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Schedule 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.    )

Filed by the Registrant /X/

Filed by a party other than the Registrant //

Check the appropriate box:

/ / Preliminary Proxy Statement

/ / Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)

/ X/ Definitive Proxy Statement

/ / Definitive Additional Materials

/ / Soliciting Material Pursuant to Section 240.14a-12

Payment of Filing Fee (Check the appropriate box):

/X/  No fee required

/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11

(1)  Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3)  Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

/ / Fee paid previously with preliminary materials.

/ / Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously.  Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

(1)  Amount Previously Paid:

(2)  Form, Schedule or Registration Statement No.:

(3)  Filing Party:

(4)  Date Filed:

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RLI Corp.

9025 North Lindbergh Drive

Peoria, Illinois 61615

March 26, 2015

Dear Shareholders:

Please consider this letter your personal invitation to attend the 2015 RLI Corp. Annual Shareholders Meeting. It will be held at the Mt. Hawley Country Club, 7724 North Knoxville Avenue, Peoria, Illinois 61614, on May 7, 2015, at 2 p.m. CDT.

Business scheduled to be considered at the meeting includes the election of directors, approval of the amendment to the 2005 RLI Corp. Omnibus Stock Plan, approval of the amendment to the 2010 RLI Corp. Long-Term Incentive Plan, approval of the 2015 RLI Corp. Long-Term Incentive Plan, ratification of KPMG LLP as our independent registered public accounting firm for the current year, and an advisory vote on executive compensation. In addition, we will review significant events of 2014 and their impact on you and your Company.

Again, this year we are furnishing our proxy materials via the Internet. Shareholders will receive a mailed notice card with instructions on how to view our proxy materials over the Internet and other information.

Thank you for your interest in RLI as well as your confidence in, and support of, our future.

Sincerely,

Jonathan E. Michael

Chairman & Chief Executive Officer

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To the Shareholders of RLI Corp.:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of RLI Corp. (“Company”) will be held at the Mt. Hawley Country Club, 7724 North Knoxville Avenue, Peoria, Illinois 61614, on Thursday, May 7, 2015, at 2 p.m. Central Daylight Time for the following purposes:

1.              to elect twelve (12) directors for a one-year term expiring at the 2016 Annual Meeting;

2.              to approve the Amendment to the 2005 RLI Corp. Omnibus Stock Plan;

3.              to approve the Amendment to the 2010 RLI Corp. Long-Term Incentive Plan;

4.              to approve the 2015 RLI Corp. Long-Term Incentive Plan;

5.              to ratify the selection of KPMG LLP as the independent registered public accounting firm of the Company for the current year;

6.              to hold an advisory vote on executive compensation (the “Say-on-Pay” vote); and

7.              to transact such other business as may properly be brought before the meeting.

Only holders of Common Stock of the Company of record at the close of business on March 9, 2015, are entitled to notice of and to vote at the Annual Meeting.

Peoria, Illinois

March 26, 2015

It is important, regardless of the number of shares you hold, that you personally be present or be represented by proxy at the Annual Meeting. Even if you expect to attend, it is important that you submit your proxy by any method described below:

·          By Internet: by submitting your proxy over the Internet in accordance with the instructions provided on your proxy card or Notice of Internet Availability of Proxy Materials;

·          By Phone: by submitting your proxy by telephone, toll-free, in accordance with the instructions provided on your proxy card, or

·          By Mail: if you received your proxy card by mail, by completing the proxy card and signing, dating and returning it as promptly as possible.

You have the right to revoke your proxy at any time prior to its use by filing a written notice of revocation with the Corporate Secretary of the Company prior to the convening of the Annual Meeting, or by presenting another proxy card with a later date or voting by telephone or over the Internet at a later date. If you attend the Annual Meeting and desire to vote in person, your proxy may be withdrawn upon request.

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RLI Corp. | 9025 N. Lindbergh Drive | Peoria, Illinois 61615

Annual Meeting of Shareholders to be held May 7, 2015

GENERAL INFORMATION

This Proxy Statement is furnished to the shareholders of RLI Corp., an Illinois corporation (“Company”), in connection with the solicitation, by the Board of Directors of the Company (“Board” or “Board of Directors”), of proxies to be used at the Annual Meeting of Shareholders (“Annual Meeting”) to be held at 2 p.m. Central Daylight Time on Thursday, May 7, 2015, at the Mt. Hawley Country Club, 7724 North Knoxville Avenue, Peoria, Illinois, 61614, and at any adjournments of the Annual Meeting.

This year, we are pleased to again be taking advantage of a Securities and Exchange Commission (“SEC”) rule that allows companies to furnish their proxy materials over the Internet. As a result, we are mailing to our shareholders a Notice of Internet Availability of Proxy Materials (“E-Proxy Notice”) instead of a paper copy of the proxy materials. The E-Proxy Notice contains instructions that will enable shareholders receiving the E-Proxy Notice to access these materials over the Internet and, if so desired, to request a paper copy of these proxy materials by mail. Shareholders who do not receive the E-Proxy Notice will receive a paper copy of the proxy materials by mail. The Company intends to mail the E-Proxy Notice to shareholders on or about March 26, 2015.

VOTING

Because many shareholders cannot attend the Annual Meeting in person, it is necessary that a large number of our voting shares be represented at the Annual Meeting by proxy to achieve a quorum. Pursuant to the Company’s By-Laws, at least a majority of the outstanding voting shares must be present (in person or by proxy) at the Annual Meeting to conduct the meeting, which is known as a “quorum” of shares. Even if you expect to attend, it is important that you vote your shares in advance.

Whether you hold your shares directly as the shareholder of record or through a broker, trustee, or other nominee (“in street name”), you may vote by proxy without attending the Annual Meeting in three different ways:

·                  Internet: Shareholders may submit their proxy over the Internet by following the instructions provided on the proxy card or on the E-Proxy Notice. Shareholders will need to have the control number appearing on their proxy card or E-Proxy Notice available in order to submit their proxy over the Internet.

·                  Telephone: Shareholders may submit their proxy by telephone, toll-free, by following the instructions provided on the proxy card. Shareholders will need to have the control number appearing on their proxy card or E-Proxy Notice available in order to submit their proxy by telephone.

·                  Mail: Shareholders who receive a paper copy of a proxy card by mail may submit their proxy by signing, dating and returning the proxy card as promptly as possible in the envelope enclosed for that purpose.

Shareholders can save the Company expense by submitting their proxy by telephone or over the Internet. If you submit your proxy by telephone or over the Internet, you do not need to also submit a proxy card, although you may do so as one method of changing your vote as described below. The method of voting will not limit a shareholder’s right to attend the Annual Meeting.

Each proxy will be voted in accordance with the shareholder’s specifications. If you return a signed proxy card without providing voting instructions or do not designate a voting preference when using the other methods, your shares will be voted as recommended by the Board of Directors. All proxies delivered pursuant to this solicitation are revocable at any time prior to the meeting at the option of the shareholder either by giving written notice to the Corporate Secretary at 9025 North Lindbergh Drive, Peoria, Illinois, 61615, or by timely delivery of a properly completed proxy, whether by proxy card or by Internet or telephone vote, bearing a later date, or by voting in person at the Annual Meeting. All shares represented by valid, unrevoked proxies will be voted at the Annual Meeting.

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Assuming the presence, in person or by proxy, of a quorum, the election of directors (Proposal One) requires the affirmative vote of a majority of the shares represented in person or by proxy at the Annual Meeting and entitled to vote. With respect to the election of directors, shareholders may vote in favor of all nominees, or withhold their votes as to all nominees, or withhold their votes as to specific nominees. Votes withheld are deemed present at the meeting and thus will be counted for quorum purposes and have the effect of a vote against the director.

Assuming the presence, in person or by proxy, of a quorum, the affirmative vote of a majority of the shares represented in person or by proxy at the meeting and entitled to vote shall be required to approve Proposals Two, Three, Four and Five. The Proposal Six (“Say-on-Pay”) vote is advisory (not binding) in nature so there is no specified voting requirement for approval. However, the Board of Directors will consider that the shareholders have approved executive compensation on an advisory basis if this agenda item receives the affirmative vote of a majority of the votes cast (in person or by proxy).

With respect to Proposals Two, Three, Four, Five and Six, shareholders may vote “For,” “Against” or “Abstain” on each proposal. Abstentions are deemed present at the meeting, and thus will be counted for quorum purposes, but will have the same effect as a vote against the matters respectively set forth in Proposals Two, Three, Four, Five and Six.

Brokers who hold shares for the accounts of their clients “in street name” may vote such shares either as directed by their clients or at their own discretion if permitted by the New York Stock Exchange (“NYSE”) and other organizations of which they are members. If an executed proxy is returned by a broker on behalf of its client that indicates the broker does not have discretionary authority as to certain shares to vote on one or more matters (a “broker non-vote”), such shares will be considered present at the Annual Meeting for purposes of determining a quorum, but are not considered entitled to vote on that matter. Therefore, broker non-votes will not have any effect on any of the proposals being voted upon at the meeting. If your broker holds your shares “in street name” and you do not instruct your broker how to vote, your broker will have discretion to vote your shares on routine matters, such as Proposal Five, the ratification of the selection of the Company’s independent public accounting firm.

Your broker will not, however, have discretion to vote on non-routine matters absent direction from you. Among other matters, brokers are not entitled to use their discretion to vote uninstructed proxies in director elections or executive compensation matters. As a result, your broker will not be able to vote your shares on Proposals One, Two, Three, Four and Six without your direction. Therefore, it is important that you provide your broker with voting instructions on all proposals. If your shares are held by your broker “in street name,” you will receive a voting instruction form from your broker or the broker’s agent asking you how your shares should be voted. Please complete the form and return it as instructed by the broker or agent.

SHAREHOLDERS ENTITLED TO VOTE

Shareholders of record at the close of business on March 9, 2015, the record date, shall be entitled to vote at the 2015 Annual Meeting. As of the record date, the Company had 43,158,911 shares of Common Stock outstanding and entitled to vote. Common share ownership entitles the holder to one vote per share upon each matter to be voted at the 2015 Annual Meeting.

PROXY SOLICITATION

The Company will bear the cost of solicitation of proxies. In addition to the use of the mail, proxies may be solicited in person or by telephone, facsimile or other electronic means, by directors, officers or employees of the Company. No additional compensation will be paid to such persons for their services. In accordance with the regulations of the SEC and the NYSE, the Company will reimburse banks, brokerage firms, investment advisors and other custodians, nominees, fiduciaries and service bureaus for their reasonable out-of-pocket expenses for forwarding soliciting material to beneficial owners of the Company’s Common Stock and obtaining their proxies or voting instructions. The Company has engaged Okapi Partners LLC (“Okapi”) to assist with the solicitation of proxies and expects to pay a maximum of $10,000 to Okapi for these services, plus reimbursement of out-of-pocket expenses.

ELECTRONIC ACCESS TO PROXY MATERIALS AND ANNUAL REPORT TO SHAREHOLDERS

This Notice of Annual Meeting and Proxy Statement and the Company’s 2014 Annual Report to Shareholders are available on the Company’s website at www.rlicorp.com and at www.proxyvote.com.

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SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

PRINCIPAL SHAREHOLDERS

Following are the persons or entities known to the Company who beneficially own more than 5 percent of the Company’s Common Stock as of December 31, 2014:

(1)         The information shown is based solely on a Schedule 13G dated February 11, 2015, filed with the SEC by State Street Corporation (“State Street”), which filing indicates that State Street Bank and Trust Company (“Trustee”), a subsidiary of State Street, in its capacity as trustee of the Company’s Employee Stock Ownership Plan (“ESOP”), held 3,512,474 shares on behalf of participants in such plan. State Street further disclosed no sole voting or sole dispositive power with respect to the shares, and shared voting and shared dispositive power with respect to 4,410,332 shares. Each ESOP participant or beneficiary may direct the Trustee as to the manner in which the shares allocated to each participant under the ESOP are to be voted. The Trustee has sole voting power with respect to all unallocated shares and sole investment power as to all allocated and unallocated shares. With respect to allocated shares for which no votes are received, the Trustee will vote such shares in proportion to the votes cast on behalf of allocated shares for which votes are received.

(2)         The information shown is based solely on a Schedule 13G dated January 12, 2015, filed with the SEC by BlackRock, Inc. (“BlackRock”). According to the Schedule 13G, BlackRock is the beneficial owner of 3,457,872 shares, and has sole voting with respect to 3,358,115 shares and sole dispositive power with respect to 3,457,872 shares.

(3)         The information shown is based solely on a Schedule 13G dated February 4, 2015, filed with the SEC by Kayne Anderson Rudnick Investment Management LLC (“Kayne”). According to the Schedule 13G, Kayne is the beneficial owner of 3,218,387 shares, and has sole voting and sole dispositive power with respect to 3,218,387 shares.

(4)         The information shown is based solely on a Schedule 13G February 11, 2015, filed with the SEC by Neuberger Berman Group LLC (“Neuberger”). According to the Schedule 13G, Neuberger is the beneficial owner of 2,837,048 shares, has shared voting power with respect to 2,830,348 shares and shared dispositive power with respect to 2,837,048 shares.

(5)         The information shown is based solely on a Schedule 13G dated February 9, 2015, filed with the SEC by The Vanguard Group, Inc. (“Vanguard”). According to the Schedule 13G, Vanguard is the beneficial owner of 2,793,152 shares, and has sole voting with respect to 57,113 shares, sole dispositive power with respect to 2,738,639 shares, and shared dispositive power with respect to 54,513 shares.

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DIRECTORS AND OFFICERS

The following is information regarding beneficial ownership of the Company’s Common Stock by each director and named executive officer (whose compensation is disclosed in this Proxy Statement), and the directors and executive officers of the Company as a group, as of February 9, 2015. James J. Scanlan was appointed to the Company’s Board on January 1, 2015.

*Less than 1% of Class.

(1)         Unless otherwise noted, each person has sole voting power and sole investment power with respect to the shares reported.

(2)         Includes shares held by a bank trustee under an irrevocable trust established by the Company pursuant to the RLI Corp. Nonemployee Director Deferred Compensation Plan (“Director Deferred Plan”) for the benefit of the following: Mr. Ahlmann 3,116 shares; Mr. Angelina 1,001 shares; Mr. Baily 27,562 shares; Mr. Graham 38,341 shares; Mr. Lenrow 152,189 shares; Mr. Linke 39,337 shares; Mr. McPheeters 39,071 shares; and Mr. Viets 119,531 shares. Each participating director has no voting or investment power with respect to such shares.

(3)         Includes 233 restricted shares awarded to the named persons in February 2014, to which such persons have sole voting and no investment power.

(4)         Includes 6,000 shares held by Mr. Baily’s spouse.

(5)         Includes shares allocated to the named persons under the ESOP with respect to which such persons have sole voting power and no investment power. As of January 1, 2015, the following shares were allocated under the ESOP: Mr. Brown 1,158 shares; Mr. Kennedy 8,121 shares; Mr. Kliethermes 8,685 shares; Mr. Michael 210,325 shares; and Mr. Stone 50,285 shares. During 2014, Messrs. Michael and Stone were eligible to elect to diversify their respective ESOP shares.

(6)         Includes shares allocated to the named persons which shares are held by a bank trustee under an irrevocable trust established by the Company pursuant to the RLI Corp. Executive Deferred Compensation Plan (“Deferred Plan”) for the benefit of the following: Mr. Brown 4,431 shares; Mr. Kennedy 1,230 shares; Mr. Kliethermes 14,926 shares; Mr. Michael 46,015 shares; and Mr. Stone 56,424 shares. Each participant has no voting or investment power with respect to such shares.

(7)         Includes shares that may be acquired by the named persons within 60 days after December 31, 2014, under the Omnibus Stock Plan and the Long-Term Incentive Plan, upon the exercise of outstanding stock options as follows: Mr. Brown

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28,400 shares; Mr. Kennedy 16,000 shares; Mr. Kliethermes 64,800 shares; Mr. Michael 418,400 shares; and Mr. Stone 115,200 shares.

(8)         Includes 114,020 shares allocated under the Key Plan, over which Mr. Michael has no voting or investment power; and 54,851 shares owned by the Jonathan E. Michael Grantor Retained Annuity Trusts, over which Mr. Michael, as Trustee, has sole voting and sole investment power.

(9)         Includes 12,550 shares held by Mr. Stone’s wife and 630 shares held by Mr. Stone’s wife, as Custodian — UTMA-FL, as to which Mr. Stone disclaims any beneficial interest.

(10) Includes 67,905 shares owned by the Michael J. Stone Grantor Retained Annuity Trusts, over which Mr. Stone, as Trustee, has sole voting and sole investment power.

(11) Includes 965 shares held in the Karen Viets Revocable Trust Agreement, and 5,244 shares held in the Karen M. Viets Grantor Retained Annuity Trust, over which Mr. Viets, as Co-Trustee, has shared voting and investment power.

The information with respect to beneficial ownership of Common Stock of the Company is based on information furnished to the Company by each individual included in the table.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s directors, executive officers and beneficial owners of more than 10 percent of the Common Stock of the Company to file with the SEC certain reports regarding their ownership of Common Stock or any changes in such ownership.

Based solely on its review of the copies of such reports received by it, and/or written representations from certain reporting persons, the Company believes that during the year ended December 31, 2014, the reporting persons have complied with all filing requirements of Section 16(a) (except one). The Company filed a voluntary Form 4 with the SEC in March 2014, to report shares which were exempt from current reporting, but had been acquired through an Executive Officer’s automated dividend reinvestment plan in 2013. Such amounts should have been included in the Executive Officer’s direct holding’s ending balance at 2013 year end.

PROPOSAL ONE: ELECTION OF DIRECTORS

GENERAL

At this year’s Annual Meeting, all (12) directors are to be elected, each to hold office for a one-year term expiring at the 2016 Annual Meeting unless that director dies, resigns or is removed prior to that time. Unless otherwise instructed, the shares represented by a signed proxy card will be voted for the election of the 12 nominees named below. The affirmative vote of a majority of the shares of common stock of the Company present in person or represented by proxy at the Annual Meeting and entitled to vote is required for the election of directors. Votes will be tabulated by an Inspector of Election appointed at the Annual Meeting. Shares may be voted for, or withheld from, each nominee. Cumulative voting for the directors is not permitted under the Company’s Articles of Incorporation.

NOMINEES

Mr. James J. Scanlan was appointed to the Board on January 1, 2015. Messrs. Kaj Ahlmann, Michael E. Angelina, John T. Baily, Jordan W. Graham, Gerald I. Lenrow, Charles M. Linke, F. Lynn McPheeters, Jonathan E. Michael, James J. Scanlan, Michael J. Stone and Robert O. Viets and Ms. Barbara R. Allen, each a current director, are standing for election. Each is nominated to serve for a one-year term expiring in 2016.

The Board of Directors has no reason to believe that any nominee will be unable to serve if elected. In the event that any nominee shall become unavailable for election, the shares represented by a proxy will be voted for the election of a substitute nominee selected by the persons appointed as proxies and recommended by the Board, unless the Board should determine to reduce the number of directors pursuant to the Company’s By-Laws or allow the vacancy to stay open until a replacement is designated by the Board.

The Board of Directors recommends the shareholders vote “For” election of all 12 nominees listed below.

DIRECTOR NOMINEE INFORMATION

Below are specific qualifications, skills, attributes and experience with respect to the director nominees to the Board of Directors furnished to the Company by such individuals, summarized herein and more fully detailed in the individual professional history below, which information led to the conclusion they are qualified to serve as a director and are beneficial

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to the Company. The Nominating/Corporate Governance Committee and the Board considered, in particular, the following with respect to each director: Mr. Ahlmann — his broad reinsurance and insurance expertise as well as his global experience. Ms. Allen — her executive management experience, which includes profit & loss, balance sheet responsibility, budgeting and strategic planning for major lines of business worldwide. Mr. Angelina — his significant insurance industry experience including his extensive risk management background; Messrs. Baily and Scanlan — their extensive experience in accounting and auditing in the insurance and reinsurance industries. Messrs. McPheeters and Viets — their significant experience, expertise and background regarding accounting matters, together with their various executive management experience. Mr. Graham — his strong financial services, strategy, merger/acquisition and advisory experience as well as deep information technology and internet background. Mr. Lenrow — his significant experience, expertise and knowledge of the insurance industry including accounting matters and insurance taxation. Mr. Linke — his many years of experience in the financial field including the broad perspective brought by Mr. Linke’s experience in consulting to clients in many diverse industries. The Board also considered the over 32 years of experience with the Company represented by Mr. Michael and over 37 years of insurance industry experience (19 years at the Company) represented by Mr. Stone.

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The following footnotes reflect directorships held within the past five years at publicly traded companies:

(1)         Mr. Baily currently serves as a director of Endurance Specialty Holdings Ltd. and Golub Capital BDC, Inc. Mr. Baily previously served as a director of NYMagic, Inc., Erie Indemnity Company and its subsidiary, Erie Family Life Insurance Company.

(2)         Mr. Michael currently serves as a Director of SS&C Technologies Holdings, Inc.

(3)         Mr. Viets previously served as a director of Patriot Coal Corporation.

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PROPOSAL TWO: APPROVAL OF THE AMENDMENT TO THE 2005 RLI CORP. OMNIBUS STOCK PLAN

PROPOSAL

The Board of Directors has approved, and recommends to the shareholders of the Company for their approval and adoption, the Amendment to the RLI Corp. Omnibus Stock Plan.

BACKGROUND

For each of the five years 2010 through 2014, the Company has returned capital to shareholders through special cash dividends as reflected in the table below.

* Adjusted for 2-for-1 stock split effective January 15, 2014.

These special dividends were in addition to regular quarterly cash dividends paid in these years. For the period 2010 through 2014, the Company has delivered total return to shareholders, including regular dividends, special dividends, stock buy backs, and share price appreciation, of $1.45 billion, including a total of $552.5 million in special dividends noted above.

Under the Company’s equity-based incentive plans, approximately 100 key members of Company management have received stock options as an incentive to promote the long-term interests of the Company for all shareholders and to reward them for achieving a high level of Company performance. Stock options also provide a means for the Company to attract and retain key talent to achieve Company objectives. Stock option holders are provided an incentive to create shareholder value because they are rewarded for increases in the Company’s share price above the share price on the date a stock option is awarded.

When a special cash dividend is paid, the Company’s book value is decreased by the amount of cash paid out. Because stock options are not eligible to receive dividends, without an exercise price adjustment, option holders would be negatively impacted, or diluted, by an amount comparable to the special dividend because the intrinsic value of the underlying options will decrease by such dividend amount.

To prevent such dilution to stock option holders from a special dividend, the Company’s Board of Directors made adjustments to all outstanding stock options each time a special dividend was paid by reducing the exercise price of stock options by the amount of the special dividend. For our tax-qualified Incentive Stock Options, both the exercise price and number of options were adjusted in compliance with applicable tax regulations. These adjustments to stock options did not increase the intrinsic value of the stock options and consequently did not result in compensation to the holders or compensation expense for the Company. In other words, these adjustments were economically neutral to both stock option holders and the Company, leaving both in the same position before and after each special dividend.

As interpreted by the Executive Resources Committee (“Committee”) of the Company’s Board of Directors, Paragraph 16 in both the 2005 RLI Corp. Omnibus Stock Plan (“Omnibus Plan”) and 2010 RLI Corp. Long-Term Incentive Plan (“2010 LTIP), titled “Adjustments for Change in Capitalization,” provides the authority to make adjustments to the exercise price of stock options (and number of options, for Incentive Stock Options) to prevent unfair dilution to the value of those options from changes in capitalization, such as a special dividend. These plans were approved by the Company’s shareholders in 2005 and 2010, respectively.

The Company has disclosed information to shareholders regarding these option adjustments as a result of special dividends in each year from 2010 to 2014, in both our Annual Report on Form 10-K and our Annual Shareholder Meeting Proxy Statement for those years. Although the adjusted option price amounts are not considered compensation to the Named Executive Officers or other option holders, such data is included therein for informational purposes.

As a result of the special dividends paid to shareholders in the years 2010 through 2014, the cumulative adjustments to the stock option exercise prices for all option holders of $37.0 million were approved by the Board. The Board believes such adjustments to prevent inappropriate dilution to stock options as a result of a return of capital to shareholders through

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special dividends are reasonable, fair and necessary. Any future special dividends by the Company could result in corresponding adjustments to option exercise prices.

As previously disclosed in the Company’s SEC reports (10-Q Quarterly Report filed October 27, 2014 and 10-K Annual Report filed February 26, 2015), on July 21, 2014, Belmont Mass. Contributory Retirement System (“Belmont”), on behalf of itself and all other similarly situated shareholders of RLI Corp., and derivatively on behalf of RLI Corp., filed a lawsuit against the Company and its directors relating to the Omnibus Plan and 2010 LTIP, (together the “Plans”). In the lawsuit, Belmont alleged, in part, that the Company’s Board of Directors lacked authority under the Plans to make the adjustments to the exercise price of outstanding stock options in response to special dividends, without shareholder approval. The lawsuit requested, among other things, that the adjustments be submitted to a vote by the Company’s shareholders. The Company and its Board disputed Belmont’s claims, and believe that the Plan provisions currently permit such adjustments.

The Company filed a Motion to Dismiss Belmont’s lawsuit on multiple grounds, maintaining that the Board had authority under the Plans to make such adjustments to prevent improper dilution of stock option holders from a change in capitalization resulting from a special dividend. In addition, the Company relied on a provision in the Plans granting the Committee final and binding discretionary authority to interpret the Plans’ provisions.

Subsequently, Belmont and the Company agreed to settle the lawsuit on terms the Company believes are favorable to and in the best interests of the Company and its shareholders. Those terms include submitting proposals to Company shareholders to approve amendments to both the 2010 LTIP and the Omnibus Plan to clarify and make explicit that in response to a special cash dividend, the Board of Directors has the authority to adjust certain terms of stock options. On March 10, 2015, the Circuit Court of Cook County, Illinois, approved the settlement as fair, reasonable and adequate.

In this Proposal Two, you are being asked to approve the amendment to the Omnibus Plan only. Proposal Three contains a similar proposal for the amendment to the 2010 LTIP. Although there can be no further issuances of equity instruments under the Omnibus Plan and the 2010 LTIP (if the 2015 Long-Term Incentive Plan (“2015 LTIP”) is approved by the shareholders), the amendments are necessary because they govern currently outstanding stock options issued under such Plans. Our proposed new 2015 LTIP, which is the subject of Proposal Four, contains the same provision permitting such adjustments.

AMENDMENT

The following provisions describe the proposed amendment to the Omnibus Plan.

Section 16 of the Omnibus Plan, as amended, would read as follows:

“ADJUSTMENT FOR CHANGES IN CAPITALIZATION. In connection with a (i) Fundamental Change (subject to Plan Section 17), (ii) recapitalization, (iii) reclassification, (iv) cash or stock dividend or other distribution (other than ordinary cash dividends), (v) stock split, (vi) stock combination, (vii) stock exchange, or (viii) other relevant change (individually and collectively, the “Event”) — which would otherwise impact or affect (a) the aggregate number or type of Shares available for Awards under the Plan, including any adjustment in the manner in which the maximum number of Shares or types of Awards available under the Plan are determined and counted; (b) the maximum number of Shares permitted to be issued to an individual Participant in any calendar year; (c) the number or type of Shares and amount of cash subject to outstanding Awards; (d) the grant, exercise price or value of outstanding Awards; and/or (e) the terms and conditions of any outstanding Award (including, without limitation, any applicable performance targets or criteria with respect to any Performance Units) — the Committee shall make such adjustments in Awards as it deems equitable and appropriate, in its sole discretion, to reflect such Event. In making any such adjustments, the Committee shall round fractional shares to the nearest whole Share.”

Section 16 of the Omnibus Plan currently reads as follows:

“16. Adjustment for Changes in Capitalization Subject to any required action by the Company’s shareholders, appropriate adjustments, so as to prevent enlargement of rights or inappropriate dilution — (i) in the aggregate number and type of Shares available for Awards under the Plan, (ii) in the limitations on the number of Shares that may be issued to an individual Participant as an Option or a Stock Appreciation Right in any calendar year or that may be issued in the form of Restricted Stock or Shares without restrictions, (iii) in the number and type of Shares and amount of cash subject to Awards then outstanding, (iv) in the Option price as to any outstanding Options and, (v) subject to Plan Section 11.2, in outstanding Performance Units and payments with respect to outstanding Performance Units — may be made by the Committee, in its sole discretion, to give effect to adjustments made in the number or type of Shares through a Fundamental Change (subject to Plan Section 17), recapitalization, reclassification, stock dividend, stock split, stock combination or other relevant change, provided that fractional Shares shall be rounded to the nearest whole Share.”

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The primary effect of this change is to clarify and make explicit the Company’s ability to adjust the exercise price of outstanding stock options in response to a number of capital events, including special cash dividends.

SUMMARY OF THE OMNIBUS PLAN

The following is a summary of the Omnibus Plan. This summary is qualified in its entirety by reference to the complete Omnibus Plan attached as Exhibit A to the Company’s proxy statement with respect to the 2005 Annual Meeting of Shareholders held on May 5, 2005 and filed with the SEC on March 24, 2005. Effective May 6, 2010, the Omnibus Plan was frozen and no future awards thereunder could be granted after that date. As of March 9, 2015, options to purchase 406,005 shares of Common Stock were outstanding under the Omnibus Plan.

Eligibility. Participation in the Omnibus Plan was limited to employees of the Company or any affiliate and to individuals or entities who were not employees but who provided services to the Company or an affiliate, including services provided in the capacity of a consultant, advisor or director. As of March 9, 2015, approximately 38 persons held options issued under the Omnibus Plan.

Continuing Administration of the Omnibus Plan. The Committee administers the Omnibus Plan. The Committee has exclusive power to determine whether, to what extent and under what circumstances awards may be cancelled, forfeited, suspended or adjusted. Notwithstanding the foregoing, the Board has the sole and exclusive power to administer the Omnibus Plan with respect to awards granted to nonemployee directors.

Description of Awards. The Omnibus Plan provided for the grant of awards in the form of (i) Restricted Stock, (ii) Options, (iii) SARs, (iv) Performance Units, (v) shares of Common Stock, or (vi) other stock based awards. Only Options are currently outstanding.

STOCK OPTIONS

Under the Omnibus Plan, options to purchase Company common stock were granted pursuant to an agreement as either an incentive stock option or a non-statutory stock option. The purchase price of each share of Common Stock subject to an Option was determined by the Committee and was not less than 100% of the Fair Market Value of a share as of the date the Option was granted. The purchase price of the shares, with respect to which an Option is exercised, will be payable in full at the time of exercise, provided that to the extent permitted by law, the agreement may permit some or all participants to simultaneously exercise Options and sell the shares thereby acquired pursuant to a brokerage or similar relationship and use the proceeds from the sale as payment of the purchase price of the shares, or exercise the Option award in a “net exercise,” by which the number of shares subject to the Option award that would otherwise have been distributed to the participant is reduced by the aggregate purchase price of the shares being exercised divided by the then Fair Market Value of a share. The purchase price may be payable in cash, by delivery or tender of shares (by actual delivery or attestation) having a Fair Market Value as of the date the Option is exercised equal to the purchase price of the shares being purchased pursuant to the Option, or a combination thereof, as determined by the Committee, but no fractional shares will be issued or accepted. A participant exercising a stock option will not be permitted to pay any portion of the purchase price with shares if, in the opinion of the Committee, payment in such manner could have adverse financial accounting consequences for the Company. Each Option is exercisable, in whole or in part, on the terms provided in the agreement. In no event will any Option be exercisable at any time after the expiration of its term. When an Option is no longer exercisable, it will be deemed to have lapsed or terminated. Upon receipt of notice of exercise, the Committee may elect to cash out all or part of the portion of the shares for which an Option is being exercised by paying the participant an amount, in cash or shares, equal to the excess of the Fair Market Value of the shares over the aggregate purchase price for the shares for which the Option is being exercised on the effective date of such cash-out.

Incentive Stock Options. The Omnibus Plan provided for the issuance of incentive stock options. In addition to the other terms and conditions applicable to all Options, the following provisions apply to incentive stock options. The purchase price of each share of Common Stock subject to an incentive stock option is not less than 100 percent of the Fair Market Value of a share as of the date the incentive stock option was granted. The aggregate Fair Market Value (determined as of the date the Option was granted) of the shares with respect to which incentive stock options held by an individual first become exercisable in any calendar year (under the Omnibus Plan and all other incentive stock option plans of the Company and its affiliates) may not exceed $100,000 and to the extent an Option or Options granted to a participant exceed this limit the Option or Options will be treated as a non-statutory stock option. Incentive stock options are not exercisable more than 10 years after the date of grant.

Duration of the Omnibus Plan. Effective May 6, 2010, the Omnibus Plan was frozen and no future awards thereunder could be granted after that date. Because it still governs all outstanding options issued under it, the Omnibus Plan will remain in effect until all Common Stock subject to the Omnibus Plan is distributed and all awards have expired or lapsed.

Amendment, Modification and Termination of the Omnibus Plan. The Board may, at any time, and from time to time, modify the Omnibus Plan. The Committee may, at any time, alter or amend any or all agreements under the Omnibus Plan to the extent

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permitted by law. No modification of the Omnibus Plan may materially and adversely affect any right acquired by any participant under an award granted before the date of modification, unless otherwise agreed to by the participant in the agreement or otherwise, or required as a matter of law.

RECOMMENDATION

The Board of Directors recommends the shareholders vote “For” Proposal Two to approve the Amendment to the Company’s 2005 Omnibus Stock Plan.

PROPOSAL THREE: APPROVAL OF THE AMENDMENT TO THE 2010 RLI CORP. LONG-TERM INCENTIVE PLAN

PROPOSAL

The Board of Directors has approved, and recommends to the shareholders of the Company for their approval and adoption, the Amendment to the RLI Corp. 2010 Long-Term Incentive Plan (the “2010 LTIP”).

BACKGROUND

The Company is proposing to amend the 2010 LTIP based on the same background and for the same reasons it is proposing Proposal Two to amend the Omnibus Plan (See Background on page 14). In this Proposal Three, you are being asked to vote on the amendment to the 2010 LTIP.

AMENDMENT

The following provisions describe the proposed amendment to the 2010 LTIP:

Section 16 of the 2010 LTIP, as amended, would read as follows:

“16. ADJUSTMENT FOR CHANGES IN CAPITALIZATION. In connection with a (i) Fundamental Change (subject to Plan Section 17), (ii) recapitalization, (iii) reclassification, (iv) cash or stock dividend or other distribution (other than ordinary cash dividends), (v) stock split, (vi) stock combination, (vii) stock exchange, or (viii) other relevant change (individually and collectively, the “Event”) — which would otherwise impact or affect (a) the aggregate number or type of Shares available for Awards under the Plan, including any adjustment in the manner in which the maximum number of Shares or types of Awards available under the Plan are determined and counted; (b) the maximum number of Shares permitted to be issued to an individual Participant in any calendar year; (c) the number or type of Shares and amount of cash subject to outstanding Awards; (d) the grant, exercise price or value of outstanding Awards; and/or (e) the terms and conditions of any outstanding Award (including, without limitation, any applicable performance targets or criteria with respect to any Performance Units) — the Committee shall make such adjustments in Awards as it deems equitable and appropriate, in its sole discretion, to reflect such Event. In making any such adjustments, the Committee shall round fractional shares to the nearest whole Share.”

Section 16 of the 2010 LTIP currently reads as follows:

“16. ADJUSTMENT FOR CHANGES IN CAPITALIZATION. Subject to any required action by the Company’s shareholders, appropriate adjustments, so as to prevent enlargement of rights or inappropriate dilution — (i) in the aggregate number and type of Shares available for Awards under the Plan, (ii) in the limitations on the number of Shares that may be issued to an individual Participant as an Option or a Stock Appreciation Right in any calendar year or that may be issued in the form of Restricted Stock or Shares without restrictions, (iii) in the number and type of Shares and amount of cash subject to Awards then outstanding, (iv) in the Option price as to any outstanding Options and, (v) subject to Plan Section 11.2, in outstanding Performance Units and payments with respect to outstanding Performance Units — may be made by the Committee in its sole discretion to give effect to adjustments made in the number or type of Shares through a Fundamental Change (subject to Plan Section 17), recapitalization, reclassification, stock dividend, stock split, stock combination or other relevant change, provided that fractional Shares shall be rounded to the nearest whole Share.”

The primary effect of this change is to clarify the Company’s ability to adjust the exercise price of outstanding stock options in response to a number of capital events, including special cash dividends.

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SUMMARY OF THE 2010 LTIP

The following is a summary of the 2010 LTIP. This summary is qualified in its entirety by reference to the complete 2010 LTIP attached as Exhibit A to the Company’s proxy statement with respect to the 2010 Annual Meeting of Shareholders held on May 6, 2010 and filed with the SEC on March 25, 2010. If the 2015 Long-Term Incentive Plan (“2015 LTIP”) is approved by shareholders, the 2010 LTIP will be frozen and no future awards thereunder may be granted. As of March 9, 2015, options to purchase 2,417,000 shares of Common Stock were outstanding under the 2010 LTIP.

Eligibility. Participation in the 2010 LTIP is limited to employees of the Company or any affiliate and to individuals or entities who are not employees but who provide services to the Company or an affiliate, including services provided in the capacity of a consultant, advisor or director. As of March 9, 2015, approximately 102 persons held options issued under the 2010 LTIP.

Continuing Administration of the 2010 LTIP. The Committee administers the 2010 LTIP. The Committee has exclusive power to determine whether, to what extent and under what circumstances awards may be cancelled, forfeited, suspended or adjusted. Notwithstanding the foregoing, the Board has the sole and exclusive power to administer the 2010 LTIP with respect to awards granted to nonemployee directors.

Description of Awards. The 2010 LTIP provides for the grant of awards in the form of (i) Restricted Stock, (ii) Options, (iii) SARs, (iv) Performance Units, (v) shares of Common Stock, or (vi) other stock based awards. Only Options are currently outstanding.

STOCK OPTIONS

Options have been granted pursuant to an agreement as either an incentive stock option or a non-statutory stock option. The purchase price of each share of Common Stock subject to an Option was not less than 100 percent of the Fair Market Value of a share as of the date the Option was granted. The purchase price of the shares, with respect to which an Option is exercised, will be payable in full at the time of exercise, provided that to the extent permitted by law, the agreement may permit some or all participants to simultaneously exercise Options and sell the shares thereby acquired pursuant to a brokerage or similar relationship and use the proceeds from the sale as payment of the purchase price of the shares, or exercise the Option award in a “net exercise,” by which the number of shares subject to the Option award that would otherwise have been distributed to the participant is reduced by the aggregate purchase price of the shares being exercised divided by the then Fair Market Value of a share. The purchase price may be payable in cash, by delivery or tender of shares (by actual delivery or attestation) having a Fair Market Value as of the date the Option is exercised equal to the purchase price of the shares being purchased pursuant to the Option, or a combination thereof, as determined by the Committee, but no fractional shares will be issued or accepted. A participant exercising a stock option will not be permitted to pay any portion of the purchase price with shares if, in the opinion of the Committee, payment in such manner could have adverse financial accounting consequences for the Company. Each Option is exercisable, in whole or in part, on the terms provided in the agreement. In no event will any Option be exercisable at any time after the expiration of its term. When an Option is no longer exercisable, it will be deemed to have lapsed or terminated. Upon receipt of notice of exercise, the Committee may elect to cash out all or part of the portion of the shares for which an Option is being exercised by paying the participant an amount, in cash or shares, equal to the excess of the Fair Market Value of the shares over the aggregate purchase price for the shares for which the Option is being exercised on the effective date of such cash-out.

Duration of the 2010 LTIP. If the 2015 LTIP is approved by shareholders, the 2010 LTIP will be frozen and no future awards thereunder may be granted. The 2010 LTIP will remain in effect until all Common Stock subject to it is distributed, all awards have expired or lapsed, the 2010 LTIP is terminated pursuant to its terms, or May 5, 2020. However, awards made before the termination date may be exercised, vested or otherwise effectuated beyond the termination date unless limited in the agreement or otherwise.

Amendment, Modification and Termination of the 2010 LTIP. The Board may at any time and from time to time terminate, suspend or modify the 2010 LTIP. The Committee may at any time alter or amend any or all agreements under the 2010 LTIP to the extent permitted by law. No termination, suspension, or modification of the 2010 LTIP may materially and adversely affect any right acquired by any participant under an award granted before the date of termination, suspension, or modification, unless otherwise agreed to by the participant in the agreement or otherwise, or required as a matter of law.

RECOMMENDATION

The Board of Directors recommends the shareholders vote “For” Proposal Three to approve the Amendment to the Company’s 2010 LTIP.

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PROPOSAL FOUR: APPROVAL OF THE 2015 RLI CORP. LONG-TERM INCENTIVE PLAN

PROPOSAL

On March 11, 2015, the Board of Directors approved the RLI Corp. 2015 Long-Term Incentive Plan (“2015 LTIP”), subject to shareholder approval. A summary of the material provisions of the 2015 LTIP is set forth below. This summary is qualified in its entirety by reference to the complete 2015 LTIP attached as Exhibit A, which you are encouraged to read carefully.

If approved by our shareholders, the 2015 LTIP will become effective May 7, 2015 (the “Effective Date”), immediately upon such approval and will continue in effect until all stock subject to it has been distributed, all awards have expired or lapsed, the 2015 LTIP is terminated by the Board, or May 7, 2025; provided, however, that awards that are outstanding after 2015 LTIP termination will remain subject to the terms of the 2015 LTIP. If the 2015 LTIP is approved by shareholders, the RLI Corp. 2010 Long-Term Incentive Plan (the “2010 LTIP”) will be discontinued except as to outstanding awards. The 2015 LTIP is intended to replace the 2010 LTIP.

SUMMARY OF AWARDS GRANTED AND SHARES REMAINING AVAILABLE UNDER THE 2010 LTIP

On February 2, 2015 under the 2010 LTIP, the Company granted options to purchase 53,500 shares of Common Stock at an exercise price of $48.82. As of March 9, 2015, there were 43,146,911 shares of Common Stock outstanding. At that date, there were also a total of 1,199,567 shares of Common Stock that remained available for future issuance under the 2010 LTIP. As noted above, if the 2015 LTIP is approved by shareholders, the 2010 LTIP will be discontinued except as to outstanding awards. The number of shares of Common Stock to be issued upon exercise of all outstanding options was 2,823,005 with a weighted-average exercise price of $27.25 and a weighted average remaining contractual term of 5.15 years.

The 2010 LTIP is the only plan under which we are currently authorized to issue equity grants to employees and directors of the Company or its affiliates. In addition, we maintain the RLI Corp. Employee Stock Ownership Plan, discussed on page 47, which allows eligible participants to own an interest in shares of Company Stock.

PURPOSE AND ELIGIBILITY

The purpose of the 2015 LTIP is to promote the interests of the Company and its shareholders by providing key personnel of the Company and its affiliates with an opportunity to acquire a proprietary interest in the Company and reward them for achieving a high level of corporate performance, and thereby developing a strong incentive to put forth maximum effort for the continued success and growth of the Company and its affiliates. In addition, the opportunity to acquire a proprietary interest in the Company will aid in attracting and retaining key personnel of outstanding ability. The 2015 LTIP is also intended to provide nonemployee directors with an opportunity to acquire a proprietary interest in the Company, to compensate nonemployee directors for their contribution to the Company and to aid in attracting and retaining nonemployee directors.

Participation in the 2015 LTIP is limited to employees of the Company or any affiliate and to certain other individuals or entities who are not employees but who provide services to the Company or an affiliate, such as services provided in the capacity of a director (“Participant”). The granting of awards is solely at the discretion of the Executive Resources Committee. Approximately 100 persons are currently eligible to participate in the 2015 LTIP. No awards have been granted under the 2015 LTIP.

ADMINISTRATION OF THE 2015 LTIP

The Executive Resources Committee (“the Committee”) of the Board (or any other committee of the Board comprised solely of two or more nonemployee directors designated by the Board to administer the 2015 LTIP so as to permit grants to comply with Rule 16b-3 under the Securities Exchange Act of 1934, as amended (“Exchange Act”), and Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), administers the 2015 LTIP. The Committee has exclusive power to (1) make awards, (2) determine when and to whom awards will be granted, the form of each award, the amount of each award, and any other terms or conditions of each award consistent with the 2015 LTIP, (3) determine whether, to what extent and under what circumstances awards may be settled, paid or exercised in cash, shares of Common Stock, or other property, and (4) determine whether, to what extent and under what circumstances awards may be cancelled, forfeited or suspended. The Committee’s interpretation of the 2015 LTIP and of any award or agreement made under the 2015 LTIP, and all related decisions or resolutions of the Board or Committee, shall be final and binding on all parties with an interest therein. Each award is subject to an agreement authorized by the Committee. Notwithstanding the foregoing, the Board has the sole and exclusive power to administer the 2015 LTIP with respect to awards granted to nonemployee directors. Subject to the terms of the 2015 LTIP, other than price, the Committee may amend the terms and conditions of any outstanding award in its sole discretion.

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SHARES AVAILABLE UNDER THE 2015 LTIP

The number of shares of Common Stock available for distribution under the 2015 LTIP may not exceed 4,000,000 (subject to adjustment for changes in capitalization of the Company). As of March 9, 2015, the closing sale price of the Company’s Common Stock was $48.70 per share, as reported by the New York Stock Exchange (“NYSE”). Any shares subject to the terms and conditions of an award under the 2015 LTIP that are not used because the terms and conditions of the award are not met may again be used for an award under the 2015 LTIP. Any unexercised or undistributed portion of any terminated, expired, exchanged, or forfeited award, or any award settled in cash in lieu of shares will be available for further awards. No fractional shares may be issued under the 2015 LTIP; however, cash will be paid in lieu of any fractional share in settlement of an award. Certain shares of Common Stock are not available for future issuance under the 2015 LTIP, including (1) shares exchanged or withheld as payment of purchase price or tax obligations in connection with any 2015 LTIP award, (2) shares not issued/delivered in connection with net award settlements, and (3) shares purchased on the open market with proceeds from exercise of options.

PLAN MAXIMUMS

Maximum awards under the 2015 LTIP in any fiscal year to a member of management are: 500,000 stock options; 500,000 shares in the form of stock appreciation rights; and 250,000 Full Value Awards. The maximum number of shares that may be awarded to an Outside Director in any fiscal year is 30,000. The maximum in the 2015 LTIP for awards of performance units is governed by the maximum for Full Value Awards, compared to the maximum in the 2010 LTIP for performance unit awards which was expressed as a dollar maximum.

DESCRIPTION OF 2015 LTIP AWARDS

All time-vested awards under the 2015 LTIP are subject to a minimum vesting period of at least one year, though the awards may provide for acceleration of vesting upon certain events. The 2015 LTIP provides that the Committee may grant awards to participants in the form of (1) non-qualified stock options (“Options”), (2) stock appreciation rights (“SARs”), which are rights to receive a payment from the Company in cash, Common Stock, or a combination thereof, equal to the excess of the Fair Market Value (described below under “Stock Options”) of a share of Common Stock on the date of exercise over a specified price fixed by the Committee, (3) performance units, which are rights to receive payment from the Company in cash, Common Stock or a combination thereof, based upon the achievement of performance goals established by the Committee (“Performance Units”), (4) shares of Common Stock subject to restrictions on transfer and conditions of forfeiture (“Restricted Stock”) and (5) restricted stock units (“Restricted Stock Units” and, together with Restricted Stock and Performance Units, “Full Value Awards”) that consist of the right to receive shares in the future provided that certain restrictions or conditions are satisfied. A description of each of these awards follows.

STOCK OPTIONS

All Option awards will be granted pursuant to an agreement and will constitute a non-statutory stock option (i.e., an option that does not qualify for special tax treatment under Section 422 of the Code). The purchase price of each share of Common Stock subject to an Option award will be determined by the Committee and set forth in the agreement, but will not be less than 100 percent of the Fair Market Value of a share as of the date the Option award is granted. “Fair Market Value” as of any date means the closing sale price of a share of Common Stock on such date or on the next business day, if such date is not a business day (1) as reported on the NYSE, or (2) if the shares are not traded on the NYSE, on the principal national securities exchange registered under the Exchange Act on which the shares are listed, or (3) if the shares are not listed on any such exchange, on any over-the-counter market or any quotation system then in use. The purchase price of the shares, with respect to which Options are exercised, will be payable in full at the time of exercise, provided that to the extent permitted by law and as may be permitted by the Committee, the agreement may permit some or all participants to simultaneously exercise Options and sell the shares thereby acquired pursuant to a brokerage or similar relationship and use the proceeds from the sale as payment of the purchase price of the shares, or exercise the Option award in a “net exercise,” by which the number of shares subject to the Option award that would otherwise have been distributed to the participant is reduced by the aggregate purchase price of the shares being exercised divided by the then Fair Market Value of a share. The purchase price may also be payable in cash, or by delivery or tender of shares (by actual delivery or attestation) having a Fair Market Value as of the date the Option award is exercised equal to the purchase price of the shares being purchased pursuant to the Option, or a combination thereof, as determined by the Committee, but no fractional shares will be issued or accepted. A participant exercising an Option will not be permitted to pay any portion of the purchase price with shares if, in the opinion of the Committee, payment in such manner could have adverse financial accounting consequences for the Company. Each Option will be exercisable, in whole or in part, on the terms provided in the agreement. When an Option is no longer exercisable, it will be deemed to have lapsed or terminated. Upon receipt of notice of exercise, the Committee may elect to pay cash in lieu of delivering the shares for which an Option

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is being exercised by paying the participant an amount equal to the excess of the Fair Market Value of the shares over the aggregate purchase price for the shares for which the Option is being exercised on the date of such exercise. In no event will any Option be exercisable at any time after the expiration of its term. Unless otherwise provided in the agreement, in the event of a participant’s death, then any Option award that has not expired or been terminated will become exercisable in full and may be exercised by the participant’s beneficiary at any time, or from time to time, within one year after the date of the participant’s death. Unless otherwise provided in the agreement, if a Participant separates from the Company due to disability, then any Option award that has not expired or been terminated will become exercisable in full, and the participant or the participant’s beneficiary may exercise such Option award at any time, or from time to time, within three years after the participant’s separation. Unless otherwise provided in the agreement, if a participant retires, then any Option award that has not expired or been terminated will remain exercisable for three years after the participant’s separation, but only to the extent that the Option award was exercisable immediately prior to the Participant’s separation. Unless otherwise provided in the agreement and subject to certain exceptions, if a participant separates from the Company for any reason other than death, retirement or other than following his or her disability, then any Option award that has not expired or been terminated will remain exercisable for three months after separation, but only to the extent that the Option award was exercisable immediately prior to the separation. Unless otherwise provided in the agreement, if the participant separates involuntarily or for good reasons within two years following a “change in control,” the Option award will remain exercisable until the expiration of the term. Unless otherwise provided in the agreement, if the participant is a non-employee director, the Option award will remain exercisable until the expiration of the term, even after the director’s termination of services as a director, but only to the extent that the Option award was exercisable immediately prior to such non-employee director ceasing to be a director. In no event will an Option award be exercisable if the participant’s employment (or service as a director) is terminated due to “cause” (as defined in the 2015 LTIP). Dividends and dividend equivalents are not paid on Options. The maximum number of shares that may be awarded to a participant in the form of Options in any fiscal year is 500,000 or, in the case of a director who is also a participant, 30,000 and the maximum term is 10 years.

STOCK APPRECIATION RIGHTS

An award of a SAR will entitle the participant, subject to terms and conditions determined by the Committee, to receive upon exercise of the SAR, all or a portion of the excess of the Fair Market Value of a specified number of shares as of the date of exercise of the SAR over a specified price that will not be less than 100 percent of the Fair Market Value of such shares as of the date of grant of the SAR. A SAR may be granted in connection with part or all of, in addition to, or completely independent of an Option or any other award under the 2015 LTIP. If issued in connection with a previously or contemporaneously granted Option, the Committee may impose a condition that exercise of a SAR cancels a pro rata portion of the Option with which it is connected and vice versa. Each SAR may be exercisable, in whole or in part, on the terms provided in the agreement. No SAR will be exercisable at any time after the expiration of its term. When a SAR is no longer exercisable, it will be deemed to have lapsed or terminated. Upon exercise of a SAR, payment to the participant will be made at such time or times as will be provided in the agreement in the form of shares of Common Stock. The agreement may provide for a limitation upon the amount or percentage of the total appreciation on which payment may be made in the event of the exercise of a SAR. Unless otherwise provided in the agreement, in the event of a participant’s death, then any SAR that has not expired or been terminated will become exercisable in full and may be exercised by the participant’s beneficiary at any time, or from time to time, within one year after the date of the participant’s death. Unless otherwise provided in the agreement, if a Participant separates from the Company due to disability, then any SAR that has not expired or been terminated will become exercisable in full, and the participant or the participant’s beneficiary may exercise such SAR at any time, or from time to time, within three years after the participant’s separation. Unless otherwise provided in the agreement, if a participant retires, then any SAR that has not expired or been terminated will remain exercisable for three years after the participant’s separation, but only to the extent that the SAR was exercisable immediately prior to the Participant’s separation. Unless otherwise provided in the agreement and subject to certain exceptions, if a participant separates from the Company for any reason other than death, retirement or other than following his or her disability, then any SAR that has not expired or been terminated will remain exercisable for three months after separation, but only to the extent that the SAR was exercisable immediately prior to the separation. Unless otherwise provided in the agreement, if the participant separates involuntarily or for good reasons with two years following a change in control, the SAR will remain exercisable until the expiration of the term. Unless otherwise provided in the agreement, if the participant is a non-employee director, the SAR will remain exercisable until the expiration of the term, even after the director’s termination of services as a director, but only to the extent that the SAR was exercisable immediately prior to such non-employee director ceasing to be a director. In no event will a SAR award be exercisable if the participant’s employment (or service as a director) is terminated due to “cause” (as defined in the 2015 LTIP). Dividends and dividend equivalents are not paid on SARs. The maximum number of shares that may be awarded to a participant in the form of SARs in any fiscal year is 500,000 and the maximum term is 10 years.

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PERFORMANCE UNITS

An award of Performance Units under the 2015 LTIP will consist of the right to receive cash or shares of Common Stock in the future provided that certain performance goals established by the Committee are satisfied during a specified performance cycle. The agreement will describe the terms and conditions required to be satisfied in order for the participant to be entitled to payment of the shares subject to the award, including the performance goals (and their target levels) to be satisfied as a condition of receiving the award. The agreement will also describe when delivery of the shares or cash subject to the Performance Units will occur should the performance goals be attained. Following the conclusion of each performance cycle, the Committee will determine the extent to which (a) performance goals have been attained, and (b) the number of shares or cash payable with respect to the award. Shares will not be issued to the participant until provided in the agreement. A participant must satisfy all of the terms and conditions of a Performance Unit award in order to be entitled to receive the shares subject to the award. If a participant separates from the Company before satisfaction of these terms and conditions, the participant will immediately forfeit the award. However, unless otherwise provided in the agreement, if a participant separates during the performance cycle because of the participant’s death or disability all restrictions will lapse with respect to a number of shares under the award that has been prorated for the portion of the term of the award prior to the participant’s separation. The agreement may provide for other circumstances, including, but not limited to, the participant’s retirement, under which the participant may receive a prorated award. Any Performance Units as to which restrictions do not lapse under the preceding sentences or under the agreement will terminate at the date of the participant’s separation and the Performance Units will be forfeited to the Company. The agreement may permit an acceleration of the Performance Cycle and an adjustment of performance targets and payments with respect to some or all of the Performance Units awarded to a participant, upon the occurrence of certain events, which may, but need not include, without limitation, a change in the accounting practices of the Company; a change in the participant’s title or employment responsibilities; the participant’s death, disability or retirement or; with respect to payments in shares with respect to Performance Units, certain specified events related to the company’s capital stock. The agreement also may provide for a limitation on the value of an award of Performance Units that a participant may receive. In no event, however, will a performance cycle be accelerated unless the acceleration is permitted by applicable law.

RESTRICTED STOCK AWARDS

An award of Restricted Stock under the 2015 LTIP will consist of shares of Common Stock subject to restrictions on transfer and conditions of forfeiture, which restrictions and conditions will be included in the agreement. The Committee may provide for the lapse or waiver of any such restriction or condition based on such factors or criteria as the Committee, in its sole discretion, may determine. Except as otherwise provided in the agreement, each stock certificate issued with respect to an award of Restricted Stock will either be deposited with the Company or its designee, together with an assignment separate from the certificate, in blank, signed by the participant, or bear such legends with respect to the restricted nature of the Restricted Stock evidenced thereby as will be provided for in the agreement. The agreement will describe the terms and conditions by which the restrictions and conditions of forfeiture upon awarded Restricted Stock will lapse. Upon the lapse of the restrictions and conditions, shares free of restrictive legends, if any, relating to such restrictions will be issued to the participant or a beneficiary. Unless otherwise provided in the agreement, a participant with a Restricted Stock award will have all the rights of a shareholder including, but not limited to, the right to receive dividends and the right to vote the shares of Restricted Stock. A participant must satisfy all of the terms and conditions of a Restricted Stock award in order for the restrictions on the shares of Restricted Stock subject to the award to lapse. If a participant separates from the Company before satisfaction of these terms and conditions, the participant will immediately forfeit the award. However, unless otherwise provided in the agreement, if a participant separates from the Company because of his or her death or disability, all restrictions will lapse with respect to a number of shares of Restricted Stock under the award that has been prorated for the portion of the term of the award prior to the participant’s separation from the Company. The agreement may provide for other circumstances, including, but not limited to, the participant’s retirement, under which the participant may receive a prorated award. Any shares of Restricted Stock as to which restrictions do not lapse under the preceding sentences or under the agreement will terminate at the date of the participant’s separation from the Company and such shares of Restricted Stock will be forfeited to the Company. No more than 250,000 shares of Restricted Stock or, in the case of a director who is also a participant, 30,000 shares of Restricted Stock, together with any other Full Value Awards, may be issued to a participant in any calendar year.

RESTRICTED STOCK UNITS

An Award of Restricted Stock Units under the 2015 LTIP will consist of the right to receive shares of Common Stock in the future provided that certain restrictions or conditions are satisfied. The Committee may provide for the lapse or waiver of any such restriction or condition based on such factors or criteria as the Committee, in its sole discretion, may determine. The agreement will describe the terms and conditions required to be satisfied in order for the participant to be entitled to payment of the shares of Common Stock subject to the award. Shares of Common Stock will not be issued to the participant until and unless any restrictions and conditions are satisfied, or at such later date as may be provided in the agreement. A

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participant must satisfy all of the terms and conditions of a Restricted Stock Unit award in order to be entitled to receive the shares of Common Stock subject to the award. If a participant separates from the Company before satisfaction of these terms and conditions, the participant will immediately forfeit the award. However, unless otherwise provided in the agreement, if a participant has a separation from the Company during the term of a Restricted Stock Unit award because of the Participant’s death or disability, all restrictions will lapse with respect to a number of shares of Common Stock under the award that has been prorated for the portion of the term of the award prior to the participant’s separation from the Company. The agreement may provide for other circumstances, including, but not limited to, the participant’s retirement, under which the participant may receive a prorated award. Any Restricted Stock Units as to which restrictions do not lapse under the preceding sentences or under the agreement will terminate at the date of the participant’s separation from the Company and such Restricted Stock Units will be forfeited to the Company. The Committee, in its sole discretion, may elect to settle Restricted Stock Units in the form of cash rather than shares of Common Stock. No more than 250,000 shares subject to Restricted Stock Units or, in the case of a director who is also a participant, 30,000 shares subject to Restricted Stock Units, together with any other Full Value Awards, may be issued to a participant in any calendar year.

2015 LTIP BENEFITS

The grant of awards under the 2015 LITP is within the discretion of the Committee and the Board. Therefore, the Company is unable to determine the benefits or amounts that will be allocated to any participant under the 2015 LTIP.

EFFECTIVE DATE AND DURATION OF THE 2015 LTIP

The 2015 LTIP will become effective as of May 7, 2015, if the 2015 LTIP is approved by the requisite vote of shareholders at the 2015 Annual Meeting of Shareholders. Thereafter, the Company will file a registration statement on Form S-8 with the SEC registering the shares issuable under the 2015 LTIP. The 2015 LTIP will remain in effect until all Common Stock subject to it is distributed, all awards have expired or lapsed, the 2015 LTIP is terminated pursuant to its terms, or until May 7, 2025. However, awards made before the termination date may be exercised, vested or otherwise effectuated beyond the termination date, unless limited in the agreement or otherwise.

AMENDMENT, MODIFICATION AND TERMINATION OF THE 2015 LTIP

The Board may at any time, and from time to time, amend, suspend or terminate the 2015 LTIP. The Committee may at any time alter or amend any or all agreements under the 2015 LTIP to the extent permitted by law. No amendment, suspension, or termination of the 2015 LTIP may materially and adversely affect any right acquired by any participant under an award granted before the date of amendment, suspension, or termination, unless otherwise agreed to by the participant in the agreement or otherwise, or required as a matter of law.

In connection with a (i) fundamental change, (ii) recapitalization, (iii) reclassification, (iv) cash or stock dividend or other distribution (other than ordinary cash dividends), (v) stock split, (vi) stock combination, (vii) stock exchange, or (viii) any other similar corporate transaction which would otherwise impact or affect (a) the number or type of shares available for or subject to awards under the 2015 LTIP (including any adjustment in the manner in which the maximum number of shares or types of awards available under the 2015 LTIP are determined and counted), (b) the maximum number of shares permitted to be issued to an individual participant in any fiscal year; (c) the number or type of shares and amount of cash subject to outstanding, awards; (d) the grant, exercise price or value of outstanding awards; and/or (e) the terms and conditions of any outstanding award (including, without limitation, any applicable performance targets or criteria with respect to any Performance Units), the Committee will make such adjustments in awards as it deems equitable and appropriate, in its sole discretion, to reflect the event. Other than as provided in the prior sentence, neither the Board nor any committee may cause the Company to take any of the following actions without receiving the prior approval of the Company’s shareholders: (a) adjusting or amending the exercise price of any outstanding award, whether through amendment, replacement grant, exchange or other means, (b) providing for the cancellation of an Option award in exchange for cash or another award when the Option’s exercise price per share exceeds the Fair Market Value of a share; or (c) providing for the cancellation of a SAR in exchange for cash or another award when the SAR’s base price per share exceeds the Fair Market Value of a share.

CHANGE IN CONTROL

In the event of a “change in control,” the Committee will take one of the following actions:

(i)             if the Change in Control is a merger, consolidation or statutory share exchange, make appropriate provision for the replacement of the outstanding awards by the substitution of equity-based awards of the corporation surviving any merger or consolidation with substantially similar terms and conditions (or, if appropriate, equity-based awards of the parent corporation of the Company or such surviving corporation), provided such equity-based awards preserve the full economic value of the outstanding awards (to the extent permitted under applicable law) and provide for full vesting of the award in the event the participant separates from the Company involuntarily or for good cause; or

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(ii)          in the case of awards of Options and SARs, at least 10 days before the occurrence of the Change in Control, declare, and provide written notice to each holder of the Option award or SAR of the declaration, that each outstanding Option award and SAR, whether or not then exercisable, will be cancelled at the time of, or immediately before the occurrence of, the Change in Control in exchange for payment to each holder of an Option award or SAR, within ten (10) days after the Change in Control of cash equal to (a) for each share covered by the cancelled Option, the amount, if any, by which the Fair Market Value per share exceeds the purchase price per share covered by the Option, or (b) for each SAR, the price determined pursuant to the agreement. At the time of the declaration provided for in the immediately preceding sentence, each SAR and each Option award will immediately become exercisable in full and each person holding an Option award or a SAR will have the right, during the period preceding the time of cancellation of the Option award or SAR, to exercise the Option award as to all or any part of the shares covered thereby or the SAR in whole or in part, as the case may be. In addition, each outstanding Option award and SAR granted pursuant to the 2015 LTIP that has been exercised before the Change in Control will be cancelled at the time of, or immediately before, the Change in Control. Notwithstanding the foregoing, no person holding an Option award or a SAR will be entitled to the payment provided for above if the Option award or SAR has terminated, expired or been cancelled. In the case of Full Value awards that are time-based vested, provide for either full vesting or pro-rated vesting (based on the number of months that have expired since the award was granted) and payout of cash or shares under the award; and in the case of Full Value Awards that are performance-based, provide for full vesting and payout of cash or shares based on the assumption that the performance goal(s) for the award were met at target.

“Change in Control” means and includes each of the following:

(i)             The date any “Person,” within the meaning of Section 13(d) or 14(d) under the Exchange Act, including any group (within the meaning of Section 13(d)(3) under the Exchange Act), becomes the “Beneficial Owner,” as such term is defined in Rule 13d-3 promulgated under the Exchange Act, of 30 percent or more of the combined voting power of the Company’s outstanding shares, other than beneficial ownership by (A) the Company or any subsidiary of the Company, (B) any employee benefit plan of the Company or any subsidiary of the Company or (C) any entity of the Company for or pursuant to the terms of any such plan. Notwithstanding the foregoing, a Change in Control will not be deemed to occur as the result of an acquisition of outstanding shares of the Company by the Company which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by a Person to 30 percent or more of the shares of the Company then outstanding; provided, however, that if a Person becomes the Beneficial Owner of 30 percent or more of the shares of the Company then outstanding by reason of share purchases by the Company and will, after such share purchases by the Company, become the Beneficial Owner of any additional shares of the Company, then a Change in Control will be deemed to have occurred; or

(ii)          the date the Company consummates a merger or consolidation with another entity, or engages in a reorganization with or a statutory share exchange or an exchange offer for the Company’s outstanding voting stock of any class with another entity or acquires another entity by means of a statutory share exchange or an exchange offer, or engages in a similar transaction; provided that no Change in Control will be deemed to have occurred by reason of this paragraph unless either:

(A)        the shareholders of the Company immediately prior to the consummation of the transaction would not, immediately after such consummation, as a result of their beneficial ownership of voting stock of the Company immediately prior to such consummation

(i)             be the Beneficial Owners, directly or indirectly, of securities of the resulting or acquiring entity entitled to elect a majority of the members of the board of directors or other governing body of the resulting or acquiring entity; and

(ii)          be the Beneficial Owners of the resulting or acquiring entity in substantially the same proportion as their beneficial ownership of the voting stock of the Company immediately prior to such transaction; or

(B)        those persons who were directors of the Company immediately prior to the consummation of the proposed transaction would not, immediately after such consummation, constitute a majority of the directors of the resulting entity;

(iii)       the date of the sale or disposition, in one or a series of related transactions, of all or substantially all of the assets of the Company to any Person (as defined in paragraph (i) above) other than an affiliate; or

(iv)       the date the number of duly elected and qualified directors of the Company who were not either elected by the Company’s Board or nominated by the Board or its nominating/governance committee for election by the shareholders will constitute a majority of the total number of directors of the Company as fixed by its By-Laws.

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The Committee will have full and final authority, which will be exercised in its discretion, to determine conclusively whether a Change in Control of the Company has occurred pursuant to the above definition, and the date of the occurrence of such Change in Control and any incidental matters relating thereto.

FEDERAL TAX TREATMENT

The following is a brief description of the U.S. federal income tax treatment that will generally apply to awards under the 2015 LTIP based on current U.S. income taxation with respect to grantees who are subject to U.S. income tax. The 2015 LTIP is not a qualified pension, profit-sharing or stock bonus plan under Section 401(a) of the Code. The 2015 LTIP is not subject to any provisions of the Employee Retirement Income Security Act of 1974.

RESTRICTED STOCK AWARDS

A grant of restricted stock generally is not a taxable event for the grantee, if the grant is subject to a risk of forfeiture or other restrictions that will lapse upon the achievement of other objectives, assuming that the restrictions constitute a “substantial risk of forfeiture” for U.S. income tax purposes. Upon the vesting of shares subject to a restricted stock award, the grantee will realize ordinary income in an amount equal to the then fair market value of those shares, and the Company will be entitled to a corresponding deduction. Gains or losses realized by the grantee upon disposition of such shares following vesting will be treated as capital gains and losses, with the basis in such shares equal to the fair market value of the shares at the time of vesting and with the holding period beginning on the date such shares became vested. Dividends paid to the grantee prior to vesting will also be compensation income to the grantee and deductible as such by the Company. Alternatively, the grantee may file an election under Section 83(b) of the Code, in which case the grantee will recognize ordinary income on the date of grant equal to the excess of the Fair Market Value of such stock on the date of grant over the amount, if any, paid for such stock notwithstanding the substantial risk of forfeiture. In this case, upon the subsequent sale of stock, the grantee would incur a capital gain or loss, with the tax rate determined on the grantee’s holding period, which would begin on the date of grant. In the event that a grantee makes such an election and subsequently forfeits such shares, the grantee will be considered to have sold the shares with the amount of loss determined as the amount, if any, paid for the shares minus the amount, if any, received upon the forfeiture of such shares.

OPTIONS

The grant of a non-statutory stock option generally is not a taxable event for the grantee. Upon exercise of the option, the grantee generally will recognize ordinary income in an amount equal to the excess of the Fair Market Value of the stock acquired upon exercise (determined as of the date of exercise) over the exercise price of such option. The Company will be entitled to a deduction equal to the amount of ordinary income recognized by the grantee in the year in which such taxable income is recognized and the Company is required to withhold federal income taxes with respect to any amounts included in the optionee’s taxable income. Gains or losses realized by the grantee upon disposition of such shares will be treated as capital gains and losses, with the basis in such shares equal to the fair market value of the shares at the time of exercise.

The exercise of a non-qualified option through the delivery of previously acquired shares will generally be treated as a non-taxable, like-kind exchange as to the number of shares surrendered and the identical number of shares received under the option. That number of shares will take the same basis and, for capital gains purposes, the same holding period as the shares that are given up. The value of the shares received upon such an exchange that are in excess of the number given up will be includible as ordinary income to the grantee at the time of the exercise. The excess shares will have a new holding period for capital gain purposes and a basis equal to the value of such shares of Stock determined at the time of exercise.

STOCK APPRECIATION RIGHTS

The grant of an SAR will not result in taxable income to the grantee. Upon exercise of an SAR, the amount of cash or the fair market value of shares of Stock received will be taxable to the grantee as ordinary income, and a corresponding deduction will be allowed to the Company. Gains or losses realized by the grantee upon disposition of such shares will be treated as capital gains and losses, with the basis in such shares equal to the fair market value of the shares at the time of exercise.

PERFORMANCE UNITS

A grant of performance units generally is not a taxable event for the grantee. However, assuming the applicable performance targets have been attained, the grantee generally will recognize ordinary income on the date of the distribution of cash or shares equal to the amount of any cash received or the Fair Market Value of any Common Stock received. Gains or losses realized by the grantee upon disposition of shares received in settlement of such performance units will be treated as capital gains and losses, with the basis in such shares equal to the fair market value of the shares at the time of distribution and with the holding period beginning on the date such shares are distributed.

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CASH AWARDS

Generally, a grantee will recognize ordinary income and the Company will be entitled to a deduction (and will be required to withhold federal income taxes) with respect to cash awards at the earliest time at which the grantee has an unrestricted right to receive the amount of such cash payment. The timing of such income recognition will depend upon the specific terms and conditions of the cash award.

OTHER STOCK BASED AWARDS

Awards may be granted under the 2015 LTIP that do not fall clearly into the categories described above. The federal income tax treatment of these awards will depend upon the specific terms of the awards. Generally, the Company will be entitled to a deduction and will be required to withhold applicable taxes with respect to any ordinary income recognized by a grantee in connection with awards made under the 2015 LTIP.

SECTION 162(M) OF THE CODE

Section 162(m) of the Code provides that the deduction by a publicly-held corporation for compensation paid in a taxable year to the chief executive officer and the three other most highly compensated executive officers of the corporation (other than the CFO) is limited to $1 million for each individual officer. For purposes of Section 162(m), compensation which is performance-based is not counted as subject to the deductibility limitation. To preserve the deduction, the Company has designed the 2015 LTIP to enable awards thereunder to constitute “performance-based compensation” and not be counted toward the $1 million limit. Income pursuant to Options and SARs granted pursuant to the 2015 LTIP is intended to constitute “performance-based compensation” and not be counted toward the $1 million limit. Other awards, including performance units, may be structured by the Committee to constitute performance-based compensation subject to the terms of the 2015 LTIP. However, the Committee maintains the flexibility to pay non-deductible compensation if they believe it is in the best interest of the Company and its shareholders.

WITHHOLDING OF TAXES

Pursuant to the 2015 LTIP, the Company may deduct, from any payment or distribution of shares under the 2015 LTIP, the amount of any tax required by law to be withheld with respect to such payment, or may require the grantee to pay such amount to the Company prior to, and as a condition of, making such payment or distribution. Subject to rules and limitations established by the Committee, a grantee may elect to satisfy the withholding required, in whole or in part, either by having the Company withhold shares of Stock from any payment under the 2015 LTIP or by the grantee delivering shares of the Company to the Company. However, the number of such shares used to satisfy the withholding obligation with respect to the exercise of a stock option may not be more than the number required to satisfy the Company’s minimum statutory withholding obligation based on minimum statutory withholding rates for U.S. federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income. The portion of the withholding that is satisfied with shares will be determined using the fair market value of shares of Stock on the date when the amount of taxes to be withheld is determined.

The use of shares of Stock to satisfy any withholding requirement will be treated, for U.S. income tax purposes, as a sale of such shares for an amount equal to the fair market value of the shares on the date when the amount of taxes to be withheld is determined. If previously owned shares of Stock of the Company are delivered by a grantee to satisfy a withholding requirement, the disposition of such shares would result in the recognition of gain or loss by the grantee for tax purposes, depending on whether the basis in the delivered shares is less than or greater than the fair market value of the shares at the time of disposition.

CHANGE IN CONTROL

Any acceleration of the vesting or payment of awards under the 2015 LTIP in the event of a change in control in the Company may cause part or all of the consideration involved to be treated as an “excess parachute payment” under the Code, which may subject the grantee to a 20 percent excise tax and preclude deduction by the Company.

DEFERRED COMPENSATION

Awards granted pursuant to the 2015 LTIP are generally not intended to constitute “deferred compensation” subject to section 409A of the Code. If an award does constitute “deferred compensation,” it is intended to comply with section 409A of the Code. A violation of section 409A of the Code may subject a grantee to immediate taxation of an award plus a 20 percent excise tax and interest.

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TAX ADVICE

The preceding discussion is based on U.S. tax laws and regulations presently in effect, which are subject to change, and the discussion does not purport to be a complete description of the Federal income tax aspects of the 2015 LTIP. A grantee may also be subject to state and local taxes, or taxes in other jurisdictions, in connection with the grant of awards under the 2015 LTIP. The Company suggests that grantees consult with their individual tax advisors to determine the applicability of the tax rules to the awards granted to them in their personal circumstances.

RECOMMENDATION

The Board of Directors recommends the shareholders vote “For” Proposal Four to approve the Company’s 2015 LTIP.

PROPOSAL FIVE: RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee has selected KPMG LLP (“KPMG”), the Company’s independent registered public accounting firm since 1983. For fiscal year 2015, the Board is asking shareholders to ratify that selection. Although current law, rules and regulations, as well as the Charter of the Audit Committee, require our independent auditor to be appointed, retained and supervised by the Audit Committee, the Board considers the selection of an independent auditor to be an important matter of shareholder concern and considers a proposal for shareholders to ratify such selection to be an important opportunity for shareholders to provide direct feedback to the Board on an important issue of corporate governance. If the appointment of KPMG is not ratified by shareholders, the Audit Committee will take such action, if any, with respect to the appointment of the independent auditor as the Audit Committee deems appropriate. Even if the selection is ratified, the Audit Committee, in its discretion, may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and our shareholders.

Representatives of KPMG are expected to be present at the Annual Meeting with the opportunity to make a statement, if they desire, and will be available to respond to appropriate questions from the shareholders.

The affirmative vote of the holders of at least a majority of the shares of Common Stock of the Company present and entitled to vote at the Annual Meeting is required for adoption of this proposal.

RECOMMENDATION

The Board of Directors recommends the shareholders vote “FOR” Proposal Five and the ratification of selection of KPMG LLP as independent registered public accounting firm of the Company for the current fiscal year.

FEES PAID TO THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Fees for services rendered by KPMG, the Company’s Independent Registered Public Accounting Firm, for the past two fiscal years for each of the following categories of services, are set forth below:

(1)         Audit fees for 2013 have been adjusted by $38,717 to reflect an increase due to audit scope changes agreed subsequent to last year’s proxy statement.

Audit fees relate to professional services rendered for the audit of the consolidated financial statements of the Company, audits of the statutory financial statements of certain subsidiaries, review of quarterly consolidated financial statements and assistance with review of documents filed with the SEC, including attestation as required under Section 404 of the Sarbanes-Oxley Act of 2002.

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PROPOSAL SIX: NON-BINDING, ADVISORY VOTE REGARDING THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS

The Dodd-Frank Wall Street Reform and Consumer Protection Act requires that we seek a non-binding vote from our shareholders to approve, on an advisory basis, the compensation of our named executive officers as disclosed in the Compensation Discussion & Analysis (“CD&A”), compensation tables and related disclosures in this Proxy Statement.

As discussed in our CD&A starting on page 38, our executive compensation programs have been designed to provide a competitive total executive compensation program linked to Company performance that will attract, retain and motivate talented executives critical to the Company’s long-term success.

Our Executive Resources Committee developed an overall compensation philosophy that is built on a foundation of the following principles:

·                  The focus is on the linkage between long-term shareholder value creation and executive pay;

·                  Incentives for executives directly involved in underwriting are based on underwriting profit measured over a period of years consistent with the income and risk to the Company;

·                  Compensation should reflect both the Company’s and individual’s performance;

·                  A meaningful element of equity-based compensation and significant executive equity holdings are important to ensure alignment of management and shareholder interests;

·                  The Company’s overall executive pay levels must be competitive in the marketplace for executive talent to enable the Company to attract, motivate and retain the best talent; and

·                  Appropriate safeguards must be in place to ensure annual incentives are aligned with long-term risk and value creation to protect against unnecessary and excessive risk to the Company.

We are asking you to indicate your support for our executive compensation programs as described in this Proxy Statement. This proposal, commonly known as a Say-on-Pay proposal, gives you the opportunity to express your views on our 2014 executive compensation policies and procedures for named executive officers. This non-binding vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the policies and procedures described in this Proxy Statement. Accordingly, we ask the shareholders to vote “FOR” the following resolution at the Annual Meeting:

RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the CD&A, compensation tables and any related material disclosed in the Company’s Proxy Statement is hereby APPROVED.

Your vote is advisory, and therefore not binding on the Executive Resources Committee or the Board. However, we value your opinions and to the extent there is any significant vote against the named executive officer compensation as disclosed in this Proxy Statement, we will consider our shareholders’ concerns. The Executive Resources Committee will evaluate whether any actions are necessary to address those concerns.

RECOMMENDATION

The Board of Directors recommends that shareholders vote “FOR” the proposal to approve the compensation of the Company’s named executive officers as described in this Proxy Statement.

CORPORATE GOVERNANCE AND BOARD MATTERS

CORPORATE GOVERNANCE PRINCIPLES

The Company is committed to having sound corporate governance principles that are designed to ensure that the Board exercises reasonable business judgment in discharging its obligations to the Company and its shareholders. Corporate governance practices also help to ensure that full and transparent disclosures are made to the Company’s shareholders and the SEC.

The Company’s published Corporate Governance Guidelines, which are publicly available on the Company’s website under the Investors section at www.rlicorp.com, outline the directors’ responsibilities, which include attendance at shareholder, Board and committee meetings. Eleven members of the Board attended the 2014 Annual Meeting of Shareholders and were available to respond to appropriate questions from the shareholders.

The Company has developed an orientation process for new directors and also encourages new directors to attend a director seminar in their first year as a director. Each incumbent director is expected to attend an accredited director education

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seminar at least once a year, and each Audit Committee member is expected to attend an audit committee forum/conference at least once a year.

DIRECTOR INDEPENDENCE

The Board is required to affirmatively determine the independence of each director and to disclose such determination in the proxy statement for each Annual Meeting of Shareholders of the Company. The Board has established guidelines, which are set forth below, to assist it in making this determination, which incorporate all of the NYSE independence standards. Only independent directors serve on the Company’s Audit Committee, Executive Resources Committee and Nominating/Corporate Governance Committee.

It is the policy of the Board of Directors of the Company that a majority of its members be independent. To be considered independent under the NYSE Listing Standards, the Board must affirmatively determine that a director or director nominee (collectively referred to as “director”) has no material relationship with the Company (directly or as a partner, shareholder or officer of an organization that has a relationship with the Company), and also meets other specific independence tests. The Board examines the independence of each of its members once per year, and again if a member’s outside affiliations change substantially during the year. With the exception of the Messrs. Michael and Stone, the Board has affirmatively determined that each director is independent within the meaning of the NYSE Listing Standards and the Company’s Director Independence Standards.

The Board has established the following categorical standards, incorporating the NYSE’s independence standards to assist it in determining director independence:

(a)         A Director will not be independent if:

(i)             the Director is, or has been within the last three years, an employee of RLI, or an immediate family member of the Director is, or has been within the last three years, an executive officer of RLI;

(ii)          the Director has received, or has an immediate family member who has received, during any 12-month period within the last three years, more than $120,000 in direct compensation from RLI, other than Director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service);

(iii)       (A) the Director is a current partner or employee of a firm that is RLI’s internal or external auditor; (B) the Director has an immediate family member who is a current partner of such firm; (C) the Director has an immediate family member who is a current employee of such firm and personally works on RLI’s audit; or (D) the Director or an immediate family member was within the last three years a partner or employee of such a firm and personally worked on RLI’s audit within that time;

(iv)       the Director or an immediate family member is, or has been within the last three years, employed as an executive officer of another company where any of RLI’s present executive officers at the same time serves or served on that company’s compensation committee; or

(v)          the Director is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received payments from, RLI for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or 2 percent of such other company’s consolidated gross revenues.

(b)         The following commercial and charitable relationships will not be considered to be material relationships that would impair a Director’s independence:

(i)             if a Director, or an immediate family member of the Director, is an executive officer, director, employee or holder of an equity interest of a company that has made payments to, or received payments from, RLI for property or services in an amount which, in the last fiscal year, does not exceed the greater of $1 million, or 2 percent of such other company’s consolidated gross revenues;

(ii)          if a Director, or an immediate family member of the Director, is an executive officer, director, employee or holder of an equity interest of a company that is indebted to RLI, or to which RLI is indebted, and the total amount of either company’s indebtedness to the other does not exceed the greater of $1 million, or 2 percent of such other company’s total consolidated assets;

(iii)       if a Director, or an immediate family member of the Director, is an executive officer, director or employee of a company in which RLI owns an equity interest, and the amount of RLI’s equity interest in such other company does not exceed the greater of $1 million, or 2 percent of such other company’s total shareholders’ equity;

(iv)       if a Director, or an immediate family member of the Director, is a holder of an equity interest of a company of which a class of equity security is registered under the Securities Exchange Act of 1934, as amended, and in which RLI owns an equity interest;

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(v)          if a Director, or an immediate family member of the Director, is an executive officer, director, employee or holder of an equity interest of a company that owns an equity interest in RLI; and

(vi)       if a Director, or an immediate family member of the Director, serves as an officer, director or trustee of a tax exempt organization, and the contributions from RLI to such tax exempt organization in the last fiscal year do not exceed the greater of $1 million, or 2 percent of such tax exempt organization’s consolidated gross revenues. (RLI’s automatic matching of employee charitable contributions will not be included in the amount of RLI’s contributions for this purpose.)

(c)          For relationships not covered by the standards in subsection (b) above, the determination of whether the relationship is material or not, and therefore whether the Director would be independent or not, shall be made by the Directors who satisfy the independence standards set forth in subsections (a) and (b) above. RLI is required to explain in its proxy statement the basis for any Board determination that a relationship was immaterial, despite the fact that it did not meet the categorical standards of immateriality set forth in subsection (b) above.

BOARD INDEPENDENCE STATUS

The following relationships were reviewed in connection with determining director independence but were determined to not be material relationships and that they do not affect such person’s independence under the Board independence standards:

Mr. Baily is a director of Endurance Specialty Holdings Ltd., affiliates of which include reinsurance companies. From time to time, the Company enters into reinsurance arrangements with the Endurance companies. Mr. Baily also is a former partner with a predecessor firm to PricewaterhouseCoopers LLP (“PwC”), retired from PwC in 1999, and receives a pension payment from PwC. Mr. Scanlan also is a former partner with PwC, retired from PwC in 2014, and receives a pension payment from PwC. From time to time, the Company engages PwC for special projects and services in actuarial, tax and other areas.

DIRECTOR EVALUATION PROCESS

To ensure that thorough attention is given to individual and collective Directors’ performance and optimizing the composition of our Board, the Board and Committees utilize an annual evaluation process. Each Director self-evaluates the performance of the Committees on which he/she serves as well as the Board as a whole. Detailed composites are completed to obtain perspective on each Committee’s performance in relationship to its respective Charter, effectiveness, functionality, areas of improvement and overall performance. The Annual Board Evaluation focuses on board processes, policies, effectiveness, committee composition and strategy as well as performance whereby establishing activities to maximize shareholder value. This process is handled by the Nominating/Corporate Governance Committee (“NCG Committee”).

Further, each Director participates in a robust evaluation process, wherein annually all Directors provide a peer evaluation on a variety of director characteristics. Those evaluations are assessed by the NCG Committee, and each reviewed Board member meets with the Chairman of the Board and/or Lead Director to discuss the consolidated comments.

Based on the cumulative results of each Director’s overall performance, the NCG Committee reviews and evaluates the Board candidates and their respective qualifications in detail to determine if it is in the best interest of the Company and its shareholders to nominate each Director to stand for election.

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DIRECTOR NOMINATION POLICY

The NCG Committee of the Company considers director candidates based upon a number of qualifications. A nominee should have:

·                  A reputation for the highest professional and personal ethics and values, fairness, honesty and good judgment;

·                  A significant breadth of experience, knowledge and abilities to assist the Board in fulfilling its responsibilities;

·                  Been in a generally recognized position of leadership in his or her field of endeavor; and

·                  A commitment to enhancing shareholder value.

Nominees with insurance and accounting backgrounds are particularly desirable. A nominee should not have a conflict of interest that would impair the nominee’s ability to represent the interests of the Company’s shareholders and fulfill the responsibilities of a director.

The NCG Committee conducts an annual assessment of the composition of the Board and its committees. The Committee reviews the appropriate skills and characteristics required of Board members with a view toward establishing a diversity of backgrounds in areas of core competencies including experience in the following: business development, insurance industry, senior management, operational, technical, compensation and finance. The NCG Committee relies upon recommendations from a wide variety of its business contacts including current executive officers, directors, community leaders and shareholders, as sources for potential director candidates, and may also utilize third party search firms.

The NCG Committee will consider qualified director candidates as properly nominated by shareholders as further set forth under SHAREHOLDER PROPOSALS on page 59. In addition, the NCG Committee will consider shareholder recommendations for director candidates, but the NCG Committee has no obligation to recommend such candidates. Assuming that appropriate biographical and background material (including qualifications) is provided for candidates recommended by shareholders, the NCG Committee will evaluate those candidates by following substantially the same process and applying substantially the same criteria as for candidates recommended by other sources.

CODE OF CONDUCT

The Company has adopted a Code of Conduct, which is designed to help directors, officers and employees maintain ethical behavior and resolve ethical issues in an increasingly complex global business environment. The Code of Conduct applies to all directors, officers and employees, including the Chief Executive Officer, the Chief Financial Officer, the Controller, the General Counsel and any other employee with any responsibility for the preparation and filing of documents with the SEC. The Code of Conduct covers topics including, but not limited to, ethical behavior, conflicts of interest, corporate opportunities, confidentiality of information and compliance with laws and regulations. A copy of our Code of Conduct is available at the Company’s website under the Investors section at www.rlicorp.com. Any amendments to the Code of Conduct will be posted on the website, and any waiver that applies to a director or executive officer will be disclosed in accordance with the rules of the SEC and NYSE.

SHAREHOLDER AND INTERESTED PARTIES COMMUNICATIONS

Any shareholder or other interested party who desires to communicate with the Board’s Lead Director of the Board’s independent directors or any of the other members of the Company’s Board of Directors may do so electronically by sending an email to the following address: Lead.Director@rlicorp.com. Alternatively, a shareholder or other interested party may communicate with the Lead Director or any of the other members of the Board by writing to: Lead Director, RLI Corp. 9025 N. Lindbergh Drive, Peoria, Illinois 61615. Communications may be addressed to the Lead Director, an individual director, a Board Committee, the independent directors or the full Board. Communications received by the Lead Director will then be distributed to the appropriate directors. Solicitations for the sale of merchandise, publications or services of any kind will not be forwarded to the directors.

COMPANY POLICY ON RELATED PARTY TRANSACTIONS

The Company recognizes that related party transactions present a heightened risk of conflicts of interest and/or improper valuation (or the perception thereof) and therefore has adopted a written policy which shall be followed in connection with all related party transactions involving the Company. The policy generally requires approval by the Nominating/Corporate Governance Committee for all transactions above $10,000 between the Company and its directors, officers, shareholders owning in excess of 5 percent of the Common Stock of the Company, and their family members and affiliates. One transaction falling within the purview of the policy was presented and approved by the Nominating/Corporate Governance Committee in 2013. The Company entered into a business arrangement with SS&C Technologies Holdings, Inc. (“SS&C”) to provide investment portfolio accounting and data processing services, on terms reasonably comparable to those that could be obtained in arm’s length dealings with an unrelated third party. The Company’s President & CEO (Mr. Michael) is a member of the Board of Directors of SS&C. The President of SS&C is the brother of Michael J. Stone, President & COO of the Company’s insurance subsidiaries.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In 2014, the transactions or series of similar transactions to which the Company is a party in which the amount involved exceeded $120,000 and in which any director, executive officer or holder of more than 5 percent of the Common Stock of the Company (or any of their immediate family members) had a direct or indirect material interest was the annual services provided to the Company by SS&C, as described above. The Company paid SS&C $302,783.96 in 2014.

COMMITTEES OF THE BOARD OF DIRECTORS

The Board has five standing committees: Audit, Executive Resources, Finance and Investment, Nominating/Corporate Governance and Strategy. The Audit, Executive Resources and Nominating/Corporate Governance Committees are composed solely of independent directors in compliance with the Company’s requirements and the NYSE Listing Standards. The Nominating/Corporate Governance Committee annually evaluates both Committee members and Committee Chairs, and rotates as necessary. In his discretion, the Chairman of the Board may attend any or all Committee meetings. All committees meet at least quarterly and also hold informal discussions from time to time. Charters for each committee are available on the Company’s website under the Investors section at www.rlicorp.com.

AUDIT COMMITTEE

The Company’s Audit Committee, composed exclusively of independent directors, met nine times in 2014 to consider various audit and financial reporting matters, including the Company’s outside audit firm relationship and to discuss the planning of the Company’s annual outside audit and its results. The committee also:

·                  monitored the Company’s management of its exposures to risk of financial loss;

·                  reviewed the adequacy of the Company’s internal controls, including the Company’s successful adoption of the Committee of Sponsoring Organizations of the Treadway Commission Internal Control - Integrated Framework 2013 update;

·                  reviewed the extent and scope of audit coverage;

·                  reviewed quarterly financial results;

·                  monitored selected financial reports;

·                  assessed the auditors’ performance; and

·                  selected the Company’s independent registered public accounting firm.

The committee also meets in executive session, with no members of management present, after its regular meetings as well as private executive sessions with KPMG and various members of management.

The Audit Committee is responsible for approving every engagement of KPMG to perform audit or non-audit services on behalf of the Company or any of its subsidiaries before KPMG is engaged to provide those services, with the Chair of the Audit Committee being authorized to pre-approve non-audit services and then reporting those services to the full Audit Committee, as described in the Audit Committee Report. The Audit Committee evaluates the effects that the provision of non-audit services may have on the Company’s independent registered public accounting firm services.

The Board of Directors annually determines the “financial literacy” of the members of the Audit Committee pursuant to the NYSE required standards. The Board has determined that based on those standards, each member of the Audit Committee is independent and financially literate, and that each member possesses accounting or related financial management expertise. The Board of Directors has further determined that each of the Audit Committee members qualifies as an “audit committee financial expert” as defined by the SEC.

Until May 1, 2014, members of the committee were Messrs. Baily (Chair), Lenrow and Viets and Ms. Allen. After May 1, 2014, members of the committee were Messrs. Baily (Chair), Angelina and Viets and Ms. Allen. Effective January 1, 2015, Mr. Scanlan became a member of the committee.

EXECUTIVE RESOURCES COMMITTEE

The Company’s Executive Resources Committee, composed exclusively of independent directors, met six times in 2014 to evaluate and recommend compensation of the President & CEO and certain key executive officers of the Company, discuss and evaluate the Company’s Market Value Potential Executive Incentive Program (“MVP Program”) and to develop objective criteria for the selection and ongoing management of the Company’s compensation peer group and to enhance the overall effectiveness of the executive compensation programs. The committee also reviews and evaluates the President & CEO’s goals and objectives, management development and succession planning and the Company’s deferred compensation, stock option, retirement and medical programs.

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Until May 1, 2014, members of the committee were Ms. Allen (Chair), and Messrs. Graham, Lenrow and McPheeters. After May 1, 2014, members of the committee were Ms. Allen (Chair), and Messrs. Ahlmann, Graham and McPheeters.

FINANCE AND INVESTMENT COMMITTEE

The Company’s Finance and Investment Committee oversees the Company’s investment and corporate finance transactions, policies and guidelines, which includes reviewing investment performance, investment risk management exposure and the Company’s capital structure. This committee met five times in 2014 to discuss ongoing financial, investment and capital matters.

Until May 1, 2014, members of the committee were Messrs. McPheeters (Chair), Ahlmann, Linke and Stone. After May 1, 2014, members of the committee were Messrs. McPheeters (Chair), Lenrow, Linke and Stone.

NOMINATING/CORPORATE GOVERNANCE COMMITTEE

The Company’s Nominating/Corporate Governance Committee, composed exclusively of independent directors, met seven times in 2014 to guide the Company’s corporate governance program and to monitor and discuss current and emerging corporate governance principles and procedures. The committee also counsels the Board with respect to Board and Committee organization, compensation, membership, function and Board and Committee performance assessments, individually and collectively. The committee identifies and reviews qualified individuals as potential new director candidates.

Until May 1, 2014, members of the committee were Messrs. Linke (Chair), Angelina, Baily and Viets. After May 1, 2014, members of the committee were Messrs. Linke (Chair), Graham, Lenrow and Viets.

STRATEGY COMMITTEE

The Company’s Strategy Committee met four times in 2014 to oversee the Company’s strategic plan and its implementation.

Until May 1, 2014, members of the committee were Messrs. Ahlmann (Chair), Angelina, Graham and Stone. After May 1, 2014, members of the committee were Messrs. Ahlmann (Chair), Angelina, Baily and Stone.

COMMITTEE MEMBERSHIP