Exhibit 10.1

 

 

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The RLI Corp. Directors’ Irrevocable Trust Agreement

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Table of Contents

 

 

 

 

 

 

 

I.

Recitals

1

A.

Adoption of Plan

1

B.

This Agreement

1

C.

Unfunded Status

1

II.

Agreements

1

1.

Irrevocability: Irrevocable Deposits

1

 

1.1

Date of Irrevocability

1

 

1.2

Initial Deposit

1

 

1.3

Additional Deposits

1

 

1.4

Absence of Reversion

2

 

1.5

Corporation Creditor Claims

2

2

Distributions Pursuant to the Plan

2

 

2.1

Distribution Dates, Amounts and Form

2

 

2.2

Reporting and Withholding of Applicable Taxes

2

3

Trustee Responsibility Regarding Distributions in the Event of the Insolvency of
the Corporation

2

4

Investment Authority

2

 

4.1

Nature of the Investments

2

 

4.2

Substitution of Assets

2

5

General Responsibilities of and With Respect to the Trustee

3

 

5.1

Annual Accountings Required of the Trustee

3

 

5.2

Application of Proceeds

3

 

5.3

Identity of Trustee

3

 

5.4

Merger of Trusts

3

 

5.5

Responsibility of Successor Trustee for Acts of Predecessor

3

 

5.6

Trustee’s Fees; Income and Principal Charges

3

 

5.7

Trustee’s Reliance Upon Information

3

 

5.8

Waiver of Bond

4

6

Trustee’s Powers

4

 

6.1

Allocation of the Fund

4

 

6.2

Ancillary Administration

4

 

6.3

Ascertainment and Allocation of Principal and Income

4

 

6.4

Conservation of the Fund

4

 

6.5

Depreciation of Tangible Property

4

 

6.6

Distribution or Division of any Portion of the Fund

4

 

6.7

Employment of Assistants

4

 

6.8

Transfer of Situs of a Trust

4

7

Indemnification, Amendment and Termination

5

 

7.1

Indemnification

5

 

7.2

Amendment

5

 

7.3

Termination

5

8

Choice of Law, Incorporation by Reference, and Interpretive Guidelines

5

 

8.1

Choice of Law

5

 

8.2

Incorporation by Reference: Internal Revenue Code Sections

5

 

8.3

Interpretive Guidelines

5

9

Glossary

5

 

Accounting Year

5

 

Corporation

5

 

Execution Date

5

 

Person

5

 

Plans

5

III.

Execution

5

 

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THIS DIRECTORS’ IRREVOCABLE TRUST AGREEMENT is made on the Execution Date by and
between RLI Corp. (“Corporation”) and the undersigned (“Trustee”).

 

 

 

I.

Recitals

 

A.   

Adoption of Plans

 

The Corporation has adopted the Director Deferred Compensation Plans for the
benefit of its current directors in the form attached hereto and may
periodically adopt similar plans for the benefit of future directors
(collectively defined as the “New Plans”).  The Corporation has adopted
predecessor versions of the New Plans (the “Old Plans”) which the directors and
the Corporation have restated in the form of the New Plans.  The New Plans and
the Old Plans are collectively defined as the “Plans”.

 

 

 

B.

This Agreement

 

The Corporation has incurred or expects to incur liability under the
Plans.  With a view toward providing the Corporation with a source of funds to
assist it in satisfying its liabilities under the Plans, the Corporation wishes
to establish this Agreement and to transfer assets to the Trustee to be held and
disposed of as provided in this Agreement, subject to the claims of the
Corporation’s creditors in the event of the Corporation’s insolvency, to be held
by the Trustee until distribution pursuant to the Plans.  This Agreement is
intended to be a grantor trust, of which the Corporation is the grantors, within
the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the
Internal Revenue Code of 1986, as amended (“Code”) and shall be construed
accordingly.

 

 

 

C.

Unfunded Status

 

Notwithstanding the fact that the Plan Benefit under the Plans shall be
satisfied from property held by the Trustee, this Agreement shall constitute an
unfunded arrangement as defined in Title I of the Employee Retirement Income
Security Act of 1974 (“ERISA”).  If this Agreement is subject to the provisions
of ERISA, then such transfer shall not affect the status of the Plans as
unfunded plans maintained for the purpose of providing deferred compensation for
a select group of management or highly compensated individuals under ERISA.

 

 

 

II.

Agreements

 

NOW, THEREFORE, the Parties hereby agree as follows:

 

1.Irrevocability: Irrevocable Deposits

 

1.1Date of Irrevocability

This Agreement shall become irrevocable ten (10) days after the first to occur
of the issuance of a favorable private letter ruling regarding the Federal
income tax aspects of this Agreement and the Plans from the Internal Revenue
Service, the receipt by the Trustee of an opinion of counsel to the Corporation
regarding the Federal income tax aspects of this Agreement and the Plans, or the
advice to the Trustee by the Corporation that neither condition expressed in the
preceding phrases shall be satisfied.

 

1.2Initial Deposit

The Corporation hereby deposits with the Trustee the number of its shares as are
equivalent to the Plan Benefits earned under the Plans determined as of the
Execution Date.  The Corporation may periodically deposit such additional number
of its shares or other assets as are equivalent to the Plan Benefits
periodically earned under the terms of the Plans subsequent to the Execution
Date.

 

The shares, other assets, income, gains and earnings thereon (collectively
defined as the “Fund”) shall be held and disposed of as provided in this
Agreement.

 

1.3 Additional Deposits

The Corporation shall irrevocably deposit additional shares or other property in
an amount sufficient to discharge all liability of the Corporation under the
Plans within the thirty (30) day period beginning on the close of each
Accounting Year.  No Person shall have any right to compel any additional
deposit.

 

1.4Absence of Reversion

The Corporation may not direct the Trustee to return to the Corporation or to
divert to any Person other than as provided under the Plans any portion of the
Fund after this Agreement has become irrevocable and before all Plan Benefits
have been distributed pursuant to the Plans.

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1.5 Corporation Creditor Claims

Except as otherwise provided in the following paragraph, the Fund shall be held
separate and apart from other assets of the Corporation and shall be held and
distributed pursuant to the Plans. No Plan participant or beneficiary shall have
any preferred claim on or any beneficial ownership interest in any portion of
the Fund. Any right created under the Plans and this Agreement shall constitute
unsecured contractual rights of Plan participants and their beneficiaries
against the Corporation.

 

The Fund shall at all times be subject to the claims of the Corporation's
general creditors under all applicable Federal and state law.

 

2.Distributions Pursuant to the Plan

 

2.1Distribution Dates, Amounts and Form

The Trustee shall distribute the Fund as, when, to the extent and in the form
expressed in the Plans or as otherwise directed by the corporation. If the Fund
is not sufficient to make all payments pursuant to the Plans, the Trustee shall
notify the Corporation of any such shortfall. The Corporation shall make any
shortfall payment.

 

2.2Reporting and Withholding of Applicable Taxes

The Trustee shall make provision for the reporting and withholding of any
Federal, state or local taxes that may be required to be withheld with respect
to distributions pursuant to the Plans.

 

3.Trustee Responsibility Regarding Distributions in the Event of the Insolvency
of the Corporation

If the Corporation shall become insolvent, the Trustee shall stop making
distributions pursuant to the Plans during the period of the Corporation's
insolvency. If the Trustee stops making distributions pursuant to the Plans and
subsequently resumes such distributions, the first distribution shall include
the sum of all distributions due pursuant to the Plans, less the sum of the
payments made by the Corporation during the period beginning with the cessation
of distributions by the Trustee.

 

The Corporation must inform the Trustee of the Corporation's insolvency. Absent
actual knowledge of the Corporation's insolvency by the Trustee, the Trustee
shall have no duty to inquire as to the insolvency status of the corporation.
Notwithstanding the failure of  the Corporation to advise the Corporation of the
Corporation's insolvency, if a Person who claims to be a creditor of the
Corporation and alleges the existence of the Corporation's insolvency, the
Trustee shall stop making distributions pursuant to the Plans until the Trustee
shall have determined that the Corporation is not insolvent. The Corporation
shall be considered insolvent if the Corporation is unable to pay its debts as
they become due, or if the Corporation is subject to a pending proceeding as a
debtor under the United States Bankruptcy Code, or if the Corporation is
determined to be insolvent by applicable Federal and state regulatory agencies.

 

4. Investment Authority

 

4.1Nature of Investments

 

The Trustee shall invest in shares of the corporation and shall purchase
additional shares of the Corporation with any cash dividend. Except with respect
to voting rights with respect to any share of the Corporation, the Trustee shall
exercise all rights with respect to the Fund. The Corporation shall exercise any
voting right with respect to any share of the Corporation.

 

Notwithstanding any provision in this Agreement to the contrary, the Trustee may
not loan any portion of the Fund to the Corporation, to any director or to any
other Person, directly or indirectly associated with the Corporation, and may
not permit the Corporation, a director or any other Person to direct the Trustee
with respect to the investment of the Fund.

 

4.2 Substitution of Assets

 

The Corporation may periodically substitute assets of equal fair
market value for any asset held by the Trustee, exercisable by the Corporation
in a non-fiduciary capacity without the approval or consent of any Person in any
fiduciary capacity.

 

5.General Responsibilities of and With Respect to the Trustee

 

The Trustee shall act with the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent person acting in a like capacity
and familiar with such matters would use in the conduct of an enterprise of a
1ike character and with like aims; however, the Trustee shall incur no liability
to any Person for any action taken or omitted pursuant to the Plans, or a
direction given to the Trustee by the Corporation.

 

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5.1Annual Accountings Required of Trustee

 

The Trustee shall render an account of its receipts and disbursements and the
then current fair market value of the Fund to the Corporation not less often
than annually.

 

5.2Application of Proceeds

 

No Person paying money or delivering any property to a Trustee need see to its
application.

 

5.3Identity of Trustee

 

Bank One, Peoria shall act as Trustee.  If at anytime Bank One, Peoria resigns,
refuses or is unable or unwilling to act as Trustee, then such Independent
Person as the Corporation periodically appoints shall act as Trustee.

 

“Independent Person” means any corporation authorized to transact trust business
in the State of Illinois, no shares of which are owned directly or indirectly by
the Corporation or any director of the Corporation.

 

Any Trustee may be removed by the Corporation; however, no removal shall be
effective unless on or before the effective date of the removal, another Trustee
is appointed. Any Trustee may resign by giving written notice to the
Corporation.

 

5.4Merger of Trusts

 

If a Trustee is holding any trust under this Agreement for the benefit of the
Corporation pursuant to the Plans having substantially similar terms, it may
consolidate them and hold them as a single trust.

 

5.5 Responsibility of Successor Trustee for Acts of Predecessor

 

No successor Trustee shall be responsible for any act or omission of a
predecessor. Any successor Trustee shall, with the written approval of such
Persons appointing it, accept the accounts rendered without examination or
review and the Fund delivered without incurring any liability or responsibility
for so doing. Any successor Trustee shall have all the title, powers and
discretion of the Trustee succeeded without the necessity of any conveyance or
transfer.

 

Any corporate successor to the trust business of any corporate Trustee shall
become Trustee in place of its predecessor without the necessity of any
conveyance or transfer.

 

5.6Trustee’s Fees; Income and Principal Charges

 

Any Trustee shall be entitled to a reasonable fee for services rendered and
reimbursement for reasonable expenses incurred and paid. The Trustee's regular
annual compensation shall be paid by the Corporation and if not paid within
thirty (30) days from the date the Corporation receives the Trustee's statement,
shall be charged half against income and half against principal, except that the
Trustee shall have full discretion to periodically charge a larger portion or
all against income without being limited to circumstances specified by state
law.

 

5.7Trustee’s Reliance Upon Information

 

A Trustee may rely upon any notice, certificate, affidavit, letter, telegram, or
other paper or document believed to be genuine or upon any evidence deemed by it
to be sufficient in making any payment or distribution hereunder. The Trustee
Shall incur no liability for any payment or distribution made in good faith and
without actual notice or knowledge of a changed condition or status affecting
any Person's interest in any trust created.

 

5.8Waiver of Bond

 

To the extent that any such requirements can legally be waived, no Trustee shall
be required to give any bond as Trustee, to qualify before, be appointed by or,
in the absence of breach of trust, account to any court, or to obtain the order
or approval of any court in the execution of any power or discretion hereunder.

 

6.Trustee’s Powers

 

Except as otherwise provided in the following sentence, the Trustee shall have
the powers expressed in the following sections and, except to the extent
inconsistent with any such power, any others that may be granted by law, none of
which may be exercised

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by either the Corporation or any other Person. The Trustee may not carry on a
business and dividing gains therefrom within the meaning of Code Regs.
§301.7701-2 as periodically amended.

 

6.1Allocation of the Fund

 

The Trustee may allocate different kinds or disproportionate in property or
undivided interests in property in accordance with the provisions of the Plans.

 

6.2 Ancillary Administration

 

The Trustee may appoint a corporation authorized under the laws of the United
States or of any state to administer trusts with respect to any portion of the
Fund situated in any jurisdiction in which the then acting Trustee is unable or
unwilling to act. The Trustee so appointed shall have all the title, powers and
discretion with respect to that property that are given to the principal
Trustee. The net income from that portion of the Fund and any net proceeds of
its sale shall be paid over to the principal Trustee.

 

6.3Ascertainment and Allocation of Principal and Income

 

The Trustee may determine the manner of ascertainment of income and principal
and the allocation or apportionment between income and principal of all receipts
and disbursements.

 

6.4Conservation of the Fund

 

The Trustee may take any action with respect to conserving or realizing upon the
value of any portion of the Fund, and with respect to foreclosures,
reorganizations or other changes affecting the Fund. Further, the Trustee may
collect, pay, contest, compromise or abandon claims of or against the trust
estate wherever situated, and may execute contracts, notes, conveyances and
other instruments, including instruments containing covenants and warranties
binding upon and creating a charge against the Fund and containing provisions
excluding personal liability.

 

6.5Depreciation of Tangible Property

 

The Trustee may establish out of income and credit to principal reasonable
reserves for the depreciation of tangible property.

 

6.6 Distribution or Division of any Portion of the Fund

 

Except as otherwise provided in the Plans, the Trustee may make any distribution
or division of the Fund in cash or in kind, or both, and may continue to
exercise any powers and discretion hereunder for a reasonable period after the
termination of the Trust, but only for so long as no rule of law relating to
perpetuities would be violated.

 

6.7Employment of Assistants

 

The Trustee may employ attorneys, auditors, depositaries, proxies and agents
with or without discretionary powers, and may keep any property in the name of a
Trustee or a nominee with or without disclosure of any fiduciary relationship,
or in bearer form.

 

6.8Transfer of Situs of a  Trust

 

The Trustee may transfer the situs of any trust to any other jurisdiction as
often as the Trustee deems it advantageous to the trust, appointing a substitute
Trustee to itself to act with respect thereto. The Trustee may delegate to the
substitute Trustee any or all of the powers given to the Trustee which may elect
to act as advisor to the substitute Trustee and shall receive a reasonable fee
for so acting. Further, the Trustee may remove any acting substitute Trustee and
appoint another or reappoint itself at will.

 

7.Indemnification, Amendment and Termination

 

7.1Indemnification

 

The Corporation must indemnify, pay and hold harmless the Trustee from or in
respect of any claim, due or demand, including any reasonable attorneys' fee,
cost and expense incurred, asserted by any Person arising out of any act or
omission taken or omitted by the Trustee pursuant   to the terms of this
Agreement, the Plans or direction by the Corporation.

 

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7.2Amendment

 

This Agreement may be amended by a written instrument executed by the Trustee
and the Corporation before this Agreement becomes irrevocable.

 

7.3 Termination

 

The Agreement shall terminate immediately after all Plan Benefits are
distributed pursuant to the terms of the Plans. Upon the termination of this
Agreement, the excess of the Fund over all Plan Benefits shall be returned to
the Corporation.

 

8.Choice of Law, Incorporation by Reference, and Interpretive Guidelines

 

8.1Choice of Law

 

The laws of the State of Illinois shall govern the validity, interpretation and
administration of this Agreement.

 

8.2Incorporation by Reference; Internal Revenue Code Sections

 

The paragraphs under the heading “I. RECITALS:” are referred to in this
Agreement are a part of this Agreement.

 

8.3Interpretive Guidelines

 

The words and phrases set off by quotation marks in the Glossary have the
meanings therein indicated. Any word or phrase which appears in this Agreement
in parenthesis, set off by quotation marks and capitalized has the meaning
denoted by its context. Whenever the words and phrases defined either in the
Glossary or elsewhere in this Agreement are intended to have their defined
meanings, the first letter of such word or the first letters of all substantive
words in such phrase shall be capitalized. When the context permits, a word or
phrase used in the singular includes the plural, and when used in any gender,
its meaning also includes all genders. Captions of Sections are inserted as a
matter of convenience only and do not define, limit or extent the scope or
intent of this Agreement or any provision hereof.

 

9.Glossary

 

“Accounting Year” means the twelve (12) consecutive month period beginning
January 1, which shall change as, when and to the extent the fiscal year of the
Corporation shall change.

 

“Corporation” means RLI Corp.

 

“Execution Date” means the date upon which this Plan is signed by the last Party
to sign this Plan.

 

“Person” means an individual, partnership, corporation, trust, unincorporated
organization, a government or any department or agency thereof, other business
or other entity, or any combination of one or more of the foregoing.

 

“Plans” is defined at Recital A. Adoption of Plans.

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III.

Execution:

 

 

 

Corporation:

 

Trustee:

 

 

 

RLI Corp.

 

Bank One, Peoria

 

 

 

By: /s/ James E. Zogby                    

 

By: /s/ Kevin A. Jones

 

 

 

Its: Treasurer

 

Its: Senior Vice President

 

 

 

Attest: /s/ Joseph E. Dondanville

 

Attest: /s/ Donna L. Miller

 

 

 

Its: Senior Vice President and CFO

 

Its: Trust Officer

 

 

 

Dated: June 18, 1993

 

Dated: June 18, 1993

 

 

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