Rli Corp. Key Employees Excess Benefit Plan

RLI CORP. KEY EMPLOYEES
EXCESS BENEFIT PLAN



ARTICLE 1



INTRODUCTION





1.1. Establishment.



1.1.1. New Plan. RLI has established this Plan effective January 1, 2004.



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 a7a7 401(a)(17) and 415A or by reason of their electing to defer receipt of compensation that would otherwise 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 97 the RLI Corp. 401k Plan, as the same may be amended from time to time.






1.3.2. Account 97 the separate recordkeeping account (unfunded and unsecured) maintained for each Participant in connection with his/her participation in the Plan.



1.3.3. Affiliate 97 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 a7 414(b), (c) and (m).



1.3.4. Beneficiary 97 the person or persons designated as such under Sec. 5.2.



1.3.5. Board 97 the Board of Directors of RLI.



1.3.6. Code 97 the Internal Revenue Code of 1986, as the same may be amended from time to time.



1.3.7. Committee 97 the Executive Resources Committee of the Board.



1.3.8. Employee 97 a common-law employee of RLI or an Affiliate (while it is an Affiliate).



1.3.9. Employer Provided Contribution 97 the amounts contributed to a Qualified Plans 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 deferred under or contributed to the Qualified Plans by the Participant.



1.3.10. ERISA 97 the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time.



1.3.11. ESOP 97 the RLI Corp. Employee Stock Ownership Plan, as the same may be amended from time to time.



1.3.12. Participant 97 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 Participant92s Account balance after his/her Termination of Employment; or



(b) The Participant92s death.



1.3.13. Plan 97 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."



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1.3.14. Prior Agreement . 97 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 97 the ESOP and the 401k Plan.



1.3.16. RLI 97 RLI Corp. and any Successor Employer.



1.3.17. RLI Stock 97 the common stock of RLI.



1.3.18. Specified Employee 97 a "key employee" (as defined in Code a7 416(i) without regard to paragraph (5) thereof), as determined under Code a7 409(A)(2)(B)(i) or any regulations or other guidance issued by the Treasury Department thereunder.



1.3.19. Successor Employer 97 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 97 the Participant92s resignation, discharge, retirement, death, failure to return to active work at the end of an authorized leave of absence or the authorized extension or extensions thereof, failure to return to work when duly called following a temporary layoff, or upon the happening of any other event or circumstance which, under the policy of RLI or an Affiliate as in effect from time to time, results in the termination of the employer-employee relationship with RLI and its Affiliates. Notwithstanding anything provided above, a "Termination of Employment" will be deemed not to have occurred if the event or circumstance would not be considered a "separation from service" under Code a7 409A(a)(2)(A)(i) or any regulation or other guidance issued by the Treasury Department thereunder. In such case, a Termination of Employment will be deemed to have occurred at the earliest time allowed under Code a7 409A.



1.3.21. Vested 97 nonforfeitable.



1.3.22. Year 97 the calendar year.





1.4. Type of Plan .



1.4.1. Top-Hat Plan . The Plan is intended to be a "top-hat" plan 96 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 a7a7 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 a7 415, that part shall be treated as a separate plan which is an "excess benefit plan" within the meaning of ERISA a7 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 a7 409A. To the extent any provision of the Plan does not satisfy the requirements contained in Code a7 409A or in any regulations or other guidance



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issued by the Treasury Department under Code a7 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:



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



(b) Be expected to have compensation in excess of the Code a7 401(a)(17) limit in his/her initial year of participation.





An employee selected by the Committee will become a Participant on the January 1 following the date he/she 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 his/her 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 Participant92s Account will be maintained in full and fractional shares of RLI Stock.



3.2. Credits to Accounts. Each Participant92s Account shall be credited from time to time as provided in this section.



3.2.1. Contribution Credits.



(a) Amount . A Participant92s 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 a7 401(a)(17);



(ii) The limit on annual additions under the Qualified Plan under Code a7 415(c); and



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



"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 Participant92s contribution credit for the Year with respect to each Qualified Plan shall be credited to the Participant92s 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 Participant92s 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 Participant92s Account under this Plan for the 2004 Year with respect to the ESOP.



3.2.2. Forfeitures.



(a) Amount . A Participant92s 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 Participant92s 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 a7 401(a)(17);



(ii) The limit on annual additions under the Qualified Plan under Code a7 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 Participant92s account under the Qualified Plan for the Year.



(b) Time . The amount of the Participant92s forfeiture credit for the Year with respect to each Qualified Plan shall be credited to the Participant92s 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



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purchased with such amount on, or as soon as administratively feasible after, the date such amount is credited to the Participant92s Account.



(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 Participant92s Account under this Plan for the 2004 Year with respect to the ESOP.



3.2.3. Dividends and Other Adjustments. The Participant92s 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 Participant92s Account. For this purposes, the share price on, or as soon as administratively practicable after, the date the dividend is paid will be used. The Account also will be adjusted for any stock split, redemption or similar event, in a manner determined to be reasonable by RLI.





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



ARTICLE 4



BENEFITS





4.1. Vesting . The Participant92s Account shall be fully (100%) Vested.



4.2. Early Payment for Unforeseeable Emergency. A Participant may receive a payment from his/her Account in the event of an Unforeseeable Emergency. The payment will be made as soon as administratively practicable after the Participant92s written request is received and the Committee has determined the amount to be paid from the Account to alleviate the Unforeseeable Emergency. The Participant92s deferrals under the Plan will automatically stop in the event of a payment for Unforeseeable Emergency, and the Participant will not be allowed to enroll again until the first day of the second Year following the date of the payment. An "unforeseeable emergency" for this purpose means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, his/her spouse or a dependent (as defined in Code a7 152(a)), a loss of the Participant92s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, which is determined to qualify as an Unforeseeable Emergency by the Committee. Cash needs arising from foreseeable events such as the purchase of a residence or education expenses for children will not, by themselves, be c ...