Document:

Exhibit 10.55

 

STOCK UNIT AWARD AGREEMENT

 

(Granted under the UFP Technologies, Inc. 2003 Incentive Plan)

 

This Stock Unit Award Agreement is entered into as of the 18th day of February, 2011 by and between UFP Technologies, Inc. (hereinafter the “Company”) and                            (the “Awardee”).  Capitalized terms used but not defined herein shall have the meanings assigned to them in the Company’s 2003 Incentive Plan (the “Plan”).  Stock Unit Awards (SUA’s represent the Company’s unfunded and unsecured promise to issue shares of Common Stock at a future date, subject to the terms of this Award Agreement, including, without limitation, the performance objectives set forth in Schedule A hereto, and the Plan.  Awardee has no rights under the SUAs other than the rights of a general unsecured creditor of the Company.

 

1.                                       Grant of Stock Unit Awards; Performance Objectives; Vesting.

 

(a)                                  The Company, in the exercise of its sole discretion pursuant to the Plan, does hereby award to the Awardee the number of SUAs set forth on Schedule A hereto upon the terms and subject to the conditions hereinafter contained.  The SUA’s shall consist of a Threshold Award, a Target Award and an Exceptional Award.  The Threshold Award, The Target Award and the Exceptional Award are each awarded subject to attainment during the Performance Cycle described on Schedule A of the Performance Objectives set forth on Schedule A.

 

(b)                                 Subject to attainment of any applicable Performance Objectives, payment with respect to vested SUA’s shall be made entirely in the form of shares of Common Stock of the Company on each respective vesting date as set forth on Schedule A.

 

(c)                                  As soon as possible after the end of the Performance Cycle, the Committee will certify in writing whether and to what extent the Performance Objectives have been met for the Performance Cycle.  The date of the Committee’s certification pursuant to this subsection (c) shall hereinafter be referred to as the “Certification Date”.  The Company will notify the Awardee of the Committee’s certification following the Certification Date (such notice, the “Determination Notice”).  The Determination Notice shall specify (i) the Performance Objective, as derived from the Company’s audited financial statements; and (ii) the extent, if any, to which the Performance Objectives were satisfied with respect to the Threshold Award, the Target Award and the Exceptional Award.

 

2.                                       Change in Control.

 

(a)                                  Notwithstanding the vesting schedule set forth in Schedule A: if there is a Change in Control of the Company (as defined below) following the end of the Performance Cycle, and the Awardee’s Continuous Status as an employee, as contemplated by Section 4 hereof, shall not have been terminated as of the date immediately prior to the effective date of such Change in Control, then subject to attainment during the Performance Cycle described on

 

 

Schedule A of the Performance Objectives set forth on Schedule A, and subject to the provisions of Section 21 of this Award Agreement, any SUA’s representing the Threshold, Target and the Exceptional Award, which are not already vested shall become vested in full as of the effective date of such Change in Control.

 

(b)                                 For the purpose of this Agreement, a “Change in Control” shall mean  (i) the consummation of a reorganization, merger or consolidation or sale or disposition of all or substantially all of the assets of the Company (a “Business Combination”), unless, in each case following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners of the Common Stock of the Company immediately before the consummation of such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that as a result of the transaction owns the Company or all or substantially all of the assets of the Company either directly or indirectly through one or more subsidiaries); and (B) no person or group (as defined in Section 13(d) or 14(d)(2) of the Securities Exchange Act of 1934) of the Company or the corporation resulting from the Business Combination) beneficially owns, directly or indirectly, more than 50% of the then outstanding shares of the common stock of the corporation resulting from the Business Combination;  (ii) Individuals who, as of the date of this Agreement, constitute the Board of Directors of the Company (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board of Directors of the Company, provided, however, that any individual’s becoming a director after the date of this Agreement whose election, or nomination for election by the stockholders of the Company, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board will be considered as though the individual were a member of the Incumbent Board, but excluding, for this purpose, any individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (iii) any person (as defined in Section 13(d) or 14(d)(2) of the Securities Exchange Act of 1934) shall become at any time or in any manner the beneficial owner of capital stock of the Company representing more than 50% of the voting power of the Company.

 

3.                                       Termination.   Unless terminated earlier under Section 4, 5 or 6 below, an Awardee’s rights under this Award Agreement with respect to the SUAs issued under this Award Agreement shall terminate at the time such SUAs are converted into shares of Common Stock.

 

4.                                       Termination of Awardee’s Continuous Status as an Employee.   Except as otherwise specified in Section 5 and 6 below, in the event of termination of Awardee’s Continuous Status as an employee of the Company, Awardee’s rights under this Award Agreement in any unvested SUAs shall terminate.  For purposes of this Award Agreement, an Awardee’s Continuous Status as an employee shall mean the absence of any interruption or termination of service as an employee.  Continuous Status as an employee shall not be considered interrupted in the case of sick leave or leave of absence for which Continuous Status is not considered interrupted as determined by the Company in its sole discretion.

 

 

5.                                       Disability of Awardee.   Notwithstanding the provisions of Section 4 above, in the event of termination of Awardee’s Continuous Status as an employee as a result of disability (within the meaning of Section 409A of the Internal Revenue Code, and hereinafter referred to as “Disability”), the SUAs which would have vested during the twelve (12) months following the date of such termination, set out in Schedule A, shall become vested as of the date of such termination, subject, however, to the provisions of Section 21 of this Award Agreement.  If Awardee’s Disability originally required him or her to take a short-term disability leave which was later converted into long-term disability, then for the purposes of the preceding sentence the date on which Awardee ceased performing services shall be deemed to be the date of commencement of the short-term disability leave.  The Awardee’s rights in any unvested SUAs that remain unvested after the application of this Section 5 shall terminate at the time Awardee ceases to be in Continuous Status as an employee.

 

6.                                       Death of Awardee.   Notwithstanding the provisions of Section 4 above, in the event of the death of Awardee:

 

(a)                                  If the Awardee was, at the time of death, in Continuous Status as an employee, the SUAs which would have vested during the twelve (12) months following the date of death of Awardee, set out in Schedule A, shall become vested as of the date of death.

 

(b)                                 The Awardee’s rights in any unvested SUAs that remain after the application of Section 6(a) shall terminate at the time of the Awardee’s death.

 

7.                                       Value of Unvested SUAs.   In consideration of the award of these SUAs, Awardee agrees that upon and following termination of Awardee’s Continuous Status as an employee for any reason (whether or not in breach of applicable laws), and regardless of whether Awardee is terminated with or without cause, notice, or pre-termination procedure or whether Awardee asserts or prevails on a claim that Awardee’s employment was terminable only for cause or only with notice or pre-termination procedure, any unvested SUAs under this Award Agreement shall be deemed to have a value of zero dollars ($0.00).

 

8.                                       Conversion of SUAs to shares of Common Stock; Responsibility for Taxes.

 

(a)                                  Provided Awardee has satisfied the requirements of Section 8(b) below, and subject to the provisions of Section 21 below, on the vesting of any SUAs, such vested SUAs shall be converted into an equivalent number of shares of Common Stock that will be distributed to Awardee or, in the event of Awardee’s death, to Awardee’s legal representative, as soon as practicable.  The distribution to the Awardee, or in the case of the Awardee’s death, to the Awardee’s legal representative, of shares of Common Stock in respect of the vested SUAs shall be evidenced by a stock certificate, appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company, or other appropriate means as determined by the Company.

 

 

(b)                                 Regardless of any action the Company takes with respect to any or all income tax (including federal, state and local taxes), social security, payroll tax or other tax-related withholding (“Tax Related Items”), Awardee acknowledges that the ultimate liability for all Tax Related Items legally due by Awardee is and remains Awardee’s responsibility and that the Company (i) makes no representations or undertakings regarding the treatment of any Tax Related Items in connection with any aspect of the SUAs, including the grant of the SUAs, the vesting of SUAs, the conversion of the SUAs into shares of Common Stock, the subsequent sale of any shares of Common Stock acquired at vesting and the receipt of any dividends; and (ii) does not commit to structure the terms of the grant or any aspect of the SUAs to reduce or eliminate the Awardee’s liability for Tax Related Items.  Prior to the issuance of shares of Common Stock upon vesting of SUAs as provided in Section 8(a) above, Awardee shall pay, or make adequate arrangements satisfactory to the Company to satisfy all withholding obligations of the Company.  In this regard, Awardee authorizes the Company to withhold all applicable Tax Related Items legally payable by Awardee from Awardee’s wages or other cash compensation payable to Awardee by the Company.  Alternatively, the Awardee may elect to satisfy an applicable withholding requirement, in whole or in part, by having the Company withhold shares of Common Stock to satisfy such tax obligations.  The Awardee may only elect to have such shares withheld having a Market Value on the date the tax is to be determined equal to the minimum statutory total tax which could be imposed on the transaction. All elections shall be irrevocable, made in writing and signed by the Awardee.  Awardee shall pay to the Company any amount of Tax Related Items that the Company may be required to withhold as a result of Awardee’s receipt of SUAs, the vesting of SUAs, or the conversion of vested SUAs to shares of Common Stock that cannot be satisfied by the means previously described.  The Company may refuse to deliver shares of Common Stock to Awardee if Awardee fails to comply with Awardee’s obligation in connection with the Tax Related Items as described herein.

 

(c)                                  In lieu of issuing fractional shares of Common Stock, on the vesting of a fraction of a SUA, the Company shall round the shares to the nearest whole share and any such share which represents a fraction of a SUA will be included in a subsequent vest date.

 

(d)                                 Until the distribution to Awardee of the shares of Common Stock in respect to the vested SUAs is evidenced by a stock certificate, appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company, or other appropriate means, Awardee shall have no right to vote or receive dividends or any other rights as a shareholder with respect to such shares of Common Stock, notwithstanding the vesting of SUAs.  Subject to the provisions of Section 21 below, the Company shall cause such distribution to Awardee to occur promptly upon the vesting of SUAs.  No adjustment will be made for a dividend or other right for which the record date is prior to the date Awardee is recorded as the owner of the shares of Common Stock, except as provided in Section 8 of the Plan.

 

(e)                                  By accepting the Award of SUAs evidenced by this Award Agreement, Awardee agrees not to sell any of the shares of Common Stock received on account of vested SUAs at a time when applicable laws or Company policies prohibit a sale.  This restriction shall apply so long as Awardee is an Employee, Consultant or outside director of the Company or a Subsidiary of the Company.

 

 

9.                                       Non-Transferability of SUAs.   Awardee’s right in the SUAs awarded under this Award Agreement and any interest therein may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner, other than by will or by the laws of descent or distribution, prior to the distribution of the shares of Common Stock in respect of such SUAs.  SUAs shall not be subject to execution, attachment or other process.

 

10.                                 Acknowledgment of Nature of Plan and SUAs.   In accepting the Award, Awardee acknowledges that:

 

(a)                                  the Plan is established voluntarily by the Company, it is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time, as provided in the Plan;

 

(b)                                 the Award of SUAs is voluntary and occasional and does not create any contractual or other right to receive future awards of SUAs, or benefits in lieu of SUAs even if SUAs have been awarded repeatedly in the past;

 

(c)                                  all decisions with respect to future awards, if any, will be at the sole discretion of the Company;

 

(d)                                 Awardee’s participation in the Plan is voluntary;

 

(e)                                  the future value of the underlying shares of Common Stock is unknown and cannot be predicted with certainty;

 

(f)                                    if Awardee receives shares of Common Stock, the value of such shares of Common Stock acquired on vesting of SUAs may increase or decrease in value;

 

(g)                                 notwithstanding any terms or conditions of the Plan to the contrary and consistent with Section 4 and Section 7 above, in the event of involuntary termination of Awardee’s employment (whether or not in breach of applicable laws), Awardee’s right to receive SUAs and vest under the Plan, if any, will terminate effective as of the date that Awardee is no longer actively employed and will not be extended by any notice period mandated under applicable law; furthermore, in the event of involuntary termination of employment (whether or not in breach of applicable laws), Awardee’s right to receive shares of Common Stock pursuant to the SUAs after termination of employment, if any, will be measured by the date of termination of Awardee’s active employment and will not be extended by any notice period mandated under applicable law.  The Committee shall have the exclusive discretion to determine when Awardee is no longer actively employed for purposes of the award of SUAs; and

 

(h)                                 Awardee acknowledges and agrees that, regardless of whether Awardee is terminated with or without cause, notice or pre-termination procedure or whether Awardee asserts or prevails on a claim that Awardee’s employment was terminable only for cause or only with notice or pre-termination procedure, Awardee has no right to, and will not bring any legal claim or

 

 

action for, (a) any damages for any portion of the SUAs that have been vested and converted into Common Shares, or (b) termination of any unvested SUAs under this Award Agreement.

 

11.                                 No Employment Right.   Awardee acknowledges that neither the fact of this Award of SUAs nor any provision of this Award Agreement or the Plan or the policies adopted pursuant to the Plan shall confer upon Awardee any right with respect to employment or continuation of current employment with the Company, or to employment that is not terminable at will.  Awardee further acknowledges and agrees that neither the Plan nor this Award of SUAs makes Awardee’s employment with the Company for any minimum or fixed period, and that such employment is subject to the mutual consent of Awardee and the Company, and subject to any written employment agreement that may be in effect from time to time between the Company and the Awardee, may be terminated by either Awardee or the Company at any time, for any reason or no reason, with or without cause or notice or any kind of pre- or post-termination warning, discipline or procedure.

 

12.                                 Administration.   The authority to manage and control the operation and administration of this Award Agreement shall be vested in the Committee (as such term is defined in Section 2 of the Plan), and the Committee shall have all powers and discretion with respect to this Award Agreement as it has with respect to the Plan.  Any interpretation of the Award Agreement by the Committee and any decision made by the Committee with respect to the Award Agreement shall be final and binding on all parties.

 

13.                                 Plan Governs.   Notwithstanding anything in this Award Agreement to the contrary, the terms of this Award Agreement shall be subject to the terms of the Plan, and this Award Agreement is subject to all interpretations, amendments, rules and regulations promulgated by the Committee from time to time pursuant to the Plan.

 

14.                                 Notices.   Any written notices provided for in this Award Agreement which are sent by mail shall be deemed received three business days after mailing, but not later than the date of actual receipt.  Notices shall be directed, if to Awardee, at the Awardee’s address indicated by the Company’s records and, if to the Company, at the Company’s principal executive office.

 

15.                                 Electronic Delivery.   The Company may, in its sole discretion, decide to deliver any documents related to SUAs awarded under the Plan or future SUAs that may be awarded under the Plan by electronic means or request Awardee’s consent to participate in the Plan by electronic means.  Awardee hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.

 

16.                                 Acknowledgment.   By Awardee’s acceptance as evidenced below, Awardee acknowledges that Awardee has received and has read, understood and accepted all the terms, conditions and restrictions of this Award Agreement and the Plan.  Awardee understands and agrees that this Award Agreement is subject to all the terms, conditions, and restrictions stated in this Award Agreement and the Plan, as the latter may be amended from time to time in the Company’s sole discretion.

 

 

17.                                 [Intentionally Omitted]

 

18.                                 Governing Law.   This Award Agreement shall be governed by the laws of the State of Delaware, without regard to Delaware laws that might cause other law to govern under applicable principles of conflicts of law.

 

19.                                 Severability.   If one or more of the provisions of this Award Agreement shall be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and the invalid, illegal or unenforceable provisions shall be deemed null and void; however, to the extent permissible by law, any provisions which could be deemed null and void shall first be construed, interpreted or revised retroactively to permit this Award Agreement to be construed so as to foster the intent of this Award Agreement and the Plan.

 

20.                                 Complete Award Agreement and Amendment.   This Award Agreement and the Plan constitute the entire agreement between Awardee and the Company regarding SUAs.  Any prior agreements, commitments or negotiations concerning these SUAs are superseded.  This Award Agreement may be amended only by written agreement of Awardee and the Company, without consent of any other person.  Awardee agrees not to rely on any oral information regarding this Award of SUAs or any written materials not identified in this Section 20.

 

21.                                 Section 409A.  This Award Agreement is intended to be in compliance with the provisions of Section 409A of the Internal Revenue Code to the extent applicable, and the Regulations issued thereunder. Anything in this Agreement to the contrary notwithstanding, if at the time of the Awardee’s separation from service within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations thereunder (the “Code”), the Company determines that the Awardee is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that the Awardee becomes entitled to under this Agreement would be considered deferred compensation subject to the 20 percent additional tax imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(a)(2)(B)(i) of the Code, such payment shall not be payable and such benefit shall not be provided until the date that is the earlier of (A) six months and one day after the Awardee’s separation from service, or (B) the Awardee’s death.  The determination of whether and when a separation from service has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation Section 1.409A-1(h). To the extent that any provision of this Agreement is ambiguous as to its compliance with Section 409A of the Code, the provision shall be read in such a manner so that all payments hereunder comply with Section 409A of the Code.  The parties agree that this Agreement may be amended, as reasonably requested by either party, and as may be necessary to fully comply with Section 409A of the Code and all related rules and regulations in order to preserve the payments and benefits provided hereunder without additional cost to either party. Solely for the purposes of Section 409A of the Code, the share increments issuable on each vesting date on Schedule A shall be considered a separate payment.   The Company makes no representation or warranty and shall have no liability to the Awardee or any other person if any provisions of this Agreement are determined to

 

 

constitute deferred compensation subject to Section 409A of the Code but do not satisfy an exemption from, or the conditions of, such Section.

 

EXECUTED the day and year first above written.

 

 

	
 
    	
UFP   TECHNOLOGIES, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
R.   Jeffrey Bailly
    
	
 
    	
 
    	
Chief   Executive Officer
    

 

AWARDEE’S ACCEPTANCE:

 

I have read and fully understood this Award Agreement and, as referenced in Section 16 above, I accept and agree to be bound by all of the terms, conditions and restrictions contained in this Award Agreement and the other documents referenced in it.

 

 

	
 
    	
 
    
	
[name   of Awardee]
    	
 
    

 

 

SCHEDULE A

 

The SUA’s issuable under this Agreement shall consist of a Threshold Performance Award, a Target Performance Award and an Exceptional Performance Award, each in the amounts set forth below, each such award issuable in one-third increments on the vesting dates set forth below, provided the respective performance objective is satisfied.

 

The Performance Objective established by the Committee with respect to the Threshold Performance Award, the Target Performance Award and Exceptional Performance Award is Adjusted Operating Income** for 2011

 

	
 
    	
 
    	
Performance
    	
 
    	
Performance
    	
 
    	
Number of
   Shares of
   Common
    	
 
    	
Vesting
    	
 
    
	
 
    	
 
    	
Objective
    	
 
    	
Cycle
    	
 
    	
Stock
    	
 
    	
*/2013
    	
 
    	
*/2014
    	
 
    	
*/2015
    	
 
    
	
a. Threshold  Performance  Award
    	
 
    	
of   Adjusted Operating Income**
    	
 
    	
Calendar   Year 2011
    	
 
    	
 
    	
 
    	
33.33
    	
%
    	
33.33
    	
%
    	
33.34
    	
%
    
	
b. Target  Performance  Award
    	
 
    	
of   Adjusted Operating Income**
    	
 
    	
Calendar   Year 2011
    	
 
    	
(in   addition to (a) above)
    	
 
    	
33.33
    	
%
    	
33.33
    	
%
    	
33.34
    	
%
    
	
c. Exceptional  Performance  Award
    	
 
    	
of   Adjusted Operating Income**
    	
 
    	
Calendar   Year 2011
    	
 
    	
***
   (in addition to (a) and (b) above)
    	
 
    	
33.33
    	
%
    	
33.33
    	
%
    	
33.34
    	
%
    

 

* this date shall be the anniversary date of the date of determination by the Compensation Committee of satisfaction of the Performance Objectives.  Such determination date is expected to be in February 2012.

 

**Adjusted Operating Income is defined herein as Operating Income on the Company’s 10-K, excluding (i) non-recurring restructuring charges related to plant closings and consolidations; and (ii) the impact of acquired or disposed of operations during such year.

 

***Between Adjusted Operating Income of                        and                        , the number of shares of Common Stock to which the Awardee shall be entitled under the Exceptional Performance Award (in addition to the shares issuable upon attainment of the Threshold and Target Performance Award) shall range from 0 to the amount stated under the column entitled “Exceptional” based on straight line interpolation in increments of one fifth the total number of shares otherwise issuable for achievement of the Exceptional Award  for each full                        of Adjusted Operating Income in excess of                        (not to exceed                        ).Exhibit 10.9

 

RLI CORP. ANNUAL INCENTIVE COMPENSATION PLAN

EFFECTIVE JANUARY 1, 2010

 

I.                                         ESTABLISHMENT AND PURPOSE

 

RLI Corp. (the “Company”) established the RLI Incentive Compensation Plan (the “Plan”), effective January 1, 2006, for the benefit of its employees and employees of its Affiliates.  The Plan was intended to amend, consolidate and restate certain prior incentive compensation plans established by the Company.  The terms of the Plan, as set forth herein, shall apply to Awards granted under the Plan on and after the Effective Date.  Except as otherwise provided, Awards granted under the Company’s incentive compensation plans in effect prior to the Effective Date shall be governed by the terms of such plans.  The Company restated the Plan effective January 1, 2009 (the “Effective Date”)  to comply with the requirements of the final regulations issued under Section 409A of the Code (“Section 409A”) on April 10, 2007.  The Company hereby restates the Plan effective January 1, 2010 to rename it the RLI Corp. Annual Incentive Compensation Plan to differentiate it from the RLI Long-Term Incentive Plan (LTIP), to define Retirement as it is defined in the LTIP, to change the term “Board Approval Limit” to “Committee Approval Limit”, to clarify the application of the maximum Award provision, and to revise the section on beneficiaries.

 

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

 

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

 

II.                                     DEFINITIONS

 

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

 

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

 

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

 

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

 

1

 

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

 

2.5                                 “Bonus Payment Date” means February 1st.  Any payment that is due to be distributed as of the Bonus Payment Date will be deemed to be distributed as of that date if it is distributed on such date or, if later, by the 15th day of March following the date and the Participant is not permitted, directly or indirectly, to designate the calendar year of payment.  Further, a payment will be treated as made on the Bonus Payment Date if it is made no earlier than 30 days before the date, and the Participant is not permitted, directly or indirectly, to designate the calendar year of payment.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2.13                           “Eligible Employee,” for any Performance Period, means a 162(m) Employee and such other employees of the Company and its Affiliates as may be designated to participate in the Plan for such Performance Period.  An employee who is designated as eligible to participate in the Plan for a particular Performance Period is not necessarily eligible to participate in the Plan for any other Performance Period.

 

2.14                           “Effective Date” means January 1, 2010.

 

2.15                           “Fiscal Year” means the calendar year.

 

2

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

3

 

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

 

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

 

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

 

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

 

2.25                           “Termination of Employment” with respect to a Participant, means the Participant’s separation from service with all Affiliates, within the meaning of Section 409A(a)(2)(A)(i) of the Code and the regulations under such section.  Solely for this purpose, a Participant who is an eligible Employee will be considered to have a Termination of Employment when the Participant dies, retires, or otherwise has a termination of employment with all Affiliates.  The employment relationship is treated as continuing intact while the Participant is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six months, or if longer, so long as the individual retains a right to reemployment with an Affiliate under an applicable statute or by contract.  For purposes hereof, a leave of absence constitutes a bona fide leave of absence only if there is a reasonable expectation that the Participant will return to perform services for an Affiliate.  If the period of leave exceeds six months and the individual does not retain a right to reemployment under an applicable statute or by contract, the employment relationship is deemed to terminate on the first date immediately following such six-month period.  Notwithstanding the foregoing, where a leave of absence is due to any medically determinable physical or mental impairment that can be expected to last for a continuous period of not less than six months, where such impairment causes the employee to be unable to perform the duties of such employee’s position of employment or any substantially similar position of employment, RLI may substitute a 29-month period of absence for such six-month period.

 

Whether a termination of employment has occurred is determined based on whether the facts and circumstances indicate that the Affiliate and the Participant reasonably anticipated that no further services will be performed after a certain date or that the level of bona fide services the Participant will perform after such date will permanently decrease to no more than 49 percent of the average level of bona fide services performed over the immediately preceding 36-month period (or the full period of services if the Participant has been providing services for less than 36 months).

 

4

 

Notwithstanding anything in Section 2.1.2 to the contrary, in determining whether a Participant has had a Termination of Employment with an Affiliate, an entity’s status as an “Affiliate” shall be determined substituting “50 percent” for “80 percent” each place it appears in Section 1563(a)(1),(2), and (3) and in Treasury Regulation Section 1.414(c)-2.

 

RLI shall have discretion to determine whether a Participant has experienced a Termination of Employment in connection with an asset sale transaction entered into by RLI or an Affiliate, provided that such determination conforms to the requirements of Section 409A and the regulations and other guidance issued under such section, in which case RLI’s determination shall be binding on the Participant.

 

III.                                 ADMINISTRATION

 

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

 

3.2                                 Duties of Plan Administrative Committee.  Except as provided in Section 3.3, the Committee may delegate some or all of its administrative powers and responsibilities under the Plan to the Plan Administrative Committee. Unless the Committee determines otherwise, the Committee shall be treated as delegating its authority to the Plan Administrative Committee to the full extent permitted hereunder.  The Plan Administrative Committee may make such determinations and take such actions within the scope of such delegation and as otherwise provided in the Plan, as it deems necessary.  The Plan Administrative Committee may further delegate any duties delegated to it pursuant to this Section 3.2 to other officers or employees of the Company and any such delegation may allow for further delegation to other officers or employees.   Each determination made by the Plan Administrative Committee, or its delegate, will be final, binding and conclusive. The Plan Administrative Committee and its delegates may rely on the financial statements certified by the Company’s independent public accountants.  Notwithstanding any such delegation, the Committee may review and change any decision made by the Plan Administrative Committee or its delegate.

 

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

 

5

 

IV.                                 ELIGIBILITY TO PARTICIPATE

 

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

 

V.                                     CALCULATION OF AWARDS

 

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

 

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

 

5.2                                 Calculation of Awards. Following the close of a Performance Period, the Committee (in the case of the 162(m) Employees) and the Plan Administrative Committee (in the case of all other Participants) shall determine the actual Award payable to a Participant by (i) multiplying the percentage achievement of the Performance Goal against the Target Performance Award to determine the Participant’s Award for the Performance period or (ii) multiplying the Participant’s interest in any Bonus Pool by the final amount of the Bonus Pool. No Award will be paid to a Participant if the percentage achievement of a Performance Goal is below any minimum level of performance established for such Performance Goal.  In no event shall the aggregate of all Award payments (including the amount of any Award credited to a Bonus Bank) with respect to a Participant in any Fiscal Year exceed $7,500,000, provided, however, that a payout from a bonus bank in a given year representing a partial payout of the amount of an Award credited to the bonus bank in the same year, shall not be counted toward the maximum to avoid double counting of such amount.

 

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

 

6

 

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

 

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

 

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

 

VI.                                 PAYMENT OF AWARDS

 

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

 

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

 

6.3                                 Change in Employment Status During Performance Period.  In general, in order to receive a payment a Participant must be employed by the Company or Affiliate on (i) the date of actual payment with respect to an Award that is not held under a Bonus Bank and (ii) the date of actual payouts from a Bonus Bank arrangement.  If the Participant’s employment is terminated during a Performance Period due to death, Retirement, or Disability, the Participant (or the Participant’s beneficiary in the case of the Participant’s death) will be entitled to receive a pro rata portion of the Award only if the Award expressly provides for such payment.  If the Participant’s employment is terminated at a time when a Participant has a balance in a Bonus Bank due to death or Disability, the Participant (or the Participant’s beneficiary in the case of the Participant’s

 

7

 

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

 

6.4                                 Beneficiary.  In the event that any amount becomes payable under the Plan by reason of the Participant’s death, such amount shall be paid to the beneficiary or beneficiaries designated by the Participant. Such amount shall be paid to the beneficiary or beneficiaries at the same time such amount would have been paid to the Participant had he or she survived.  In order for such designation to be valid for purposes of the Plan, it must be completed and filed with the Company according to the rules established by the Company.  If the Participant has not completed a beneficiary designation, or all such beneficiaries have predeceased the Participant, then any amount that becomes payable under the Plan by reason of the Participant’s death shall be paid to the personal representative of the Participant’s estate.  If there is any question as to the legal right of any person to receive a distribution under the Plan by reason of the Participant’s death, the amount in question may, at the discretion of the Committee, be paid to the personal representative of the Participant’s estate, in which event the Company shall have no further liability to anyone with respect to such amount.  This section 6.4 shall apply to all Awards granted under the Plan.

 

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

 

VII.                             MISCELLANEOUS

 

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

 

8

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

9

 

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

 

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

 

 

	
Date:   February 5, 2010
    	
RLI   CORP.
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/Jonathan   E. Michael
    
	
 
    	
Chief   Executive Officer
    

 

10

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00185-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00185-of-00352.parquet"}]]