Exhibit 4.3
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THE RLI CORP./EXECUTIVE
DEFERRED COMPENSATION AGREEMENT
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THIS RLI CORP./EXECUTIVE DEFERRED COMPENSATION AGREEMENT is made in duplicate
at Peoria, Illinois, effective on the Execution Date by and between RLI and
the Executive.
I. RECITALS
A. BACKGROUND: THE CORPORATION
RLI is a holding company which, through its subsidiaries, is engaged in the
Business, is possessed of the Accounting Year and reports its income and
expense on the Accounting Basis.
B. MVP EXECUTIVE PLAN
The Executive is a participant under the Market Value Potential Executive
Incentive Plan ("MVP Plan") incident to which the Executive may defer all or any
part of the cash bonus ("MVP Bonus") otherwise distributable to the Executive.
The Parties wish to supplement the MVP Plan with this Agreement which shall
control the distribution of any MVP Bonus otherwise distributable to the
Executive.
C. EXEMPTION FROM THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT
RLI has established the RLI Corp. Executive Deferred Compensation Irrevocable
Trust ("Trust") with an independent trustee ("Trustee") to which RLI may
periodically transfer shares of RLI and other assets designed to fund the
obligation of RLI to the Executive under this Agreement. Even though the Plan
Benefit may be satisfied from property transferred to the Trustee under the
Trust, this Agreement and the Plan Benefit are unfunded and are maintained
primarily for the purpose of providing deferred compensation for the
Executive.
If this Agreement is subject to the provisions of Title I of the Employee
Retirement Income Security Act of 1974 ("ERISA"), then subject to the filing
of the statement described in ERISA Labor Reg. Section 2520.104-23, this
Agreement shall be exempt from the participation, vesting, benefit accrual,
funding and fiduciary provisions of ERISA.
II. AGREEMENTS
NOW, THEREFORE, the Parties agree as follows:
1. REMUNERATION: DIRECT
RLI shall pay upon demand all reasonable expenses incurred by the Executive
incident to the Business.
Except as otherwise provided in the following sections, RLI shall pay the
Executive for services rendered as an employee of RLI or an Affiliate a base
salary ("Base Compensation") in an amount periodically determined to be
appropriate by the Parties, payable not less often than annually.
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2. REMUNERATION: BASE COMPENSATION DEFERRED
2.1 AMOUNT OF AND LIMITATIONS ON DEFERRED COMPENSATION
Subject to the limitations and the satisfaction of the conditions expressed
in the following sections, the Executive may defer not to exceed one hundred
percent (100%) of the Executive's Base Compensation attributable to services
to be rendered in respect of the period beginning on the Execution Date.
2.1(a) CURRENT ACCOUNTING YEAR: DELIVERY AND IRREVOCABILITY OF
DEFERRED COMPENSATION DIRECTION
Any Deferred Compensation Direction with respect to the period beginning on
the Execution Date and ending on December 31, 1998, must be delivered to RLI
prior to the expiration of the thirty (30) day period beginning on the
Execution Date and shall be irrevocable.
2.1(b) SUBSEQUENT ACCOUNTING YEAR: DELIVERY AND IRREVOCABILITY
OF DEFERRED COMPENSATION DIRECTION
Any Deferred Compensation Direction with respect to any Accounting Year
beginning on or after January 1, 1999, must be delivered to RLI prior to
January 1 of the subject Accounting Year and shall be irrevocable effective
December 31 of the preceding Accounting Year.
2.1(c) INVESTMENT OF BASE COMPENSATION DEFERRED
RLI shall transfer to the Trustee either cash or such number of shares of RLI
as shall be equal in value to the amount of the Base Compensation deferred
not less often than monthly and in any event within the thirty (30) day
period beginning on the close of the subject Accounting Year. RLI shall
direct the Trustee to purchase additional shares of RLI with any cash
dividend. The value of each share of RLI to be transferred shall be equal to
the closing price of a share of RLI as of the close of the last business day
of the referent month.
3. REMUNERATION: MVP BONUS DEFERRED
3.1 AMOUNT OF AND LIMITATIONS ON DEFERRED COMPENSATION
Subject to the limitations and the satisfaction of the conditions expressed
in the following sections, the Executive may defer not to exceed one hundred
percent (100%) of the Executive's MVP Bonus to the extent not then
ascertainable, subject to forfeiture or attributable to services to be
rendered in respect of the period beginning on the Execution Date.
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3.1(a) CURRENT ACCOUNTING YEAR: DELIVERY AND IRREVOCABILITY OF
DEFERRED COMPENSATION DIRECTION
Any Deferred Compensation Direction with respect to the period beginning on the
Execution Date and ending on December 31, 1998, must be delivered to RLI prior
to the expiration of the thirty (30) day period beginning on the Execution Date
and shall be irrevocable.
3.1(b) SUBSEQUENT ACCOUNTING YEAR: DELIVERY AND IRREVOCABILITY
OF DEFERRED COMPENSATION DIRECTION
Any Deferred Compensation Direction with respect to any Accounting Year
beginning on or after January 1, 1999, must be delivered to RLI prior to
January 1 of the subject Accounting Year and shall be irrevocable effective
December 31 of the preceding Accounting Year.
3.1(c) INVESTMENT OF MVP BONUS DEFERRED
RLI shall transfer to the Trustee either cash or such number of shares of RLI
as shall be equal in value to the amount of the MVP Bonus within the thirty
(30) day period beginning on the date the amount of the MVP Bonus is finally
determined. RLI shall direct the Trustee to purchase additional shares of RLI
with any cash dividend. The value of each share of RLI to be transferred
shall be equal to the closing price of a share of RLI as of the close of the
last business day of the referent month.
3.2 DISTRIBUTION OF PLAN BENEFIT
3.2(a) PLAN BENEFIT DISTRIBUTION COMMENCEMENT DATE
Except as otherwise provided in the following paragraphs, the Plan Benefit
shall commence to be distributed to the Executive not earlier than thirty
(30) days after a Distribution Event.
If the Executive is the subject of an Unforeseeable Emergency that is caused
by an event beyond the control of the Executive which Unforeseeable Emergency
would result in severe financial hardship to the Executive but for the
distribution of the Plan Benefit before the Distribution Event, then, subject
to the satisfaction of the conditions expressed in the following paragraph,
the Plan Benefit may be distributed to the Executive as, when and to the
extent specified by the Executive Resources Committee.
The Executive Resources Committee must approve the payment period in respect
of any distribution. No payment shall be made to the extent that a hardship
may be relieved (i) through reimbursement or compensation by insurance or
otherwise, (ii) by liquidation of the participant's assets, to the extent the
liquidation of such assets would not itself cause severe financial hardship,
or (iii) by cessation of deferrals under the Plan. No payment shall be made
in excess of the amount reasonably required to satisfy the Unforeseeable
Emergency determined with regard to any Federal or state income tax payable
with respect to any distribution.
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3.2(b) DISTRIBUTION PERIOD
Except as otherwise provided in Section 3.2(a) Plan Benefit Distribution
Commencement Date with respect to an Unforeseeable Emergency and the
following paragraphs, the Plan Benefit shall be distributed in sixty (60)
substantially equal monthly installments. If the Executive is the subject of
a fraud, a theft, or an embezzlement from or with respect to either RLI or an
Affiliate, RLI may suspend, reduce or otherwise alter any payment of the
Executive's Plan Benefit in full or partial satisfaction of any direct or
indirect damage sustained or reasonably foreseeable by RLI or any Affiliate
with respect to any such act or omission. If any dispute arising with respect
to this paragraph shall not be resolved by the Parties, such dispute shall be
subject to arbitration in accordance with the Federal Arbitration Act 9
U.S.C. 1, et seq. from a location in the City of Peoria designated by
the Parties.
Subject to the satisfaction of the conditions expressed in the following
sentences, the Executive Resources Committee may, in its sole and
unrestricted discretion, upon application of the Executive, or the
Executive's beneficiary, periodically alter or amend the period over which
the Plan Benefit shall be distributed. The Executive Resources Committee may
require the presentation of such evidence as the Executive Resources
Committee periodically determines to be appropriate. The decision of the
Executive Resources Committee or the decision of the Executive Resources
Committee not to review the application of the Executive or the Executive's
beneficiary, shall not be the subject of any review by the Executive.
3.2(c) FORM OF DISTRIBUTION
The Plan Benefit shall be distributed in the form of RLI shares. Unless the
shares have been registered under the Act, are otherwise exempt from the
registration requirements of such 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, 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.
3.2(d) BENEFICIARY
The Plan Benefit shall be distributed to the Executive and then to such
beneficiary as the Executive may periodically designate during the lifetime
of such beneficiary. If the Executive fails to designate a beneficiary or the
designated beneficiary dies before the Executive's Plan Benefit is fully
distributed, the undistributed balance shall be distributed to the
Executive's spouse, if living, and upon the death of the Executive's spouse,
to the Executive's then living descendants, per stirpes, and upon the death
of the last surviving descendant to the estate of the Executive.
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4. CLAIM PROCEDURE
This Agreement shall be administered by the Executive Resources Committee.
4.1 FILING OF A CLAIM FOR A PLAN BENEFIT
The Executive may present a claim for any Plan Benefit in writing to the
Executive Resources Committee. The Executive Resources Committee shall
determine the validity of any claim. If all or any part of the claim is
denied, a written notice of the denial will be provided to the Executive not
later than sixty (60) days following the receipt or filing of such claim. The
notice of denial must be expressed in a manner calculated to be understood by
the Executive and include the following: (a) the specific reason or reasons
for denial; (b) a specific reference to the pertinent Plan provisions on
which the denial is based; (c) description of any additional material or
information necessary for the Executive to perfect the claim; (d) an
explanation of why such material or information is necessary; and, (e) an
explanation of this review procedure.
4.2 APPEAL
Within ninety (90) days of the receipt by the Executive of written notice of
denial, or such later time as will be deemed reasonable, taking into account
the nature of any Plan Benefit claimed and any other circumstance, or if the
claim has not been granted within a reasonable period of time, the Executive
may file for a full review of the denial of the claim, including a hearing if
deemed necessary by the Board of Directors of RLI. In connection with such
review, the Executive may inspect pertinent documents and may submit issues
and comments in writing.
The Board of Directors of RLI will deliver to the Executive a written
decision on the review of the claim not later than sixty (60) days after the
receipt of the request for such review, except that if there are special
circumstances which require an extension of time for processing, the sixty
(60) day period will be extended to one hundred twenty (120) days. A decision
on review will be in writing and will include specific reasons for the
decision, written in a manner calculated to be understood by the Executive
and with specific references to the applicable provisions of this Agreement.
5. GENERAL CONDITIONS
5.1 ABSENCE OF FUNDING AND CREDITOR CLAIMS
Except as otherwise provided in the following sentence, this Agreement and the
Plan Benefit are unfunded, are subject to the claims of the general creditors of
RLI, may not be assigned, sold, anticipated, pledged or otherwise transferred
and shall not be subject to any claim of the Executive, the Executive's spouse,
their respective creditors, or their respective successors or assigns. The
foregoing sentence shall not relieve RLI of its obligation to pay the Plan
Benefit as, when and to the extent distributable pursuant to this Agreement.
5.2 ADDITIONAL DOCUMENTS REQUIRED
Each Party shall execute, acknowledge and deliver such additional documents,
writings or assurances as the other may periodically require so as to give full
force and effect to the terms and provisions of this Agreement.
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5.3 AMENDMENT AND TERMINATION
Subject to the limitation expressed in the following sentence, this Agreement
may be altered, amended or terminated by RLI upon the vote of its directors
other than the Executive. No alteration, amendment or termination of this
Agreement shall reduce any Plan Benefit existent prior to the date of any
such alteration, amendment or termination.
5.4 BINDING EFFECT
The terms and provisions of this Agreement shall be binding upon and shall
inure to the benefit of the Parties and their respective successors and
assigns.
5.5 CHOICE OF LAW
The laws of the State of Illinois shall govern the validity, interpretation
and administration of this Agreement.
5.6 COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original and all of which shall constitute but one and the
same instrument.
5.7 INCAPACITATED BENEFICIARY
If any beneficiary is Incapacitated, the Trustee may distribute such
beneficiary's Plan Benefit to such beneficiary's parent, guardian,
conservator, or to any individual with whom such beneficiary is residing
without responsibility for its expenditure.
5.8 INCORPORATION BY REFERENCE; SCHEDULES
The paragraphs under the heading "I. RECITALS:" and any Schedule referred to
in this Agreement are a part of this Agreement.
5.9 INTERPRETIVE GUIDELINES
The words and phrases set off by quotation marks in the GLOSSARY have the
meanings therein indicated. Any word or phrase which appears in this
Agreement in parenthesis, set off by quotation marks and capitalized has the
meaning denoted by its context. Whenever the words and phrases defined either
in the GLOSSARY or elsewhere in this Agreement are intended to have their
defined meanings, the first letter of such word or the first letters of all
substantive words in such phrase shall be capitalized. When the context
permits, a word or phrase used in the singular includes the plural, and when
used in any gender, its meaning also includes all genders. Captions of
Sections are inserted as a matter of convenience only and do not define,
limit or extend the scope or intent of this Agreement or any provision hereof.
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5.10 NOTICES
Any notice, request, communication and demand hereunder shall be in writing
and shall be deemed to have been duly given if delivered in person or sent by
registered or certified mail, postage prepaid, to RLI at its principal place
of business, or to such other address as RLI shall periodically designate by
written notice, and in the case of the Executive, to the Executive's last
known principal place of residence or to such other address as the Executive
shall periodically designate by written notice.
5.11 RECEIPT AND RELEASE FOR PAYMENTS
Any payment to the Executive, any beneficiary or any guardian for either
shall, to the extent thereof, be in full satisfaction of any claim hereunder
against RLI. RLI may require the distributee, as a condition precedent to
such payment, to execute a receipt and release thereof in such form as shall
be determined by RLI.
5.12 WAIVER
The waiver by either Party of any breach of this Agreement, whether in a
single instance or repeatedly, shall not be construed as a waiver of rights
under this Agreement to terminate the same because of similar or additional
breaches. Further such waiver shall not in any manner be construed as a
waiver by any Party to strictly adhere to the terms and conditions of this
Agreement, nor as a waiver of any claim for damages or other remedy by reason
of any such breach.
5.13 DISPUTE RESOLUTION
Any claim, due, demand or dispute arising out of or with respect to this
Agreement not otherwise resolved, shall be subject to arbitration in
accordance with the Federal Arbitration Act 9 U.S.C, ss.1, et seq. from a
location in the City of Peoria designated by RLI.
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with Section 6 GLOSSARY.]
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6. GLOSSARY
"Accounting Basis" means the accrual basis method of accounting.
"Accounting Year" means the twelve (12) consecutive month period beginning
January 1, which shall change as, when and to the extent the fiscal year of
RLI shall change.
"Act" means the Securities Act of 1933, as periodically amended.
"Affiliate" of any particular Person means any other Person controlling,
controlled by or under common control with such particular Person, where
"control" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the ownership
of voting securities, contract or otherwise.
"Base Compensation" is defined under Section 1 REMUNERATION: DIRECT.
"Business" means the underwriting of specialty property and casualty
insurance, and providing licensing services for agents and brokers .
"Business Organization" means a partnership, limited partnership, limited
liability company, estate, trust, or any other form of for-profit activity or
any combination of the foregoing.
"Capital Structure Change" means any stock dividend, stock split, reverse
stock split, or any other change in the number of outstanding RLI shares
occasioned by any reorganization, merger, consolidation, split-up,
combination or exchange, or any combination of the foregoing.
"Change in Control" means:
(a) any transfer, sale of substantially all of the shares or assets of
RLI, any exchange, reorganization, merger, recapitalization or other
capital adjustment, or any combination of the foregoing, incident to
which the shareholders before any such event shall own after such
event less than fifty-one percent (51%) of the issued and outstanding
shares of the surviving corporation, or less than fifty-one percent
(51%) of the capital or profits interest of any surviving Business
Organization; or
(b) any transaction or series of transactions after which a majority
of the board of directors of the surviving corporation or a majority
of the voting members of the surviving Business Organization may be
elected or appointed without the consent of the Executive or any
combination of the foregoing.
"Deferred Compensation Direction" means an instrument executed by the
Executive specifying (a) the amount, expressed in either a fixed dollar
amount or a percentage, of the Base Compensation which the Executive elects
to defer; (b) the amount, expressed in either a fixed dollar amount or a
percentage, of the MVP Bonus which the Executive elects to defer; and (c) any
other information as RLI may periodically request.
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"Disability" means the inability of the Executive, by reason of accident or
mental or physical illness reasonably expected to be of indefinite duration,
to continue to provide the services expressed in this Agreement as
conclusively determined by RLI.
"Distribution Event" means (a) the death of the Executive, (b) the Disability
of the Executive, (c) the termination of the Executive's employment with
either RLI or an Affiliate, or (d) a Change in Control.
"ERISA" is defined under I. RECITALS: C. EXEMPTION FROM THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT.
"Execution Date" means the date upon which this Agreement is signed by the
last Party to sign this Agreement.
"Executive" means the undersigned.
"Executive Resources Committee" means a committee of the members of the Board
of Directors of RLI other than the Executive.
"MVP Bonus" is defined under I. RECITALS: B. MVP EXECUTIVE PLAN.
"MVP Plan" is defined under I. RECITALS: B. MVP EXECUTIVE PLAN.
"Parties" means RLI and the Executive.
"Person" means any individual, partnership, corporation, unincorporated
organization, limited liability company, a government or any department or
agency thereof, or any combination of the foregoing.
"Plan Benefit" means the sum of (a) such number of shares of RLI transferred
to the Trustee pursuant to the Executive's Deferred Compensation Direction,
equitably adjusted for any Capital Structure Change; (b) any uninvested
dividends; and (c) any cash or cash equivalents.
"RLI" means RLI Corp.
"Securities Act" means any provision of ss.10(b) of the Securities Exchange
Act of 1934, as periodically amended.
"Trust" is defined under I. RECITALS: C. EXEMPTION FROM THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT.
"Trustee" is defined under I. RECITALS: C. EXEMPTION FROM THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT.
"Unforeseeable Emergency" means severe financial hardship to the Executive
resulting from a sudden illness or accident of the Executive or of a
dependent of the Executive, loss of the Executive's property due to a
casualty, or other similar extraordinary or unforeseeable circumstance
arising as a result of events beyond the control of a participant.
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with Section III. EXECUTION:.]
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III. EXECUTION
Dated at Peoria, Illinois as of the day and year noted above, on the Execution
Date noted below.
RLI: Executive:
RLI Corp. __________________________________
By: __________________________
Its: _____________________ Dated: ___________________________
Dated: _______________________
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DEFERRED COMPENSATION ELECTION
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1998 BASE COMPENSATION: I elect to defer:
(a) ___% (or $________) of my Base Compensation attributable to the
period beginning on the Execution Date and otherwise payable to me
during 1998; and,
(b) ___% (or $________) of my MVP Bonus, if any, attributable to the
period beginning on the Execution Date and otherwise payable to me
during 1999.
(c) ___% of my MVP Bonus, if any, attributable to the period beginning
on the Execution Date and otherwise payable to me during 1999,
exceeding $______________, not to exceed $_______________.
Dated: ____________, 1998. _____________________________________________
Executive
Received this ____ day of __________, 1998
RLI Corp.
By: ______________________________________
Its: _________________________________
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