and other information relevant to the claimant’s
claim for benefits.

 

6.3.                            CLAIMS RULES.

 

(a)                                  No inquiry or question shall be deemed to
be a claim or a request for a review of a denied claim unless made in accordance
with the established claims and review procedures.  RLI may require that any
claim for benefits and any request for a review of a denied claim be filed on
forms to be furnished by RLI upon request.

 

(b)                                 All decisions on claims and on requests for
a review of denied claims shall be made by RLI.

 

(c)                                  Claimants may be represented by a lawyer or
other representative at their own expense, but RLI reserves the right to
(i) require the claimant to furnish written authorization and (ii) establish
reasonable procedures for determining whether an individual has been

 

13

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authorized to act on behalf of a claimant.  A claimant’s representative shall be
entitled to copies of all notices given to the claimant.

 

(d)                                 The decision of RLI on a claim and on a
request for a review of a denied claim may be provided to the claimant in
electronic form instead of in writing at the discretion of RLI.

 

(e)                                  In connection with the review of a denied
claim, the claimant or the claimant’s representative shall be provided, upon
request and free of charge, reasonable access to, and copies of, all documents,
records, and other information relevant to the claimant’s claim for benefits.

 

(f)                                    The time period within which a benefit
determination will be made shall begin to run at the time a claim or request for
review is filed in accordance with the claims and review procedures, without
regard to whether all the information necessary to make a benefit determination
accompanies the filing.

 

(g)                                 The claims and review procedures shall be
administered with appropriate safeguards so that benefit claim determinations
are made in accordance with governing Plan documents and, where appropriate, the
Plan provisions have been applied consistently with respect to similarly
situated claimants.

 

(h)                                 For the purpose of this article, a document,
record, or other information shall be considered “relevant” if such document,
record, or other information:  (i) was relied upon in making the benefit
determination; (ii) was submitted, considered, or generated in the course of
making the benefit determination, without regard to whether such document,
record, or other information was relied upon in making the benefit
determination; or (iii) demonstrates compliance with the administration
processes and safeguards designed to ensure that the benefit claim determination
was made in accordance with governing Plan documents and that, where
appropriate, the Plan provisions have been applied consistently with respect to
similarly situated claimants.

 

(i)                                     RLI may, in its discretion, rely on any
applicable statute of limitation or deadline as a basis for denial of any claim.

 

6.4.                            DEADLINE TO FILE CLAIM.  TO BE CONSIDERED TIMELY
UNDER THE PLAN’S CLAIMS AND REVIEW PROCEDURES, A CLAIM MUST BE FILED WITH THE
COMMITTEE WITHIN ONE (1) YEAR AFTER THE CLAIMANT KNEW OR REASONABLY SHOULD HAVE
KNOWN OF THE PRINCIPAL FACTS UPON WHICH THE CLAIM IS BASED.

 

6.5.                            EXHAUSTION OF ADMINISTRATIVE REMEDIES.  THE
EXHAUSTION OF THE CLAIMS AND REVIEW PROCEDURES IS MANDATORY FOR RESOLVING EVERY
CLAIM AND DISPUTE ARISING UNDER THE PLAN.  AS TO SUCH CLAIMS AND DISPUTES NO
CLAIMANT SHALL BE PERMITTED TO COMMENCE AN ARBITRATION ACTION TO RECOVER PLAN
BENEFITS OR TO ENFORCE OR CLARIFY RIGHTS UNDER THE PLAN OR UNDER ANY PROVISION
OF THE LAW, WHETHER OR NOT STATUTORY, UNTIL THE CLAIMS AND REVIEW PROCEDURES SET
FORTH HEREIN HAVE BEEN EXHAUSTED IN THEIR ENTIRETY.

 

6.6.                            Arbitration.  Any claim, dispute or other matter
in question of any kind relating to the Plan which is not resolved by the claims
and review procedures shall be settled by arbitration in accordance with the
Federal Arbitration Act 9 U.S.C. §1, et seq.  Notice of demand for arbitration
must be made in writing to the opposing party within the time period specified
in Sec. 6.7.  In no event will a demand for arbitration be made after the date
when the applicable statute of limitations would bar the institution of a

 

14

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legal or equitable proceeding based on such claim, dispute or other matter in
question.  The decision of the arbitrator(s) will be final and may be enforced
in any court of competent jurisdiction.  The arbitrator(s) may award reasonable
fees and expenses to the prevailing party in any dispute hereunder and will
award reasonable fees and expenses in the event that the arbitrator(s) find that
the losing party acted in bad faith or with intent to harass, hinder or delay
the prevailing party in the exercise of its rights in connection with the matter
under dispute.  The arbitration will take place in Peoria, Illinois, unless
otherwise agreed by the parties.

 

6.7.                            DEADLINE TO FILE AN ARBITRATION ACTION.  NO
ARBITRATION ACTION TO RECOVER PLAN BENEFITS OR TO ENFORCE OR CLARIFY RIGHTS
UNDER THE PLAN UNDER OR UNDER ANY PROVISION OF THE LAW, WHETHER OR NOT
STATUTORY, MAY BE BROUGHT BY ANY CLAIMANT ON ANY MATTER PERTAINING TO THE PLAN
UNLESS THE ACTION IS COMMENCED BEFORE THE EARLIER OF:

 

(a)                                  Thirty (30) months after the claimant knew
or reasonably should have known of the principal facts on which the claim is
based, or

 

(b)                                 Six (6) months after the claimant has
exhausted the claims and review procedures.

 

6.8.                            KNOWLEDGE OF FACT BY PARTICIPANT IMPUTED TO
BENEFICIARY.  KNOWLEDGE OF ALL FACTS THAT A PARTICIPANT KNEW OR REASONABLY
SHOULD HAVE KNOWN SHALL BE IMPUTED TO EVERY CLAIMANT WHO IS OR CLAIMS TO BE A
BENEFICIARY OF THE PARTICIPANT OR OTHERWISE CLAIMS TO DERIVE AN ENTITLEMENT BY
REFERENCE TO THE PARTICIPANT FOR THE PURPOSE OF APPLYING THE PREVIOUSLY
SPECIFIED PERIODS.

 

6.9.                            DEFERRAL OF PAYMENT.  IF THERE IS A DISPUTE
REGARDING A PLAN BENEFIT, RLI, IN ITS SOLE DISCRETION, MAY DEFER PAYMENT OF THE
BENEFIT UNTIL THE DISPUTE HAS BEEN RESOLVED.

 

ARTICLE 7

 

ADMINISTRATION

 

7.1.                            Administrator.  RLI shall be the administrator
of the Plan.  RLI shall control and manage the administration and operation of
the Plan and shall make all decisions and determinations incident thereto.
 Except with respect to the ordinary day-to-day administration of the Plan,
action on behalf of RLI must be taken by one of the following:

 

(a)                                  The Board; or

 

(b)                                 The Committee.

 

7.1.1.                  Delegation.  The ordinary day-to-day administration of
the Plan may be delegated by the Chief Executive Officer to an individual or a
committee.  Such individual or committee shall have the authority to delegate or
redelegate to one or more persons, jointly or severally, such functions assigned
to such individual or committee as such individual or committee may from time to
time deem advisable.

 

7.1.2.                  Automatic Removal.  If any individual or committee
member to whom responsibility under the Plan is allocated is a director, officer
or employee of RLI when responsibility is so allocated, then such individual
shall be automatically removed as a member of a committee at the earliest time
such individual ceases to be a director, officer or employee of RLI.  This
removal shall occur automatically and without any requirement for action by RLI
or any notice to the individual so removed.

 

15

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7.1.3.                  Conflict of Interest.  If any individual or committee
member to whom responsibility under the Plan is allocated is also a Participant
or Beneficiary, that individual or committee member shall have no authority as
such member with respect to any matter specifically affecting such individual’s
interest hereunder (as distinguished from the interests of all Participants and
Beneficiaries or a broad class of Participants and Beneficiaries), all such
authority being reserved exclusively to the other members to the exclusion of
such individual, and such Participant or Beneficiary shall act only in an
individual capacity in connection with any such matter.

 

7.1.4.                  Binding Effect.  The determination of the Board, the
Committee or the Chief Executive Officer in any matter within its authority
shall be binding and conclusive upon RLI and all persons having any right or
benefit under the Plan.

 

7.1.5.                  Third-Party Service Providers.  RLI may from time to
time appoint or contract with an administrator, record keeper or other
third-party service provider for the Plan.  Any such administrator, record
keeper or other third-party service provider will serve in a nondiscretionary
capacity and will act in accordance with directions given and procedures
established by RLI.

 

7.2.                            BENEFITS NOT TRANSFERABLE.  NO PARTICIPANT OR
BENEFICIARY SHALL HAVE THE POWER TO TRANSMIT, ALIENATE, DISPOSE OF, PLEDGE OR
ENCUMBER ANY BENEFIT PAYABLE UNDER THE PLAN BEFORE ITS ACTUAL PAYMENT TO THE
PARTICIPANT OR BENEFICIARY.  ANY SUCH EFFORT BY A PARTICIPANT OR BENEFICIARY TO
CONVEY ANY INTEREST IN THE PLAN SHALL NOT BE GIVEN EFFECT UNDER THE PLAN.  NO
BENEFIT PAYABLE UNDER THE PLAN SHALL BE SUBJECT TO ATTACHMENT, GARNISHMENT,
EXECUTION FOLLOWING JUDGMENT OR OTHER LEGAL PROCESS BEFORE ITS ACTUAL PAYMENT TO
THE PARTICIPANT OR BENEFICIARY.

 

7.3.                            BENEFITS NOT SECURED.  THE RIGHTS OF EACH
PARTICIPANT AND BENEFICIARY SHALL BE SOLELY THOSE OF AN UNSECURED, GENERAL
CREDITOR OF RLI.  NO PARTICIPANT OR BENEFICIARY SHALL HAVE ANY LIEN, PRIOR CLAIM
OR OTHER SECURITY INTEREST IN ANY PROPERTY OF RLI.

 

7.4.                            RLI’S OBLIGATIONS.  RLI SHALL PROVIDE THE
BENEFITS UNDER THE PLAN.  RLI’S OBLIGATION MAY BE SATISFIED BY DISTRIBUTIONS
FROM A TRUST FUND CREATED AND MAINTAINED BY RLI, IN ITS SOLE DISCRETION, FOR
SUCH PURPOSE.  HOWEVER, THE ASSETS OF ANY SUCH TRUST FUND SHALL BE SUBJECT TO
CLAIMS BY THE GENERAL CREDITORS OF RLI IN THE EVENT RLI IS (I) UNABLE TO PAY ITS
DEBTS AS THEY BECOME DUE, OR (II) IS SUBJECT TO A PENDING PROCEEDING AS A DEBTOR
UNDER THE UNITED STATES BANKRUPTCY CODE.

 

7.5.                            WITHHOLDING TAXES.  RLI SHALL HAVE THE RIGHT TO
WITHHOLD (AND TRANSMIT TO THE PROPER TAXING AUTHORITY) SUCH FEDERAL, STATE OR
LOCAL TAXES, INCLUDING (BUT NOT LIMITED TO) FICA AND FUTA TAXES, AS IT MAY BE
REQUIRED TO WITHHOLD BY APPLICABLE LAWS.  SUCH TAXES MAY BE WITHHELD FROM ANY
BENEFITS DUE UNDER THE PLAN OR FROM ANY OTHER COMPENSATION TO WHICH THE
PARTICIPANT IS ENTITLED FROM RLI AND ITS AFFILIATES.

 

7.6.                            SERVICE OF PROCESS.  THE CHIEF EXECUTIVE OFFICER
IS DESIGNATED AS THE APPROPRIATE AND EXCLUSIVE AGENT FOR THE RECEIPT OF SERVICE
OF PROCESS DIRECTED TO THE PLAN IN ANY LEGAL PROCEEDING, INCLUDING ARBITRATION,
INVOLVING THE PLAN.

 

7.7.                            LIMITATION ON LIABILITY.  NEITHER RLI’S OFFICERS
NOR ANY MEMBER OF ITS BOARD NOR ANY INDIVIDUAL OR COMMITTEE TO WHOM RLI
DELEGATES RESPONSIBILITY UNDER THE PLAN IN ANY WAY SECURES OR GUARANTEES THE
PAYMENT OF ANY BENEFIT OR AMOUNT WHICH MAY BECOME DUE AND PAYABLE HEREUNDER TO
OR WITH RESPECT TO ANY PARTICIPANT.  EACH PARTICIPANT AND OTHER PERSON ENTITLED
AT ANY TIME TO PAYMENTS HEREUNDER SHALL LOOK

 

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SOLELY TO THE ASSETS OF RLI FOR SUCH PAYMENTS AS AN UNSECURED, GENERAL
CREDITOR.  AFTER BENEFITS HAVE BEEN PAID TO OR WITH RESPECT TO A PARTICIPANT AND
SUCH PAYMENT PURPORTS TO COVER IN FULL THE BENEFIT HEREUNDER, SUCH FORMER
PARTICIPANT OR OTHER PERSON(S), AS THE CASE MAY BE, SHALL HAVE NO FURTHER RIGHT
OR INTEREST IN THE OTHER ASSETS OF RLI IN CONNECTION WITH THE PLAN.  NEITHER RLI
NOR ANY OF ITS OFFICERS NOR ANY MEMBER OF ITS BOARD NOR ANY INDIVIDUAL OR
COMMITTEE TO WHOM RLI DELEGATES RESPONSIBILITY UNDER THE PLAN SHALL BE UNDER ANY
LIABILITY OR RESPONSIBILITY FOR FAILURE TO EFFECT ANY OF THE OBJECTIVES OR
PURPOSES OF THE PLAN BY REASON OF THE INSOLVENCY OF RLI.

 

ARTICLE 8

 

AMENDMENT AND TERMINATION

 

8.1.                            AMENDMENT.  RLI RESERVES THE POWER TO AMEND THE
PLAN EITHER PROSPECTIVELY OR RETROACTIVELY OR BOTH, IN ANY RESPECT, BY ACTION OF
ITS BOARD; PROVIDED THAT, NO AMENDMENT SHALL BE EFFECTIVE TO REDUCE OR DIVEST
BENEFITS PAYABLE WITH RESPECT TO THE ACCOUNT OF ANY PARTICIPANT OR BENEFICIARY
WITHOUT CONSENT.  NO AMENDMENT OF THE PLAN SHALL BE EFFECTIVE UNLESS IT IS IN
WRITING AND SIGNED ON BEHALF OF RLI BY A PERSON AUTHORIZED TO EXECUTE SUCH
WRITING.  NO ORAL REPRESENTATION CONCERNING THE INTERPRETATION OR EFFECT OF THE
PLAN SHALL BE EFFECTIVE TO AMEND THE PLAN.

 

8.2.                            TERMINATION.  RLI RESERVES THE RIGHT TO
TERMINATE THE PLAN AT ANY TIME BY ACTION OF ITS BOARD; PROVIDED THAT, THE
TERMINATION OF THE PLAN SHALL NOT REDUCE OR DIVEST BENEFITS PAYABLE WITH RESPECT
TO THE ACCOUNT OF ANY PARTICIPANT OR BENEFICIARY OR NEGATE THE PARTICIPANT’S OR
BENEFICIARY’S RIGHTS WITH RESPECT TO SUCH BENEFITS.  ANY SUCH TERMINATION WILL
BE DONE IN ACCORDANCE WITH THE REQUIREMENTS OF SECTION 409A.

 

ARTICLE 9

 

MISCELLANEOUS

 

9.1.                            EFFECT ON OTHER PLANS.  THIS PLAN SHALL NOT
ALTER, ENLARGE OR DIMINISH ANY PERSON’S RIGHTS OR OBLIGATIONS UNDER ANY OTHER
BENEFIT PLAN MAINTAINED BY RLI OR ANY AFFILIATE.

 

9.2.                            EFFECT ON EMPLOYMENT.  NEITHER THE TERMS OF THIS
PLAN NOR THE BENEFITS HEREUNDER NOR THE CONTINUANCE THEREOF SHALL BE A TERM OF
THE EMPLOYMENT OF ANY EMPLOYEE.  RLI SHALL NOT BE OBLIGED TO CONTINUE THE PLAN. 
THE TERMS OF THIS PLAN SHALL NOT GIVE ANY EMPLOYEE THE RIGHT TO BE RETAINED IN
THE SERVICE OF RLI OR ANY AFFILIATE.

 

9.3.                            DISQUALIFICATION.  NOTWITHSTANDING ANY OTHER
PROVISION OF THE PLAN OR ANY DESIGNATION MADE UNDER THE PLAN, ANY INDIVIDUAL WHO
FELONIOUSLY AND INTENTIONALLY KILLS A PARTICIPANT SHALL BE DEEMED FOR ALL
PURPOSES OF THE PLAN AND ALL ELECTIONS AND DESIGNATIONS MADE UNDER THE PLAN TO
HAVE DIED BEFORE SUCH PARTICIPANT.  A FINAL JUDGMENT OF CONVICTION OF FELONIOUS
AND INTENTIONAL KILLING IS CONCLUSIVE FOR THIS PURPOSE.  IN THE ABSENCE OF A
CONVICTION OF FELONIOUS AND INTENTIONAL KILLING, RLI SHALL DETERMINE WHETHER THE
KILLING WAS FELONIOUS AND INTENTIONAL FOR THIS PURPOSE.

 

9.4.                            RULES OF DOCUMENT CONSTRUCTION.  WHENEVER
APPROPRIATE, WORDS USED HEREIN IN THE SINGULAR MAY BE READ IN THE PLURAL, OR
WORDS USED HEREIN IN THE PLURAL MAY BE READ IN THE SINGULAR; AND THE WORDS
“HEREOF,” “HEREIN” OR “HEREUNDER” OR OTHER SIMILAR COMPOUNDS OF THE WORD “HERE”
SHALL MEAN AND REFER TO THE ENTIRE PLAN AND NOT TO ANY PARTICULAR ARTICLE,
SECTION OR PARAGRAPH OF THE PLAN UNLESS THE CONTEXT CLEARLY INDICATES TO THE
CONTRARY.  THE TITLES GIVEN TO THE VARIOUS ARTICLES AND SECTIONS OF THE PLAN ARE
INSERTED FOR

 

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CONVENIENCE OF REFERENCE ONLY AND ARE NOT PART OF THE PLAN, AND THEY SHALL NOT
BE CONSIDERED IN DETERMINING THE PURPOSE, MEANING OR INTENT OF ANY PROVISION
HEREOF.  WRITTEN NOTIFICATION UNDER THE PLAN SHALL INCLUDE SUCH OTHER METHODS
(FOR EXAMPLE, FACSIMILE OR E-MAIL) AS RLI, IN ITS SOLE DISCRETION, MAY AUTHORIZE
FROM TIME TO TIME.

 

9.5.                            REFERENCES TO LAWS.  ANY REFERENCE IN THE PLAN
TO A STATUTE SHALL BE CONSIDERED ALSO TO MEAN AND REFER TO THE APPLICABLE
REGULATIONS FOR THAT STATUTE.  ANY REFERENCE IN THE PLAN TO A STATUTE OR
REGULATION SHALL BE CONSIDERED ALSO TO MEAN AND REFER TO ANY SUBSEQUENT
AMENDMENT OR REPLACEMENT OF THAT STATUTE OR REGULATION.

 

9.6.                            CHOICE OF LAW.   THE PLAN HAS BEEN EXECUTED IN
THE STATE OF ILLINOIS AND HAS BEEN DRAWN IN CONFORMITY TO THE LAWS OF THAT STATE
AND SHALL, EXCEPT TO THE EXTENT THAT FEDERAL LAW IS CONTROLLING, BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS (WITHOUT
REGARD TO ITS CONFLICT OF LAW PRINCIPLES).

 

9.7.                            BINDING EFFECT.  THE PLAN SHALL BE BINDING UPON
AND INURE TO THE BENEFIT OF THE SUCCESSORS AND ASSIGNS OF RLI, AND THE
BENEFICIARIES, PERSONAL REPRESENTATIVES AND HEIRS OF THE PARTICIPANT.

 

IN WITNESS WHEREOF, RLI has cause the Plan to be executed by its duly authorized
officers as of  the                  day of                             .

 

 

RLI CORP.

 

 

 

By:

 

 

 

 

 

 

Its:

 

 

 

 

 

 

And

 

 

 

By:

 

 

 

 

 

 

Its:

 

 

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