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RLI Corp./Name of Director
Director's Stock Option
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Table of Contents
I. RECITALS: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
A. Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
B. Tax Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
C. Securities Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
II. AGREEMENTS: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1. Grant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2. Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
3. Exercise Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
4. Exercise Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
4.1 Transferability . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
5. Exercise Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . .2
5.1 Exercise. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
5.2 Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
6. Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
7. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
7.1 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
7.2 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
7.3 Incorporation by Reference. . . . . . . . . . . . . . . . . . . . . . . .4
7.4 Interpretive Guidelines . . . . . . . . . . . . . . . . . . . . . . . . .4
7.5 Invalid Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
8. Glossary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Disabled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Execution Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Fair Market Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Grant Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
RLI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Securities Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Stock Option Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
III. EXECUTION:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
THIS RLI CORP./NAME OF DIRECTOR DIRECTOR'S STOCK OPTION ("Option") is issued
to Name of Director ("(Name of Director)") pursuant to the RLI Corp. ("RLI")
Stock Option Plan ("Plan") at Peoria, Illinois.
I. RECITALS:
A. Purposes
The Board of Directors adopted the Directors' Stock Option Plan to provide
compensation, in the form of stock options, to each director of RLI who is not
an employee of RLI at the time of such director's election or selection to the
Board of Directors in an effort to enhance RLI's ability to attract and retain
well-qualified individuals to serve as directors of RLI. The Board of
Directors believes that the Directors' Stock Option Plan will also enhance the
long-term commitment of outside directors to RLI and further align their
interests with the interests of the shareholders.
B. Tax Law
This Option is granted pursuant to the Plan and is not an "incentive stock
option" as defined in Code Section 422 Incentive Stock Option. Accordingly,
upon the exercise of this option, (Name of Director) must recognize income
equal to the difference between the purchase price for the shares and the
option price for the shares.
C. Securities Law
The Plan and any Option Share issuable pursuant to this Option comply with all
Securities Laws.
II. AGREEMENTS:
NOW, THEREFORE, (Name of Director) and RLI agree as follows:
Grant
Effective May 2, 1996, subject to shareholder ratification of the adoption of
the Plan by the Board of Directors, RLI hereby grants to (Name of Director) an
option ("Option") to purchase three thousand (3,000) shares of RLI ("Option
Shares").
If any change in the outstanding shares 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 RLI of all of its assets, any distribution to shareholders
other than a normal cash dividend, or other extraordinary or unusual event,
the number of Option Shares shall automatically be equitably adjusted by the
Stock Option Committee to reflect any such change.
Price
The price in respect of each Option Share shall be an amount equal to the Fair
Market Value of such Option Share on the Grant Date.
Exercise Period
(Name of Director) must exercise this Option before the expiration of the ten
(10) year period beginning on the Grant Date.
Exercise Schedule
Except in the case of (Name of Director)'s death, Disability or termination of
(Name of Director)'s status as a director of RLI, this Option may not be
exercised for more than the percentage of the aggregate number of Option
Shares, determined by the number of full years from the Grant Date to the date
of such exercise, in accordance with the following Option exercise schedule:
Cumulative Percentage
Completed Years of Option Shares That May
From Grant Date Be Exercised
Less than 1 year 0%
1 but less than 2 years up to 33%
2 but less than 3 years up to 66%
3 but less than 4 years up to 100%
In the case of (Name of Director)'s death, Disability or the termination of
(Name of Director)'s status as a director of RLI, the preceding Option
exercise schedule shall not be applicable and (Name of Director) may exercise
this Option with respect to all Option Shares.
Transferability
This Option may not be Transferred by (Name of Director) otherwise than by
will or the laws of descent and distribution without the consent of the Stock
Option Committee.
Upon the death of (Name of Director) while a director of RLI, this Option may
be exercised by the estate of (Name of Director) or by a Person who acquired
the right to exercise such Option by bequest or inheritance, or by reason of
the death of (Name of Director).
Exercise Procedures
(Name of Director) must satisfy the conditions expressed in the following
Sections with respect to the exercise of this Option.
Exercise
This Option must be exercised by written notice from (Name of Director) to RLI
at 9025 North Lindbergh Drive, Peoria, Illinois, 61615, or its then current
principal office, Attention: Vice President/Administration. The notice must
express the number of Option Shares for which this Option is being exercised
and must be accompanied by certified funds in the amount of the Option price.
If this Option is exercised other than by (Name of Director), such Person
shall provide evidence of authority to exercise this Option as counsel to RLI
may periodically request.
Certificate
Subject to the satisfaction of the conditions expressed in the following
paragraphs, a certificate for the Option Shares will be issued as soon as
reasonably practical.
RLI need not issue a certificate until RLI has complied with all requirements
of the Securities Laws, rules of any stock exchange on which RLI's shares may
then be listed, and all applicable Federal and state laws in connection with
the issuance or sale of such Option Shares or the listing of such Option
Shares on any such exchange. Until the issuance of the certificates for such
Option Shares, (Name of Director) shall have no rights of a shareholder with
respect to the Option Shares or this Option.
If no registration statement under the Securities Laws is in effect covering
the issuance of the Option Shares to (Name of Director), the certificate must
bear a legend to the effect that the Option Shares cannot be Transferred in
the absence of such a registration statement or an opinion of counsel
satisfactory to RLI that such registration is not required, coupled with a
representation from (Name of Director) that the Option Shares are being
acquired by (Name of Director) for investment and not with a view toward the
resale or distribution thereof, and that the Option Shares will not be
Transferred in the absence of such registration statement or an opinion of
counsel satisfactory to RLI that such registration is not required.
Beneficiary
(Name of Director) may designate a beneficiary of this Option. If (Name of
Director) fails to designate a beneficiary, (Name of Director)'s Option will
be distributed to the individuals expressed in the following phrases and in
the order in which each sentence appears. (Name of Director)'s spouse; (Name
of Director)'s then living descendants, per stirpes; the individuals entitled
to inherit (Name of Director)'s property under the law of the State of
Illinois and in the proportions determined under such law.
General
Amendment
This Option may be periodically amended with the consent of the Parties.
Governing Law
The validity, construction, interpretation and effect of this instrument shall
exclusively be governed by and determined in accordance with the law of the
State of Illinois, except to the extent preempted by Federal law, which shall
to the extent govern.
Incorporation by Reference
The terms and provisions of the Plan are hereby incorporated herein by this
reference.
Interpretive Guidelines
The Stock Option Committee shall interpret and construe this Option, which
interpretation and constructions shall be conclusive and binding on the
Parties and any other Person claiming an interest in respect of (Name of
Director).
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.
Invalid Provision
If any term or provision of this Option, or the application thereof to any
Person or circumstance will, to any extent, be invalid or unenforceable, the
remainder of this Option, 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
Option will be valid and will be enforced to the fullest extent permitted by
law.
Glossary
"Code" means the Internal Revenue Code of 1986, as may periodically be
amended.
"Disabled" means the state of 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.
"Execution Date" means the date on which the last Party to sign this Option
signs this Option.
"Fair Market Value" means, 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 Stock Option Committee; 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
Stock Option Committee 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.
"Grant Date" means May 2, 1996.
"Parties" means (Name of Director) and RLI.
"Person" means an individual, partnership, corporation, unincorporated
organization, limited liability company, a government or any department or
agency thereof, or any combination of the foregoing.
"Plan" means the RLI Corp. Directors' Stock Option Plan, as periodically
amended or restated.
"RLI" means RLI Corp. or its successor.
"Securities Laws" means collectively (a) the Securities Act of 1933, as
periodically amended, 15 U.S.C. Section 77a, et seq., (b) the Securities
Exchange Act of 1934, as periodically amended, 15 U.S.C. Section 78a, et seq.,
including Rule 16(b)-3; (c) any subsequent federal legislation and (d) any
state legislation regulating the sale of any security.
"Stock Option Committee" means a committee comprised of the outside members of
the Board of Directors of RLI.
"Transfer" means any direct or indirect, voluntary or involuntary, for value,
by operation of law or otherwise, assignment, or other 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 Option Share or
this Option.
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with Section III. EXECUTION.]
III. EXECUTION:
Executed in duplicate at Peoria, Illinois, on the Execution Date effective May
2, 1996.
RLI: (Name of Director):
RLI Corp. ________________________________
Name of Director
By:______________________________
Its:________________________ Dated:__________________________
Dated:___________________________