Document:

Exhibit 10.7

 

RLI CORP. KEY EMPLOYEES

 

EXCESS BENEFIT PLAN

 

(Restated as of January 1, 2009)

 

 

12/12/2008

 

 

RLI CORP. 
KEY EMPLOYEES

 

EXCESS BENEFIT PLAN

 

TABLE OF CONTENTS

 

	
  ARTICLE 1

  	
   

  	
  INTRODUCTION

  	
  1

  
	
   

  	
   

  	
  1.1

  	
  Establishment

  	
  1

  
	
   

  	
   

  	
  1.2

  	
  Purpose

  	
  1

  
	
   

  	
   

  	
  1.3

  	
  Definitions

  	
  2

  
	
   

  	
   

  	
  1.4

  	
  Type of Plan

  	
  4

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 2

  	
   

  	
  PARTICIPATION

  	
  4

  
	
   

  	
   

  	
  2.1

  	
  Eligibility and Selection

  	
  4

  
	
   

  	
   

  	
  2.2

  	
  Notification

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 3

  	
   

  	
  ACCOUNTS

  	
  5

  
	
   

  	
   

  	
  3.1

  	
  Accounts

  	
  5

  
	
   

  	
   

  	
  3.2

  	
  Credits to Accounts

  	
  5

  
	
   

  	
   

  	
  3.3

  	
  Charges to Accounts

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 4

  	
   

  	
  BENEFITS

  	
  7

  
	
   

  	
   

  	
  4.1

  	
  Vesting

  	
  7

  
	
   

  	
   

  	
  4.2

  	
  Payment of Plan Benefits on Termination of Employment - General Rule

  	
  7

  
	
   

  	
   

  	
  4.3

  	
  Changing Payment Elections

  	
  7

  
	
   

  	
   

  	
  4.4

  	
  Special Rules

  	
  8

  
	
   

  	
   

  	
  4.5

  	
  Medium of Payments

  	
  8

  
	
   

  	
   

  	
  4.6.

  	
  Delay in Distributions

  	
  9

  
	
   

  	
   

  	
  4.7

  	
  Acceleration of Distributions

  	
  9

  
	
   

  	
   

  	
  4.8

  	
  When a Payment is Deemed to be Made

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 5

  	
   

  	
  DEATH
  BENEFITS

  	
  11

  
	
   

  	
   

  	
  5.1

  	
  Death Benefits

  	
  11

  
	
   

  	
   

  	
  5.2

  	
  Designation of Beneficiary

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 6

  	
   

  	
  CLAIMS AND
  REVIEW PROCEDURES

  	
  13

  
	
   

  	
   

  	
  6.1

  	
  Application for Benefits

  	
  13

  
	
   

  	
   

  	
  6.2

  	
  Claims and Review Procedures

  	
  13

  
	
   

  	
   

  	
  6.3

  	
  Claims Rules

  	
  14

  
	
   

  	
   

  	
  6.4

  	
  Deadline to File Claim

  	
  15

  
	
   

  	
   

  	
  6.5

  	
  Exhaustion of Administrative Remedies

  	
  16

  
	
   

  	
   

  	
  6.6

  	
  Arbitration

  	
  16

  
	
   

  	
   

  	
  6.7

  	
  Deadline to File an Arbitration Action

  	
  16

  
	
   

  	
   

  	
  6.8

  	
  Knowledge of Fact by Participant Imputed to Beneficiary

  	
  16

  
	
   

  	
   

  	
  6.9

  	
  Deferral of Payment

  	
  16

  

 

 

	
  ARTICLE 7

  	
   

  	
  ADMINISTRATION

  	
  16

  
	
   

  	
   

  	
  7.1

  	
  Administrator

  	
  16

  
	
   

  	
   

  	
  7.2

  	
  Benefits Not Transferable

  	
  17

  
	
   

  	
   

  	
  7.3

  	
  Benefits Not Secured

  	
  17

  
	
   

  	
   

  	
  7.4

  	
  RLI’s Obligations

  	
  17

  
	
   

  	
   

  	
  7.5

  	
  Withholding Taxes

  	
  18

  
	
   

  	
   

  	
  7.6

  	
  Service of Process

  	
  18

  
	
   

  	
   

  	
  7.7

  	
  Limitation on Liability

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 8

  	
   

  	
  AMENDMENT
  AND TERMINATION

  	
  18

  
	
   

  	
   

  	
  8.1

  	
  Amendment

  	
  18

  
	
   

  	
   

  	
  8.2

  	
  Termination

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 9

  	
   

  	
  MISCELLANEOUS

  	
  19

  
	
   

  	
   

  	
  9.1

  	
  Effect on Other Plans

  	
  19

  
	
   

  	
   

  	
  9.2

  	
  Effect on Employment

  	
  19

  
	
   

  	
   

  	
  9.3

  	
  Disqualification

  	
  19

  
	
   

  	
   

  	
  9.4

  	
  Rules of Document Construction

  	
  19

  
	
   

  	
   

  	
  9.5

  	
  References to Laws

  	
  19

  
	
   

  	
   

  	
  9.6

  	
  Choice of Law

  	
  19

  
	
   

  	
   

  	
  9.7

  	
  Binding Effect

  	
  19

  
						

 

 

RLI CORP. KEY EMPLOYEES

EXCESS BENEFIT PLAN

 

ARTICLE 1

 

INTRODUCTION

 

1.1                               Establishment.

 

1.1.1                     Establishment.  RLI established the RLI Corp. Key Employees
Excess Benefit Plan effective January 1, 2004.  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 on April 10, 2007.

 

1.1.2                     Transition
Rules.

 

(a)                                  Before 2004.  For
Years ending before 2004, benefits for the Chairman of the Board and the Chief
Executive Officer of RLI accrued under certain Prior Agreements, which restored
contributions and forfeitures that could not be provided under the ESOP.

 

(b)                                 For 2004.  For the
2004 Year, benefits for the Chairman of the Board and the Chief Executive
Officer of RLI shall accrue under the Prior Agreements and under this Plan, as
follows:

 

(1)                                  ESOP.  Benefits to
restore contributions and forfeitures that cannot be provided under the ESOP
shall accrue under the Prior Agreements in accordance with the terms of the
Prior Agreements.

 

(2)                                  401k Plan.  Benefits
to restore contributions and forfeitures that cannot be provided under the 401k
Plan shall accrue under this Plan in accordance with the terms of this Plan.

 

(c)                                  After 2004.  For Years
commencing after 2004, benefits for the Chairman of the Board and the Chief
Executive Officer of RLI shall accrue under this Plan to restore contributions
and forfeitures that cannot be provided under both Qualified Plans, and no
additional benefits shall accrue under the Prior Agreements.  All obligations under the Prior Agreements
with respect to ESOP contributions and forfeitures for Years ending before 2005
shall be satisfied under the Prior Agreements, rather than under this Plan.

 

1.2                               Purpose.  The purpose of the Plan is to restore
retirement benefits to those eligible Employees whose contributions and
forfeitures under the Qualified Plans are reduced by the limitations imposed by
the Code §§ 401(a)(17) and 415A or by reason of their electing to defer receipt
of compensation that would otherwise be taken into account in calculating
contributions and forfeitures under the Qualified Plans.

 

 

1.3                               Definitions.  When the following terms are used herein with
initial capital letters, they shall have the following meanings:

 

1.3.1                     401k Plan
— the RLI Corp 401k Plan, as the same may be amended from time to time.

 

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

 

1.3.3                     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 § 4l4(b), (c) and (m).

 

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

 

1.3.7                     Committee
— the Executive Resources Committee of the Board.

 

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

 

1.3.9                     Employer
Provided Contribution — the amounts contributed to a Qualified Plan by RLI
on behalf of a Participant, specifically:

 

(a)                                  The
“ESOP Contribution” as defined in the ESOP, and

 

(b)                                 The
“Basic Contribution” and “Profit Sharing Contribution” as defined in the 401k
Plan.

 

Employer Provided Contributions do not include any “401k Contributions”,
“401k Catch-Up Contributions”, “Rollover Contributions”, as defined in the 401k
Plan, or any other amounts defined under or contributed to the Qualified Plans
by the Participant.

 

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

 

1.3.11              ESOP — the RLI
Corp. Employee Stock Ownership Plan, as the same may be amended from time to
time.

 

1.3.12              Participant — an
Employee who becomes a Participant in the Plan under Sec. 2.1.  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

 

2

 

(b)                                 The
Participant’s death.

 

1.3.13              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. Key Employees Excess Benefit
Plan.”

 

1.3.14              Prior Agreement
— an individual agreement entered into by an Employee and RLI before January 1,
2004, to provide key employee excess benefits to the Employee.

 

1.3.15              Qualified Plans
— the ESOP and the 401k Plan.

 

1.3.16              RLI — RLI
Corp.  and any Successor Employer.

 

1.3.17              RLI Stock — the
common stock of RLI.

 

1.3.18              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.

 

1.3.19              Successor Employer
— 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.

 

1.3.20              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 the 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 

 

3

 

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).

 

Notwithstanding anything in Section 2.1.2 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.

 

1.3.21              Vested —
nonforfeitable.

 

1.3.22              Year — the
calendar year.

 

1.4                               Type
of Plan.

 

1.4.1                     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.

 

1.4.2                     Separate
Excess Benefit Plan.  To the extent
that a separable part of the Plan is maintained for the purpose of providing
benefits for eligible Employees in excess of the limitations on contributions
and benefits imposed by Code § 415, that part shall be treated as a separate
plan which in an “excess benefit plan” within the meaning of ERISA § 3(36) and
which is exempt from the participation, vesting, benefit accrual, funding and
fiduciary provisions of ERISA.

 

1.4.3                     Nonqualified
Deferred Compensation Plan.  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 Committee, in its
sole discretion, shall determine from time to time the Employees who will be
Participants in the Plan, provided that each such Employee must:

 

4

 

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

 

(b)                                 Be
expected to have compensation in excess of the Code § 401 (a)(17) limit in the
Participant’s initial year of participation.

 

An employee selected by the Committee will become a Participant on the January 1
following the date the Participant is selected by the Committee.  However, for the 2004 Year, each selected
Employee shall become a Participant on January 1, 2004.

 

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

 

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                     Contribution
Credits.

 

(a)                                  Amount.  A Participant’s
contribution credit for a Year with respect to each Qualified Plan is an amount
equal to A minus B, where:

 

“A” =                The amount of Employer Provided
Contributions that would have been contributed to the Qualified Plan on behalf
of the Participant for the Year if such Employer Provided Contributions were
determined without regard to:

 

(i)                                     The limit on
compensation taken into account under the Qualified Plan under Code §
401(a)(17);

 

(ii)                                  The limit on annual
additions under the Qualified Plan under Code § 415(c); and

 

(iii)                               The exclusion of amounts
deferred by the Participant under the RLI Executives Deferred Compensation Plan
from the compensation base used to determine the Employer Provided
Contributions under the Qualified Plan.

 

5

 

“B” =                  The amount of
Employer Provided Contributions actually contributed to the Qualified Plan on
behalf-of the Participant for the Year.

 

(b)                                 Time.  The amount of
the Participant’s contribution credit for the Year with respect to each
Qualified Plan shall be credited to the Participant’s Account on, or as soon as
administratively practicable after, the date such amount would otherwise have
been contributed to the Qualified Plan. 
The 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.

 

(c)                                  2004 Transition.  Notwithstanding the foregoing, the
contribution credits for the 2004 Year for any Participant who was covered
under a Prior Agreement shall be limited to the amount determined with respect
to the 401(k) Plan.  No contribution
credits shall be added to such Participant’s Account under this Plan for the
2004 Year with respect to the ESOP.

 

3.2.2                     Forfeitures.

 

(a)                                  Amount.  A Participant’s forfeiture credit for a Year
with respect to each Qualified Plan  is an amount
equal to A minus B, where:

 

“A” =                The amount of forfeitures that would
have been allocated to the Participant’s account under the Qualified Plan for
the Year if such allocation were determined without regard to:

 

(i)                                     The limit on
compensation taken into account under the Qualified Plan under Code § 401
(a)(17);

 

(ii)                                  The limit on annual
additions under the Qualified Plan under Code § 415(c); and

 

(iii)                               The exclusion of amounts
deferred by the Participant under the RLI Corp. Executives Deferred
Compensation Plan from the compensation base used to allocate forfeitures under
the Qualified Plan.

 

“B” =                  The amount of
forfeitures actually allocated to the Participant’s account under the Qualified
Plan for the Year.

 

(b)                                 Time.  The amount of
the Participant’s forfeiture credit for the Year with respect to each Qualified
Plan shall be credited to the Participant’s Account on, or as soon as
administratively practicable after, the date such amount would otherwise have
been allocated under the Qualified Plan. 
The 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.

 

6

 

(c)                                  2004 Transition. 
Notwithstanding the foregoing, the forfeiture credits for the 2004 Year
for any Participant who was covered under a Prior Agreement shall be limited to
the amount determined with respect to the 401(k) Plan, No forfeiture
credits shall be added to such Participant’s Account under this Plan for the
2004 Year with respect to the ESOP.

 

3.2.3                     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 purpose,
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.

 

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, 

 

7

 

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.  Such an
election will only be effective to defer amounts earned after the election is
made, and not before.

 

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 Participant 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, such 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 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.

 

8

 

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.

 

(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

 

9

 

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

 

10

 

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.

 

11

 

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
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 m 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.)

 

12

 

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

 

(c)                                  The Participant’s
estate.

 

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.

 

13

 

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.

 

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

 

14

 

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 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 or 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.

 

15

 

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 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:

 

16

 

(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.

 

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, such
individual 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 Participant or Beneficiary, 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

 

17

 

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 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.

 

18

 

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 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 caused the Plan to
be executed by its duly authorized officers as of the
                    
day of                         .

 

 

	
   

  	
  RLI CORP

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
       Its VP, Corporate Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  And

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
       Its Asst. Corporate Secretary

  

 

19Exhibit 10.9

 

RLI INCENTIVE COMPENSATION PLAN

EFFECTIVE JANUARY 1, 2009

 

I.              ESTABLISHMENT AND PURPOSE

 

RLI Corp. (the “Company”) established the RLI
Incentive Compensation Plan (the “Plan”), effective January 1, 2006 , for
the benefit of its employees and employees of its Affiliates.  The Plan was intended to amend, consolidate
and restate certain prior incentive compensation plans established by the
Company.  The terms of the Plan, as set
forth herein, shall apply to Awards granted under the Plan on and after the
Effective Date.  Awards granted under the
Company’s incentive compensation plans in effect prior to the Effective Date
shall be governed by the terms of such plans. 
The Company hereby restates the Plan effective January 1, 2009 (the
“Effective Date”)  to comply with the
requirements of the final regulations issued under Section 409A of the
Code (“Section 409A”) on April 10, 2007.

 

The Plan is intended to align incentive
compensation with achieving the financial performance factors on which the Company’s
market value is driven.  The Plan is also
designed to promote the accomplishment of management’s primary annual
objectives as reflected in the Company’s annual operating plan and in the
objectives established by management for employees, and to recognize the
achievement of management’s objectives through the payment of incentive
compensation.

 

The Plan provides for incentive payments to employees based upon the
achievement of pre-established performance goals.  The performance goals may be annual or multi-year
goals.  Incentive compensation payable
under the Plan is intended to be deductible by the Company in accordance with Section 162(m) of
the Internal Revenue Code of 1986, as amended (the “Code”).  The Company may adopt a variety of bonus and
incentive programs under the Plan provided such programs are based on the
performance goals described herein.

 

II.            DEFINITIONS

 

For purposes of the Plan, unless the context
otherwise requires, the following terms shall have the meanings set forth
below.

 

2.1           “Affiliate”
means any corporation that is part of a controlled group within the meaning of
Code Section 414(b) or (c).

 

2.2           “Award”
means an award of incentive compensation under the Plan to a Participant in
accordance with the terms set forth herein.

 

12/12/2008

 

 

2.3           “Board”
means the Board of Directors of the Company as constituted at the relevant
time.

 

2.4           “Board
Approval Limit” means a predetermined Award level at which the independent
directors of the Board approve Awards in accordance with Section 5.3(c).

 

2.5           “Bonus
Bank” means a deferred payment arrangement established under Section 6.2.

 

2.6           “Bonus
Payment Date” means February 1st. 
Any payment that is due to be distributed as of the Bonus Payment Date
will be deemed to be distributed as of that date if it is distributed on such
date or, if later, by the 15th day of March 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 the Bonus Payment 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.

 

2.7           “Bonus
Pool” means an amount available for distribution to Participant’s who have
been assigned an interest in the Bonus Pool (e.g. Market Value Potential bonus
pool arrangement in effect as of the Effective Date.). The amount of the Bonus
Pool will be determined by the Committee based on the Performance Goals.

 

2.8           “Cause”
means termination for reasons described in Section 6.3.

 

2.9           “Code”
means the Internal Revenue Code of 1986, as amended.

 

2.10         “Committee”
means the Executive Resources Committee of the Board, as constituted at the
relevant time, which shall consist of two or more “outside directors” within
the meaning of Section 162(m) of the Code who are not eligible for
participation in the Plan.

 

2.11         “Company”
means RLI Corp., an Illinois corporation.

 

2.12         “Disability
or Disabled,” with respect to a Participant, means that the Participant
satisfies the requirements to receive long-term disability benefits under the
Company-sponsored group long-term disability plan in which the Participant
participates without regard to any waiting periods, or that the Participant has
been determined by the Social Security Administration to be eligible to receive
Social Security disability benefits.  A
Participant shall not be considered to be “Disabled” unless the Participant
furnishes proof of the Disability to the Company in such form and manner as the
Company may require.

 

2.13         “Eligible
Employee,” for any Performance Period, means a 162(m) Employee and
such other employees of the Company and its Affiliates as may be designated to
participate in the Plan for such Performance Period.  An employee who is 

 

2

 

designated as eligible to participate in the Plan for a particular
Performance Period is not necessarily eligible to participate in the Plan for
any other Performance Period.

 

2.14         “Effective
Date” means January 1, 2009.

 

2.15         “Fiscal
Year” means the calendar year.

 

2.16         “Normal
Retirement Date,” of a Participant, means the date on which the Participant
has attained both (i) combined age and years of service with the Company
of seventy-five and (ii)  and at least 10 years of service.  For this purpose, Company service will be
based only on Participant’s actual service with the Company (and not any other
employer that may be acquired by the Company with respect to service prior to
the acquisition) and shall be calculated based on the number of whole
employment years the Participant has completed from the date of Participant’s
initial employment with the Company.  No
credit shall be given for fractional years of service.

 

2.17         “162(m) Employee,”
for any Fiscal Year, means any employee described in Code Section 162(m)(3).

 

2.18         “Participant,”
for any Performance Period, means an Eligible Employee and who has commenced
participating in the Plan for such Performance Period.

 

2.19         “Performance
Goals,” of a Participant for a Performance Period, are the goals
established for the Performance Period, the achievement of which is a condition
for receiving an Award under the Plan.

 

In the case of a Participant who is a 162(m) Employee,
all Performance Goals must be pre-established by the Committee, must be
objective, and must state, in terms of an objective formula or standard, the
method for computing the amount of compensation payable if the goal is
attained.  A Performance Goal is
considered “pre-established” for purposes of this paragraph if it is
established in writing by the Committee no later than 90 days after the
commencement of a Performance Period, provided that the outcome is
substantially uncertain at the time the Committee actually establishes the
goal.  However, in no event will a
Performance Goal be considered to be pre-established if it is established after
25% of a Performance Period has elapsed. 
A Performance Goal is considered “objective” if a third party having
knowledge of the relevant facts could determine whether the goal is met.  A formula or standard is considered “objective”
if a third party having knowledge of the relevant performance results could
calculate the amount to be paid to the Participant.  A Performance Goal may be adjusted in
accordance with Code Section 162(m) during a Performance Period to
prevent dilution or enlargement of an Award as a result of extraordinary events
or circumstances as determined by the Committee or to exclude the effects of
extraordinary, unusual or nonrecurring events, changes in accounting
principles, discontinued operations, acquisitions, divestitures and material
restructuring charges.

 

3

 

Performance Goals may be based on one or more
of the following criteria and may be based on attainment of a particular level
of, or on a positive change in, a factor: 
revenue, revenue per employee, earnings before income tax (profit before
taxes), earnings before interest and income tax, net earnings (profit after
taxes), earnings per employee, earnings per share, operating income, total
shareholder return, market share, return on equity, before-tax return on net
assets, after-tax return on net assets, economic value added (economic profit),
market value potential, and underwriting profit.  Such criteria may relate to one or any
combination of two or more of Company, Affiliate, division or individual
performance.

 

2.20         “Performance
Period” means, generally, the Fiscal Year. 
However, the Committee may, its discretion, designate a shorter or
longer Performance Period.

 

2.21         “Plan
Administrative Committee” means the Chief Executive Officer, Chief
Financial Officer, Chief Operating Officer, and Chief Human Resources Officer
of the Company or such other officers as the Committee may designate from time
to time.

 

2.22         “Retirement,”
of a Participant, means the Participant’s Termination of Employment with the
Company and all Affiliates on or after his Normal Retirement Date.

 

2.23         “Salary,”
of a Participant for a Performance Period means the annualized base
compensation payable to a Participant determined by the salary rate in effect
on the last day of the Performance Period. 
The salary rate shall be determined without regard to reductions or
deferrals of compensation under qualified and nonqualified plan or welfare
benefit plan.  The salary rate shall be
determined without regard to fringe benefits, bonuses or other payments in
addition to Participant’s base compensation.

 

2.24         “Target
Performance Award” means a dollar amount (which may be expressed as a
percentage of Salary) established for a Participant if the Performance Goal for
the Participant is achieved.  The Target
Performance Award may also state the maximum amount that may actually be paid
to the Participant under Section 5.3 (which may be expressed as a
percentage of Salary.)

 

2.25         “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 

 

4

 

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).

 

Notwithstanding anything in Section 2.1.2
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.

 

III.           ADMINISTRATION

 

3.1           Duties
of Committee.  The Committee will
administer the Plan.  Any actions taken
by the Committee shall be by a majority vote of all Committee members.  The Committee may establish such rules and
regulations as it deems necessary for the Plan and its interpretation.  In addition, the Committee may make such
determinations and take such actions in connection with the Plan as it deems necessary.  Each determination made by the Committee in
accordance with the provisions of the Plan will be final, binding and
conclusive. The Committee may rely on the financial statements certified by the
Company’s independent public accountants.

 

3.2           Duties
of Plan Administrative Committee. 
Except as provided in Section 3.3, the Committee may delegate some
or all of its administrative powers and responsibilities under the Plan to the
Plan Administrative Committee. Unless the Committee determines otherwise, the
Committee shall be treated as delegating its authority to the Plan
Administrative Committee to the full extent permitted hereunder.  The Plan Administrative Committee may make
such determinations and take such actions within the scope of such delegation
and as otherwise provided in the Plan, as it deems necessary.  The Plan Administrative Committee may further
delegate any duties delegated to it pursuant to this 

 

5

 

Section 3.2 to other officers or employees
of the Company and any such delegation may allow for further delegation to
other officers or employees.   Each
determination made by the Plan Administrative Committee, or its delegate, will
be final, binding and conclusive. The Plan Administrative Committee and its
delegates may rely on the financial statements certified by the Company’s
independent public accountants. 
Notwithstanding any such delegation, the Committee may review and change
any decision made by the Plan Administrative Committee or its delegate.

 

3.3           Committee’s
Duties with Respect to 162(m) Employees and to Amend or Terminate Plan.  Notwithstanding anything in the Plan to the
contrary:  (a) the Committee shall
have sole and exclusive authority to (i) establish the Performance Goals
for all 162(m) Employees, (ii) determine and certify the achievement
of the Performance Goals for all 162(m) Employees, (iii) decrease the
amount of Awards payable to all 162(m) Employees pursuant to Section 5.2
and 5.3, and (iv) to modify, suspend, terminate or reinstate the Plan.

 

IV.           ELIGIBILITY TO PARTICIPATE

 

Participation in the Plan is limited to
Eligible Employees.  An employee who is a
162(m) Employee for a Performance Period shall be eligible to participate
in the Plan for the Performance Period. 
Prior to, or within an administratively reasonable period of time
following, the beginning of a Performance Period, the Plan Administrative
Committee, or its delegate, shall determine which other employees are Eligible
Employees for the Performance Period.  The Committee has final authority to approve
or disapprove the selection of any Eligible Employee.  An Eligible Employee (other than a 162(m) Employee)
shall become a Participant only upon approval by the Plan Administrative
Committee or it’s delegate and compliance with such terms and conditions as the
Committee or Plan Administrative Committee may from time to time establish for
the implementation of the Plan.

 

V.            CALCULATION OF AWARDS

 

A Participant’s Award for a Performance
Period is determined as follows:

 

5.1           Establishing
Performance Goals and Target Performance Awards and Board Approval Limits.  Prior to the beginning of a Performance
Period or as soon thereafter as administratively reasonable, but no later than
the time permitted under Code Section 162(m), the Committee (in the case
of Participants who are 162(m) Employees) and the Plan Administrative
Committee, or its delegate, (in the case of all other Participants), shall
establish the Performance Goal or Goals and each Participant’s Target Performance
Award.  Alternatively the Committee (in
the case of Participants who are 162(m) Employees) and the Plan
Administrative Committee, or its delegate (in the case of all other
Participants), may establish a Bonus Pool for one or more Participants and assign
Participants an interest in the Bonus Pool. 
In addition, the Committee shall establish a Board Approval Limit for
each Award made to a 162(m) Employee.

 

6

 

5.2           Calculation
of Awards. Following the close of a Performance Period, the Committee (in
the case of the 162(m) Employees) and the Plan Administrative Committee
(in the case of all other Participants) shall determine the actual Award
payable to a Participant by (i) multiplying the percentage achievement of
the Performance Goal against the Target Performance Award to determine the
Participant’s Award for the Performance period or (ii) multiplying the
Participant’s interest in any Bonus Pool by the final amount of the Bonus Pool.
No Award will be paid to a Participant if the percentage achievement of a
Performance Goal is below any minimum level of performance established for such
Performance Goal.  In no event shall the
aggregate of all Award payments (including the amount of any Award credited to
a Bonus Bank) with respect to a Participant in any Fiscal Year exceed
$7,500,000.

 

5.3           Adjustments
and Certifications of Awards.  Once
the determination in section 5.2 is made, the Committee, in the case of a
Participant who is a 162(m) Employee, and the Plan Administrative
Committee or its delegate in all other cases, shall:

 

(a)           Review the amount of each Award and
make any adjustments it, in its sole discretion, deems appropriate to the
amount of the Award.  In general, each
Participant’s Award will be the amount pre-established (when the Performance
Goals were established) for achievement of the Performance Goals at the
achievement levels described in Section 5.1.  However, at the discretion of the Plan
Administrative Committee, this amount may be increased (except in the case of a
Participant who is a 162(m) Employee) or decreased based upon such
objective or subjective criteria, as it deems appropriate.  The Committee, in its discretion, may
decrease (but not increase) the amount in the case of a 162(m) Employee
based upon such objective or subjective criteria as it deems appropriate; and

 

(b)           In the case of a Participant who is a
162(m) Employee, the Committee shall certify the extent to which the
Participant has satisfied each of the Performance Goals and all other material
terms of an Award.

 

(c)           In the case of any Award subject to a
Board Approval Limit, the independent directors serving on the Board may reduce
the actual Award, but not below the Board Approval Limit established by the
Committee.

 

VI.           PAYMENT OF AWARDS

 

6.1           Timing
of Award Payment.  Except as provided
in Section 6.2, a Participant’s Award for a Performance Period shall be
paid in a cash lump sum to him or her no later March 15 following the end
of the Fiscal Year in which the Performance Period ends.  A Participant who is also eligible to
Participate in the RLI Corp. Executive Deferred Compensation Plan may elect to
defer some or all of any amount otherwise payable to him or her under this Section 6.2
to the extent permitted by such plan.

 

7

 

6.2           Bonus
Bank.  The Committee may specify that
a portion of an Award will be credited to a Bonus Bank immediately prior to the
beginning of a Performance Period. Any such Award will be in writing and shall
specify a fixed schedule of payments and such other terms and conditions as the
Committee or Plan Administrative Committee may choose.  The terms of the Award may provide that
amounts credited to the Bonus Bank may be reduced if Performance Goals in a
subsequent Performance Period are not met. 
Amounts deposited to the Bonus Bank will be credited with interest
equivalent to the interest rate on three year U.S. Government Treasury Bills in
effect at the beginning of the fiscal year.

 

6.3           Change
in Employment Status During Performance Period.  In general, in order to receive a payment a
Participant must be employed by the Company or Affiliate on (i) the date
of actual payment with respect to an Award that is not held under a Bonus Bank
and (ii) the date of actual payouts from a Bonus Bank arrangement.  If the Participant’s employment is terminated
during a Performance Period due to death, Retirement, or Disability, the
Participant (or the Participant’s beneficiary in the case of the Participant’s
death) will be entitled to receive a pro rata portion of the Award only if the
Award expressly provides for such payment. 
If the Participant’s employment is terminated at a time when a
Participant has a balance in a Bonus Bank due to death or Disability, the
Participant (or the Participant’s beneficiary in the case of the Participant’s
death) will be entitled to receive a payment equal to the balance of the Bonus
Bank adjusted for interest through the end of the preceding quarter within 30
days of termination.  Notwithstanding
anything in this Section 6.3 to the contrary, a Participant shall not be
entitled to any Award for a Performance period if the Participant’s employment
is terminated by the Company or Affiliate for “Cause” during the Performance
Period.  For these purposes “Cause” shall
mean the Participant’s:  (a) failure
to comply with any material policies and procedures of the Company or
Affiliate; (b) conduct reflecting dishonesty or disloyalty to the Company
or Affiliate, or which may have a negative impact on the reputation of the
Company or Affiliate; (c) commission of a felony, theft or fraud, or
violations of law involving moral turpitude; (d) failure to perform the
material duties of his or her employment; (e) excessive absenteeism; (f) unethical
behavior; or (g) violation of a material policy of the Company.  If a Participant’s employment is terminated
for “Cause,” the date on which the Participant’s employment is considered to be
terminated, for purposes of this Section 6.3, shall be the time at which
such Participant is instructed or notified to cease performing job
responsibilities for the Company or any Affiliate, whether or not for other
reasons, such as payroll, benefits or compliance with legal procedures or
requirements, he or she may still have other attributes of an employee.

 

6.4           Beneficiary.  In the event that any amount becomes payable
under the Plan by reason of the Participant’s death, such amount shall be paid
to the same beneficiary or  beneficiaries
(and in the same proportions) as last designated by the Participant to receive
benefits under the Company basic life insurance plan upon the Participant’s
death.  Such amount shall be paid to the
beneficiary or beneficiaries at the same time such amount would have been paid
to the Participant had he or she survived. 
In order for such designation to be valid for purposes of the Plan, it
must be completed and filed with the 

 

8

 

Company according to the rules established
by the Company for the Company basic life insurance plan.  If the Participant has not completed a
beneficiary designation for the Company basic life insurance plan, or all such
beneficiaries have predeceased the Participant, then any amount that becomes
payable under the Plan by reason of the Participant’s death shall be paid to
the personal representative of the Participant’s estate.  If there is any question as to the legal
right of any person to receive a distribution under the Plan by reason of the
Participant’s death, the amount in question may, at the discretion of the
Committee, be paid to the personal representative of the Participant’s estate,
in which event the Company shall have no further liability to anyone with
respect to such amount.

 

6.5           Forfeiture.  All Awards paid to the Chief Executive
Officer and Chief Financial Officer of the Company under this Plan are subject
to forfeiture as provided in Section 304 of the Sarbanes-Oxley Act of
2002, and the implementing rules and regulations.

 

VII.          MISCELLANEOUS

 

7.1           No
Guaranty of Employment.  Neither the
adoption nor maintenance of the Plan, the designation of an employee as an
Eligible Employee, the setting of Performance Goals, nor the provision of any
Award under the Plan shall be deemed to be a contract of employment between the
Company or an Affiliate and any employee. 
Nothing contained in the Plan shall give any employee the right to be
retained in the employ of the Company or an Affiliate or to interfere with the
right of the Company or an Affiliate to discharge any employee at any time, nor
shall it give the Company or an Affiliate the right to require any employee to
remain in its employ or to interfere with the employee’s right to terminate
employment at any time.

 

7.2           Release.  Any payment of an Award to or for the benefit
of a Participant or beneficiary that is made in good faith by the Company in
accordance with the Company’s interpretation of its obligations hereunder shall
be in full satisfaction of all claims against the Company for payments under
the Plan to the extent of such payment.

 

7.3           Notices.  Any notice provided by the Company under the
Plan may be posted to a Company-designated web-site.

 

7.4           Nonalienation.  No benefit payable at any time under the Plan
shall be subject in any manner to alienation, sale, transfer, assignment,
pledge, levy, attachment, or encumbrance of any kind by any Participant or
beneficiary.

 

7.5           Plan
is Unfunded.  All Awards under the
Plan shall be paid from the general assets of the Company.  No Participant shall be deemed to have, by virtue
of being a Participant in the Plan, any claim on any specific assets of the
Company such that the Participant would be subject to income taxation on any
Award prior to distribution to him or her, and the rights of a Participant or
beneficiary to any payment to which he or 

 

9

 

she is otherwise entitled under the Plan shall be those of an unsecured
general creditor of the Company.

 

7.6           Tax
Liability.  The Company may withhold
from any payment of Awards or other compensation payable to or on behalf of a
Participant or beneficiary such amounts as the Company determines are
reasonably necessary to pay any taxes required to be withheld under applicable
law.

 

7.7           Captions.  Article and section headings and captions
are provided for purposes of reference and convenience only and shall not be
relied upon in any way to construe, define, modify, limit, or extend the scope
of any provision of the Plan.

 

7.8           Invalidity
of Certain Plan Provisions.  If any
provision of the Plan is held invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision of the Plan and the Plan
shall be construed and enforced as if such provision had not been included.

 

7.9           Venue.  As a substantial portion of the duties and
obligations of the parties created by the Plan will be performed in Peoria,
Illinois, it shall be the sole and exclusive venue for any arbitration,
litigation, special proceedings, or other proceedings between the parties in
connection with the Plan.

 

7.10         Hold
Harmless.  A Participant shall hold
the Company harmless from and pay any cost, expense or fee (not to exceed the
bank balance) incurred by the Company with respect to any claim, due or demand
asserted by any person, except the Company against any amounts due Participant
under the Plan.

 

7.11         No
Other Agreements.  The terms and
conditions set forth herein constitute the entire understanding of the Company
and the Participants with respect to the matters addressed herein.

 

7.12         Incapacity.  In the event that any Participant is unable
to care for the Participant’s affairs because of illness or accident, any
payment due may be paid to the Participant’s duly qualified guardian or other
appointed legal representative.

 

7.13         Applicable
Law.  The Plan and all rights under
it shall be governed by and construed according to the laws of the State of
Illinois.

 

 

	
  Date:
                            ,
  2006

  	
  RLI CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Chief Executive Officer

  

 

 

10

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00153-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00153-of-00352.parquet"}]]