As filed with the Securities and Exchange Commission on March 11, 1996,
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
RLI Corp.
(Exact name of registrant as specified in its charter)
Illinois 37-0889946
(State of incorporation) (I.R.S. Employer identification Number)
9025 North Lindbergh Drive, Peoria, Illinois 61615
(address of principal executive offices)
RLI Corp. Incentive Stock Option Plan
(Full Title of the plan)
Gerald D. Stephens
President
RLI Corp.
9025 North Lindbergh Drive
Peoria, Illinois 61615
309-692-1000
(Name, address, and telephone number of agent for service)
Copies to:
Camille J. Hensey Edward F. Sutkowski, Esq.
Corporate Secretary Sutkowski & Washkuhn Ltd.
RLI Corp. 124 Southwest Adams Street
9025 North Lindbergh Drive Suite 560
Peoria, Illinois 61615 Peoria, Illinois 61602
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Exhibit Index on Sequentially Numbered Page 10. Page 1 of 25
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered Per Share Price* Fee*
Common 1,250,000 $25.40 $31,750,000 $10,948.28
Stock, par shares
value $1
per share
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* Estimated pursuant to Rule 457(h) solely for the purpose of calculating the
aggregate offering price and the amount of the registration fee based upon the
average of the high and low prices reported for the shares of the New York
Stock Exchange on March 8, 1996.
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PART I
INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
The documents containing information specified in Part I (Plan information and
Registrant information) will be sent or given to employees as specified by
Rule 428(b)(1) under the Securities Act of 1933, as amended (the "Securities
Act"). Such documents need not be filed with the Commission either as part of
this Registration Statement or as prospectuses or prospectus supplements
pursuant to Rule 424 under the Securities Act. These documents and the
documents incorporated by reference in this Registration Statement pursuant to
Item 3 of Part 2 of this Registration Statement, taken together, constitutes a
prospectus that meets the requirements of Section 10(a) of the Securities Act.
Part II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents filed by RLI Corp. (the "Company") with the Securities
and Exchange Commission are incorporated herein by reference except to the
extent that any statement or information therein is modified, superseded or
replaced by a statement or information contained in this document or in any
other subsequently filed document incorporated by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994.
2. The Company's Quarterly Reports on Form 10-Q filed pursuant to Section 13
or 15(d) of the Securities Exchange Act, as amended (the "Exchange Act") for
the quarterly periods ended March 31, 1995, June 30, 1995, and September 30,
1995.
3. The description of the Company's Common Stock, par value $1.00 per share
(the "Common Stock") contained in Item 13 of the Company's Registration
Statement on Form S-1 (Registration No. 2-32225) filed with the Commission
pursuant to Section 12 of the Exchange Act, on July 24, 1969.
4. All documents filed by the Company pursuant to Sections
13(a) and 15(d) of the Exchange Act after the date hereof and prior to the
filing of a post effective amendment which indicates that all securities
offered have been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference herein and to be a
part hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein or in any other subsequently filed document which also is or
is deemed to be incorporated by reference herein modifies or replaces such
statement. Except as so modified or superseded, such statement shall not be
deemed to constitute a part of this Registration Statement.
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ITEM 4. INTERESTS OF NAMED EXPERTS AND COUNSEL
Edward F. Sutkowski, Esq., of Sutkowski & Washkuhn Ltd., 124 Southwest Adams
Street, Suite 560, Peoria, Illinois 61602, is a director of the Company.
Sutkowski & Washkuhn Ltd., an Illinois professional corporation in which
Edward F. Sutkowski is a shareholder, will pass upon the legality of the
shares of Common Stock.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
RLI Corp. is incorporated under the laws of the State of Illinois. Under
Section 8.75 of the Business Corporation Act of 1983 of the State of Illinois
(the "Act"), an Illinois corporation may indemnify any person who was or is a
party, or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in right of the corporation) by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation, or who is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expense
(including attorney's fees), judgments, fines and amounts to be paid in
settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding, if such person acted in good faith and in a
manner such person reasonably believed to be in, or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe that such person's conduct was
unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which such person reasonably believed to be in or not
opposed to the best interests of the corporation or, with respect to any
criminal action or proceeding, that such person had reasonable cause to
believe that such person's conduct was unlawful.
An Illinois corporation may indemnify any person who was or is a party, or is
threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that such person is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection with the defense or settlement of such action or suit, if
such person acted in good faith and in a manner that such person reasonably
believed to be in, or not opposed to, the best interest of the corporation,
provided that no indemnification shall be made with respect to any claim,
issue, or matter as to which such person has been adjudged to have been liable
to the corporation, unless, and only to the extent that the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability, but in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses as the court shall deem proper.
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To the extent that a director, officer, employee or agent of a corporation has
been successful, on the merits or otherwise, in the defense of any action,
suit or proceeding referred to above, or in defense of any claim, issue or
matter therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith.
The Company's Articles of Incorporation and By-Laws provide for the
indemnification of directors and officers of the Company to the fullest extent
permitted by Section 8.75 of the Act; however, both provide that,
notwithstanding anything in Section 8.75 of the Act to the contrary, no
director or officer shall be indemnified or insured against any liability to
the Company or to its shareholders to which such person would otherwise be
subject by reason of wilful misfeasance, bad faith or gross negligence with
respect to the duties involved in the conduct of such person's office.
The Company maintains directors' and officers' liability insurance with an
annual aggregate limit of $10,000,000 for the current policy period, subject
to a $200,000 deductible at the corporate level, for each wrongful act where
corporate reimbursement is not available to any director or officer. In
addition, the Company has entered into indemnification agreements with each of
its directors and officers which provide for the indemnification of such
directors and officers to the fullest extent authorized or permitted by
Illinois law.
ITEM 6. EXEMPTION FROM REGISTRATION CLAIMED
Not Applicable
ITEM 7. EXHIBITS
4.1 Articles of Incorporation (incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the Second Quarter ended June 30, 1993.)
4.2 By-Laws of the Company (incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the Second Quarter ended June 30, 1993)
4.3 RLI Corp. Incentive Stock Option Plan (as attached at Pages 11 through
23).
4.4 Form of Certificate representing shares of Common Stock of RLI Corp, an
Illinois corporation (incorporated by reference to Exhibit 4.3 of Amendment
No. 1 to the Company's Registration Statement on Form S-3 as filed June 11,
1993, Registration Number 33-61788)
5.1 Opinion of Sutkowski & Washkuhn Ltd. as to the legality of certain shares
of the Common Stock being registered (as attached at Page 25).
23.1 Consent of KPMG Peat Marwick LLP (as attached at Page 24).
23.2 Consent of Sutkowski & Washkuhn Ltd. (included in the Opinion filed as
Exhibit 5.1)
24.1 Powers of Attorney (included in signature page)
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28.1 Information from Reports Furnished to State Insurance Regulatory
Authorities (incorporated by reference to Exhibit 29.1 to the Company's Annual
Report on Form 10-K for the fiscal year ending December 31, 1994)
ITEM 8. UNDERTAKINGS
The Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made a
post-effective amendment to this Registration Statement:
i. To include any Prospectus required by Section 10(a)(3) of the Securities
Act;
ii. To reflect in the Prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement;
iii. To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
PROVIDED HOWEVER, that paragraphs 1(i) and 1(ii) shall not apply if the
information required to be included in a post effective amendment by such
paragraphs is contained in periodic reports filed by the Company pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this Registration Statement.
(2) or the purpose of determining any liability under the Securities Act,
each such post effective amendment shall be deemed to be a new Registration
Statement relating to the securities to be offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment to the
Registration Statement any of the securities being registered which remain
unsold at the termination of the offering.
The Company hereby undertakes that, for the purposes of determining any
liability under the Securities Act, each filing of the Company's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Act (and, where
applicable, each filing of an employee benefit plan's annual report pursuant
to Section 15(d) of the Securities Act) that is incorporated by reference in
the Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
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indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Company will, unless in the opinion of counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
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SIGNATURES
The Company, pursuant to the requirements of the Securities Act, certifies
that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Peoria, State of Illinois.
RLI CORP.
Dated: March 11, 1996 By: /s/ Gerald D. Stephens
________________________________
Gerald D. Stephens, PRESIDENT
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, the undersigned constitute and appoint Gerald
D. Stephens, Joseph E. Dondanville and Camille J. Hensey and each of their
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for the undersigned, in any and all capacities (including
any capacity as a director and/or officer of RLI Corp.), to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting upon said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
* * * * *
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Pursuant to the requirements of the Securities Act, this Registration
Statement and Power Of Attorney have been signed by the undersigned in the
capacities and on the dates indicated.
Signature Capacity Date
/s/Gerald D. Stephens President, Chief Executive March 11, 1996
_______________________
Gerald D. Stephens Officer and Director
(Principal Executive Officer)
/s/Joseph E. Dondanville Vice President, Chief Financial March 11, 1996
________________________
Joseph E. Dondanville Officer (Principal Financial
and Accounting Officer)
/s/Edward F. Sutkowski Director March 11, 1996
________________________
Edward F. Sutkowski
/s/Robert O. Viets Director March 11, 1996
________________________
Robert O. Viets
/s/Bernard J. Daenzer Director March 11, 1996
________________________
Bernard J. Daenzer
/s/Richard J. Haayen Director March 11, 1996
________________________
Richard J. Haayen
/s/William R. Keane Director March 11, 1996
________________________
William R. Keane
/s/John S. McGuinness Director March 11, 1996
________________________
John S. McGuinness
/s/Edwin S. Overman Director March 11, 1996
________________________
Edwin S. Overman
/s/Gerald I. Lenrow Director March 11, 1996
________________________
Gerald I. Lenrow
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF REFERENCE
NO. DOCUMENTS
4.1 Articles of Incorporation Incorporated by reference to
the Company's Quarterly Report
on Form 10-Q for the Second
Quarter ended June 30, 1993.
4.2 By-Laws of the Company Incorporated by reference to
the Company's Quarterly Report
on Form 10-Q for the Second
Quarter ended June 30, 1993
4.3 RLI Corp. Incentive Attached at Pages 11 through 23
Stock Option Plan
4.4 Form of Certificate Incorporated by reference to
representing shares of Exhibit 4.3 of Amendment No. 1
Common Stock of RLI to the Company's Registration
Corp., an Illinois Statement on Form S-3 as filed
corporation Number 33-61788
5.1 Opinion of Sutkowski Attached at Page 25
& Washkuhn Ltd. as to
the legality of the
shares of the Common
Stock being registered
23.1 Consent of KPMG Attached at Page 24
23.2 Consent of Sutkowski Included in the Opinion filed
& Washkuhn Ltd. as Exhibit 5.1
24.1 Powers of Attorney Included in signature page
28.1 Information from Incorporated by reference to
reports furnished to Exhibit 29-1 to the Company's
state insurance Annual Report on Form 10-K for
regulatory authorities the fiscal year ending
December 31, 1994
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EXHIBIT 4.3
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RLI CORP. INCENTIVE STOCK OPTION PLAN
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TABLE OF CONTENTS
I.
RECITALS:................................................................14
A. Purposes.............................................................14
B. Tax Law Considerations...............................................14
C. Securities Law Considerations........................................14
II. AGREEMENTS:.........................................................14
1. Eligibility for Participation........................................14
1.1 Eligible Employee, Eligible Corporation......................15
1.2 Plan Conditions and Limitations..............................14
1.2(a) Disposition Limitation.......................................14
1.2(b) Employment Limitation........................................15
1.2(c) Aggregate Shares.............................................15
1.2(d) Class of Participants........................................16
1.2(e) Shareholder Approval.........................................16
1.2(f) Option Grant Period..........................................16
1.2(g) Option Exercise Period.......................................16
1.2(h) Option Price.................................................16
1.2(i) Transferability and Exercisability...........................16
1.2(j) Share Ownership Limitation...................................17
1.2(k) Aggregate Annual Limitation: One
Hundred Thousand Dollars.....................................17
2. Option Exercise Procedures...........................................17
2.1 Instrument...................................................17
2.2 Registration of Shares.......................................17
2.3 Taxes........................................................17
3. Administration.......................................................18
3.1 Assignability................................................18
3.2 Expenses.....................................................18
3.3 Funding......................................................18
3.4 Identity of Plan Administrator...............................18
3.5 Liability....................................................18
3.6 Majority Rule................................................18
3.7 Payment.......................................................18
3.8 Powers........................................................18
3.9 Reports.......................................................19
3.10 Shareholder Rights............................................19
4. Plan Amendment or Suspension.........................................19
5. Plan Termination.....................................................19
5.1 Employment or Related Agreements..............................19
5.2 Incorporation by Reference; Internal Revenue Code.............19
5.3 Interpretive Guidelines.......................................19
5.4 Invalid Provision.............................................20
5.5 Legal Actions.................................................20
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6. Glossary.............................................................20
Board................................................................20
Code.................................................................20
Disabled.............................................................20
Eligible Corporation.................................................20
Eligible Employee....................................................21
Exchange Act.........................................................21
Fair Market Value....................................................21
Option...............................................................21
Parent...............................................................21
Plan.................................................................21
Plan Administrator...................................................21
Rule 16(b)-3.........................................................21
Subsidiary...........................................................21
Tax..................................................................21
Transfer.............................................................22
III. EXECUTION:.........................................................23
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THIS RLI CORP. INCENTIVE STOCK OPTION PLAN is made at Peoria, Illinois.
I. RECITALS:
A. PURPOSES
The purposes of this RLI Corp. Incentive Stock Option Plan ("Plan") are to:
closely associate the interests of the management of RLI Corp. ("RLI") with
its shareholders by reinforcing the relationship between management rewards
and shareholder gains; provide management with additional equity ownership in
RLI commensurate with RLI performance reflected in increased shareholder
value; maintain competitive compensation levels; replace incentives in respect
of compensation which may no longer be considered for tax qualified plan
benefit purposes; and, encourage management to continue long term employment
with RLI.
B. TAX LAW CONSIDERATIONS
Section 421 GENERAL RULES provides that if a share is transferred to an
employee in a transfer in respect of which the requirements expressed in
Section 422(a) INCENTIVE STOCK OPTIONS are met, then no income shall result at
the time of the transfer of such share to such employee upon the exercise of
such Option, no deduction shall be allowable at any time to the employer
corporation, and no amount other than the price paid under the Option shall be
considered as received by the employer corporation for the share so
transferred.
The Plan is intended to qualify as an incentive stock Option plan as defined
in Section 422 INCENTIVE STOCK OPTIONS, and the Options to qualify as such.
C. SECURITIES LAW CONSIDERATIONS
The Plan and any share issuable pursuant thereto must comply with Rule 16b-3
and any subsequent legislation.
II. AGREEMENTS:
NOW, THEREFORE, the Plan Administrator agrees as follows:
1. ELIGIBILITY FOR PARTICIPATION
1.1 ELIGIBLE EMPLOYEE, ELIGIBLE CORPORATION
The Plan Administrator may periodically grant to any Eligible Employee of any
Eligible Corporation an Option ("Option") to purchase any share of any
Eligible Corporation.
1.2 PLAN CONDITIONS AND LIMITATIONS
This Plan and any Option granted pursuant to this Plan must satisfy the
conditions expressed in the following sections.
1.2(a) DISPOSITION LIMITATION
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Except as otherwise provided in the following sentence, no disposition of any
share may be made within the two (2) year period beginning on the date of the
grant of an Option or within the one (1) year period beginning on the date the
share which was the subject of such Option was transferred to the Eligible
Employee. If an Option is exercised after the death of the Eligible Employee
by the estate of the Eligible Employee, or by a Person who acquired the right
to exercise such Option by bequest or inheritance, or by reason of the death
of the Eligible Employee, the holding period expressed in the preceding
sentence shall not apply.
For purposes of the preceding paragraph, a disposition includes a sale,
exchange, gift, or a Transfer of legal title, but does not include: (a) a
Transfer from a decedent to an estate or a Transfer by bequest or inheritance;
(b) an exchange to which Sections 354 EXCHANGES OF STOCK AND SECURITIES IN
CERTAIN REORGANIZATIONS, 355 DISTRIBUTION OF STOCK AND SECURITIES OF A
CONTROLLED CORPORATION, 356 RECEIPT OF ADDITIONAL CONSIDERATION, or 1036 STOCK
FOR STOCK OF SAME CORPORATION (or so much of Section 1036 as relates to
Section 1036) applies; (c) a mere pledge or hypothecation; (d) a Transfer
between spouses or incident to divorce which meets the conditions expressed in
Section 1041(a) GENERAL RULE; and, (e) if such share is acquired in the name
of the Eligible Employee and another jointly with the right of survivorship or
a subsequent Transfer of a share into such joint ownership shall not be deemed
a disposition, but a termination of such joint tenancy (except to the extent
such Eligible Employee acquires ownership of such shares) shall be treated as
a disposition by such Eligible Employee at the time such joint tenancy is
terminated.
If an insolvent Eligible Employee holds a share acquired pursuant to an
exercise of an Option, and if such share is transferred to a trustee,
receiver, or any other similar fiduciary in any proceeding under Title 11 or
any other similar insolvency proceeding, neither such Transfer, nor any other
Transfer of such share for the benefit of such Eligible Employee's creditors
in such proceeding, shall constitute a disposition of such share.
1.2(b) EMPLOYMENT LIMITATION
Except as otherwise provided in the following paragraph, at all times during
the period beginning on the date of the grant of the Option and ending on the
date three (3) months before the exercise of the Option, the Eligible Employee
was an employee of an Eligible Corporation or a corporation assuming such
Option in a transaction to which Section 424(a) CORPORATE REORGANIZATIONS,
LIQUIDATIONS, ETC. applies.
In the case of an Eligible Employee who is Disabled, the three month period
expressed in the preceding paragraph shall be one (1) year. If an Option is
exercised after the death of the Eligible Employee by the estate of the
Eligible Employee, or by a Person who acquired the right to exercise such
Option by bequest or inheritance, or by reason of the death of the Eligible
Employee, the employment requirement expressed in the preceding paragraph
shall not apply.
1.2(c) AGGREGATE SHARES
The aggregate number of shares which may be issued under Options granted
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pursuant to this Plan must not exceed one million (1,000,000) shares.
For purposes of the preceding paragraph, if any change in the outstanding
shares of an Eligible Corporation occurs by reason of any stock split,
dividend, split-up, split-off, spin-off, recapitalization, merger,
consolidation, rights offering, reorganization, combination or exchange of
shares, a sale by an Eligible Corporation of all of its assets, any
distribution to shareholders other than a normal cash dividend or other
extraordinary or unusual event, the Plan Administrator may adjust the terms of
any Option or the number of shares available.
1.2(d) CLASS OF PARTICIPANTS
No Eligible Employee other than an officer of an Eligible Corporation may be
granted an Option pursuant to this Plan.
1.2(e) SHAREHOLDER APPROVAL
The Plan must be approved by the shareholders of RLI within the twelve (12)
month period beginning on the date the Plan is adopted by the Board.
1.2(f) OPTION GRANT PERIOD
An Option must be granted within the ten (10) year period beginning on the
earlier of the date the Plan is adopted by the Board or the date the Plan is
approved by the shareholders of RLI.
1.2(g) OPTION EXERCISE PERIOD
Except as otherwise provided in 1.2(j) SHARE OWNERSHIP LIMITATION, an Option
must be exercised before the expiration of the ten (10) year period beginning
on the date such Option is granted.
1.2(h) OPTION PRICE
The Option price must not be less than the Fair Market Value of such share at
the time the Option is granted. For purposes of the preceding sentence, the
Fair Market Value of any share shall be determined without regard to any
restriction other than a restriction which, by its terms, will never lapse.
1.2(i) TRANSFERABILITY AND EXERCISABILITY
An Option must not be transferable by an Eligible Employee otherwise than by
will, the laws of descent and distribution, and be exercisable if at all,
during the lifetime of such Eligible Employee, only by such Eligible Employee.
Upon the death of an Eligible Employee, any Option exercisable on the date of
the death of such Eligible Employee may be exercised by the Eligible
Employee's estate or by a Person who acquired the right to exercise such
Option by bequest or inheritance, or by reason of the death of the Eligible
Employee. The provisions of the preceding sentence shall apply,
notwithstanding the fact that the Eligible Employee's employment may have
terminated prior to death, but only to the extent of any Option exercisable on
the date of the Eligible Employee's death.
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1.2(j) SHARE OWNERSHIP LIMITATION
Except as otherwise provided in the following paragraph, an Eligible Employee
must not, at the time the Option is granted, own shares possessing more than
ten percent (10%) of the total combined voting power of all classes of shares
of RLI, any Parent, or any Subsidiary.
The preceding paragraph shall not apply if, at the time such Option is
granted, the Option price is at least one hundred ten percent (110%) of the
fair market value of the shares subject to Option and such Option must be
exercised before the expiration of the five (5) year period beginning on the
date such Option is granted.
In applying the ten percent (10%) ownership limitation, the Eligible Employee
shall be considered as owning shares owned, directly or indirectly, by or for
such Eligible Employee's brothers and sisters (whether by the whole or the
half blood), spouse, and lineal descendants, and shares owned directly or
indirectly by or for a corporation, partnership, estate or trust shall be
considered as being owned proportionately by or for the shareholders, partners
or beneficiaries.
1.2(k) AGGREGATE ANNUAL LIMITATION: ONE HUNDRED THOUSAND DOLLARS
To the extent that the aggregate Fair Market Value of shares exercisable for
the first time by any Eligible Employee during any calendar year, (under all
plans of the Eligible Employee's employer corporation and its Parent and any
Subsidiary corporation) exceeds One Hundred Thousand Dollars ($100,000), such
Options shall be treated as Options which are not incentive stock Options, as
defined in Code Section 422 INCENTIVE STOCK OPTIONS. The preceding sentence
shall be applied by taking Options into account in the order in which they
were granted. The Fair Market Value of any share shall be determined as of
the time the Option with respect to such share is granted.
2. OPTION EXERCISE PROCEDURES
2.1 INSTRUMENT
Each Option granted pursuant to the Plan must be evidenced by an instrument in
such form as the Plan Administrator periodically prescribes.
2.2 REGISTRATION OF SHARES
The Plan Administrator may periodically recommend that RLI list, register or
qualify any shares subject to any Option, seek the consent or approval of any
governmental body, or obtain an agreement from the Eligible Employee that the
transfer of the shares in respect of such Option may not be consummated unless
such listing, registration, qualification, consent or approval shall have been
obtained in such form as the Plan Administrator shall periodically determine
to be appropriate.
2.3 TAXES
RLI may deduct from any Plan payment or receive from any Person to whom any
share is issuable before issuing any such share, any Tax.
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3. ADMINISTRATION
The Plan shall be administered as expressed in the following sections.
3.1 ASSIGNABILITY
Except as otherwise determined by the Plan Administrator, no interest under
this Plan may be Transferred to any other Person.
3.2 EXPENSES
The expenses of the Plan shall be borne by RLI.
3.3 FUNDING
The Plan shall be unfunded. RLI shall not be required to establish any
special or separate fund or to make any other segregation of assets to assure
the payment of any Option under the Plan, and any right to the payment of any
Option shall be no greater than any right of the general creditors of RLI.
3.4 IDENTITY OF PLAN ADMINISTRATOR
Except as otherwise provided in the following paragraph, the Plan shall be
administered by the Plan Administrator.
No member of the Plan Administrator may have received an Option pursuant to
this Plan during the twelve (12) month period ending on the date of such
appointment if such receipt would cause such member to cease to be a
"disinterested person" under Rule 16b-3.
3.5 LIABILITY
No member of the Plan Administrator and no officer of RLI shall be liable for
anything done or omitted by any other member of the Plan Administrator or by
any officer of RLI in connection with the performance of any duty under this
Plan, except as to any willful misconduct or as expressly provided by statute.
3.6 MAJORITY RULE
The Plan Administrator may act only by a majority of its members, except that
any member may authorize any one or more of their members or any officer of
RLI to execute and deliver any document or to take any other ministerial
action on behalf of the Plan Administrator.
3.7 PAYMENT
The Plan Administrator may periodically determine the method by which the
Eligible Employee may pay for the shares issuable incident to the exercise of
an Option, including but not limited to, payment for such shares in the form
of other shares of any Eligible Corporation.
3.8 POWERS
The Plan Administrator shall have the power to: (a) interpret the Plan and
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the Options granted under the Plan; (b) establish, amend and rescind any rules
and regulations relating to the Plan; and (c) make any other determination
which it deems desirable for the administration of the Plan.
The interpretation and administration of the Plan shall lie within its sole
and absolute discretion and shall be final, conclusive and binding on all
parties. Determinations to be made by the Plan Administrator under the Plan
may be made by any delegate.
3.9 REPORTS
The officers of RLI shall cause to be filed any report, return or other
information regarding any Option or share issuable pursuant thereto as may
periodically be required by Section 13 or 15(d) of the Exchange Act or any
other applicable statute, rule or regulation.
3.10 SHAREHOLDER RIGHTS
No Eligible Employee shall have any right as a shareholder unless and until a
certificate evidencing a share of the Eligible Corporation is issued to such
Eligible Employee.
4. PLAN AMENDMENT OR SUSPENSION
The Plan may be periodically amended or suspended by the Board; however, no
amendment shall be effective until approved by the shareholders of RLI where
the failure to obtain such approval would adversely affect the compliance of
the Plan with Rule 16b-3 and with other applicable law. No amendment of the
Plan shall adversely affect any right of any Eligible Employee with respect to
any Option granted before such amendment.
5. PLAN TERMINATION
This Plan shall terminate upon the earlier of the adoption of a resolution of
the Board terminating the Plan, or ten years from the date the Plan is
initially approved and adopted by the shareholders of RLI.
5.1 EMPLOYMENT OR RELATED AGREEMENTS
This Plan does not constitute a contract between the Employer and any Eligible
Employee, a consideration for or an inducement for the employment of any
Eligible Employee. Nothing contained in this Plan will be deemed to give any
Eligible Employee the right to be retained in the service or to interfere with
the right of any Eligible Corporation to discharge any Eligible Employee at
any time regardless of the effect which such discharge will have upon such
individual under this Plan.
5.2 INCORPORATION BY REFERENCE; INTERNAL REVENUE CODE
Any reference to Section or Sections is to such section or sections of the
Internal Revenue Code, as may be amended.
5.3 INTERPRETIVE GUIDELINES
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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 Plan 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 Plan are intended to have their defined
meanings, the first letter of such word or the first letters of all
substantive words in such phrase will be capitalized. When the context
permits, a word or phrase used in the singular means 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 Plan or any provision hereof.
5.4 INVALID PROVISION
If any term or provision of this Plan or the application thereof to any Person
or circumstance will to any extent be invalid or unenforceable, the remainder
of this Plan, or the application of such term or provision to such Person or
circumstance other than that as to which it is invalid or unenforceable, will
not be affected, and each term and provision of this Plan will be valid and
will be enforced to the fullest extent permitted by law.
5.5 LEGAL ACTIONS
If any claim, suit or proceeding is brought regarding the Plan to which the
Plan Administrator may be a party, and such claim, suit or proceeding is
resolved in favor of the Plan Administrator, any member of the Plan
Administrator shall be entitled to be reimbursed by RLI for any cost,
attorneys' fee and other expense incurred. Necessary parties to any
accounting, litigation or other proceedings will include only the Plan
Administrator and RLI. The settlement of any judgment in any case in which RLI
is duly served or cited will be binding upon all Eligible Employees and their
respective estates, as well as upon any Person claiming by, through or under
any of them.
6. GLOSSARY
"Board" means the Board of Directors of RLI Corp. or its successor.
"Code" means the Internal Revenue Code of 1986, as may periodically be
amended.
"Disabled" means being unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can
be expected to result in death or which has lasted or can be expected to last
for a continuous period of not less than twelve (12) months.
"Eligible Corporation" means, collectively, (a) RLI; (b) any corporation
(other than RLI), in an unbroken chain of corporations ending with RLI if, at
the time of the granting of the Option, each of the corporations, other than
RLI, owns shares possessing fifty percent (50%) or more of the total combined
voting power of all classes of shares in one of the other corporations in such
chain; and (c) any corporation (other than RLI) in an unbroken chain of
corporations beginning with RLI if, at the time of the granting of the Option,
each of the corporations, other than the last corporation in the unbroken
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chain, owns shares possessing fifty percent (50%) or more of the total
combined voting power of all classes of shares in one of the other
corporations in such chain.
"Eligible Employee" means any common law employee of an Eligible Corporation,
thus excluding any non-employee director of an Eligible Corporation or an
independent contractor.
"Exchange Act" means the Securities Exchange Act of 1934, as may periodically
be amended.
"Fair Market Value" means, (a) in respect of any share of RLI, the closing
price on such date or on the next business date, if such date is not a
business day, of a share of RLI reflected in THE WALL STREET JOURNAL or any
other publication selected by the Plan Administrator; however, if shares of
RLI shall not have been traded on the New York Stock Exchange for more than
ten (10) days immediately preceding such date or if deemed appropriate by the
Plan Administrator for any other reason, the fair market value of shares of
RLI shall be determined by RLI in such other manner as it may deem
appropriate, and (b) as to any share of any other Eligible Corporation, as
determined by the Plan Administrator in accordance with the Code regulations.
"Option" is defined at Section 1.1 ELIGIBLE EMPLOYEE, ELIGIBLE CORPORATION.
"Parent" means any corporation (other than the employer corporation) in an
unbroken chain of corporations ending with the employer corporation if, at the
time of the granting of the Option, each of the corporations other than the
employer corporation owns shares possessing fifty percent (50%) or more of the
total combined voting power of all classes of shares in one of the other
corporations in such chain.
"Plan" means this RLI Corp. Incentive Stock Option Plan.
"Plan Administrator" means the Board, or if designated by the Board, the
Executive Resources Committee, or if any provision of the Exchange Act or the
Code would impair the ability of either the Board or the Executive Resources
Committee to administer the Plan in accordance with the provisions of Rule
16(b)-3 and Code Section 162(m), or such other Person as the Board
periodically determines to be appropriate so as to permit the Plan to be
administered in accordance with Rule 16(b)-3 and Code Section 162(m).
"Rule 16(b)-3" means such rule promulgated under the Securities Exchange Act
of 1934, as may periodically be amended.
"Subsidiary" means any corporation (other than the employer corporation) in an
unbroken chain of corporations beginning with the employer corporation if, at
the time of the granting of the Option, each of the corporations other than
the last corporation in the unbroken chain owns shares possessing fifty
percent (50%) or more of the total combined voting power of all classes of
shares in one of the other corporations in such chain.
"Tax" means any Federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental, customs, duties, capital stock, franchise,
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profits, withholding, social security, unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty or addition, whether disputed or not.
"Transfer" means any direct or indirect, voluntary or involuntary, for value,
by operation of law or otherwise, assignment, or otherwise disposition of any
direct or indirect, economic or legal interest in, including but not limited
to any security interest in or with respect to either any share or any Option.
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III. EXECUTION:
RLI Corp. Approved by the Shareholders of
RLI Corp. on May 11, 1995
By: /s/Gerald D. Stephens
_______________________________
At the direction of its Board
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- -----------------------------------------------------------------------------
CONSENT OF INDEPENDENT ACCOUNTANTS
- -----------------------------------------------------------------------------
The Board of Directors
RLI Corp.:
We consent to the use of our report incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the Prospectus.
KPMG PEAT MARWICK LLP
/s/ KPMG Peat Marwick LLP
____________________________________
Chicago, Illinois
March 11, 1996
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December 7, 1995
RLI Corp.
9025 North Lindbergh Drive
Peoria, Illinois 61615
Ladies and Gentlemen:
We have acted as counsel for RLI Corp. (the "Company") in
connection with the registration by the Company under the
Securities Act of 1933, as amended (the "Act"), of 1,250,000
shares of common stock, par value $1.00 per share, of the
Company ("Common Stock") issuable under the Company's
Incentive Stock Option Plan (the "Plan") and subject to
adjustment as provided therein, under a registration
statement on Form S-8 (the "Registration Statement") about to
be filed with the Securities and Exchange Commission.
We have examined originals, or copies certified to our
satisfaction, of all such corporate records of the Company,
agreements and other instruments, certificates of public
officials and officers and representatives of the Company and
such other documents as we have deemed necessary as a basis
of the opinions hereafter expressed.
Based on the foregoing and having regard to legal
considerations that we deem relevant, we are of the opinion
that, when the shares of Common Stock have been registered
under the Act and when the Company has received the
consideration to be received for the shares in accordance
with the provision of the Plan and the shares of Common Stock
have been issued by the Company as provided under the Plan,
the shares of Common Stock will be duly authorized, validly
issued and outstanding, fully paid and nonassessable, with no
personal liability attaching to the ownership thereof.
We hereby consent to the inclusion of this opinion in the
Registration Statement.
SUTKOWSKI & WASHKUHN LTD.
By:
dk\jrg\S-8.4
01768 80046
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