Document:

rli_Ex10-4

		
			Exhibit 10.4
		

		
			 
		

		
			RLI CORP. EXECUTIVES
		

		
			 
		

		
			DEFERRED COMPENSATION PLAN
		

		
			 
		

		
			Restated as of January 1, 2009
		

		
			Amended as of May 4, 2017
		

		
			

		 

		

			 

		

		

			 

		

 

		

		
			RLI CORP. EXECUTIVES
		

		
			DEFERRED COMPENSATION PLAN
		

		
			 
		

		
			TABLE OF CONTENTS
		

			
					
						 

					
					
						 

					
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

					
					
						Page

				
	
					
						Article 1

					
					
						INTRODUCTION

					
1
				
	
					
						 

					
					
						1.1.

					
					
						Establishment

					
1
				
	
					
						 

					
					
						1.2.

					
					
						Purpose

					
1
				
	
					
						 

					
					
						1.3

					
					
						Definitions

					
1
				
	
					
						 

					
					
						 

					
					
						1.3.1.

					
					
						Account

					
1
				
	
					
						 

					
					
						 

					
					
						1.3.2.

					
					
						Affiliate

					
1
				
	
					
						 

					
					
						 

					
					
						1.3.3.

					
					
						Base Salary

					
1
				
	
					
						 

					
					
						 

					
					
						1.3.4.

					
					
						Beneficiary

					
1
				
	
					
						 

					
					
						 

					
					
						1.3.5.

					
					
						Board

					
1
				
	
					
						 

					
					
						 

					
					
						1.3.6.

					
					
						Chief Executive Officer

					
1
				
	
					
						 

					
					
						 

					
					
						1.3.7.

					
					
						Code

					
1
				
	
					
						 

					
					
						 

					
					
						1.3.8.

					
					
						Committee

					
1
				
	
					
						 

					
					
						 

					
					
						1.3.9.

					
					
						Deferral Eligible Amounts

					
1
				
	
					
						 

					
					
						 

					
					
						1.3.10.

					
					
						Employee

					
2
				
	
					
						 

					
					
						 

					
					
						1.3.11.

					
					
						ERISA

					
2
				
	
					
						 

					
					
						 

					
					
						1.3.12.

					
					
						Incentive Compensation

					
2
				
	
					
						 

					
					
						 

					
					
						1.3.13.

					
					
						Participant

					
2
				
	
					
						 

					
					
						 

					
					
						1.3.14.

					
					
						Performance-Based Compensation

					
2
				
	
					
						 

					
					
						1.3.15.

					
					
						Plan

					
2
				
	
					
						 

					
					
						 

					
					
						1.3.16.

					
					
						Prior Agreement

					
2
				
	
					
						 

					
					
						 

					
					
						1.3.17.

					
					
						RLI

					
2
				
	
					
						 

					
					
						1.3.18.

					
					
						RLI Stock

					
2
				
	
					
						 

					
					
						 

					
					
						1.3.19.

					
					
						Specified Employee

					
2
				
	
					
						 

					
					
						 

					
					
						1.3.20.

					
					
						Successor Corporation

					
2
				
	
					
						 

					
					
						 

					
					
						1.3.21.

					
					
						Termination of Employment

					
2
				
	
					
						 

					
					
						 

					
					
						1.3.22.

					
					
						Vested

					
3
				
	
					
						 

					
					
						 

					
					
						1.3.23.

					
					
						Year

					
3
				
	
					
						 

					
					
						1.4.

					
					
						“Top-Hat” Plan

					
3
				
	
					
						Article 2

					
					
						PARTICIPATION

					
3
				
	
					
						 

					
					
						2.1.

					
					
						Eligibility and Selection

					
3
				
	
					
						 

					
					
						2.2.

					
					
						Notification

					
3
				
	
					
						 

					
					
						2.3.

					
					
						Enrollment

					
3
				
	
					
						 

					
					
						2.4.

					
					
						Elective Deferrals

					
4
				
	
					
						 

					
					
						 

					
					
						2.4.1.

					
					
						Elections

					
4
				
	
					
						 

					
					
						 

					
					
						2.4.2.

					
					
						Elections Relate to Services Performed After the Election and Are Irrevocable

					
4
				
	
					
						 

					
					
						 

					
					
						2.4.3.

					
					
						Limits

					
4
				
	
					
						Article 3

					
					
						ACCOUNTS

					
4
				
	
					
						 

					
					
						3.1.

					
					
						Accounts

					
4
				
	
					
						 

					
					
						3.2.

					
					
						Credits to Accounts

					
5
				
	
					
						 

					
					
						 

					
					
						3.2.1.

					
					
						Elective Deferrals

					
5
				
	
					
						 

					
					
						 

					
					
						3.2.2.

					
					
						Dividends and Other Adjustments

					
5
				
	
					
						 

					
					
						3.3.

					
					
						Changes to Accounts

					
5
				
	
					
						Article 4

					
					
						BENEFITS

					
5
				
	
					
						 

					
					
						4.1.

					
					
						Vesting

					
5
				
	
					
						 

					
					
						4.2.

					
					
						Payment of Plan Benefits on Termination of Employment – General Rule

					
5
				
	
					
						 

					
					
						4.3.

					
					
						Changing Payment Elections

					
5
				
	
					
						 

					
					
						 

					
					
						4.3.1.

					
					
						General Rule

					
5
				
	
					
						 

					
					
						 

					
					
						4.3.2.

					
					
						Election upon Initial Plan Enrollment

					
5
				
	
					
						 

					
					
						 

					
					
						4.3.3.

					
					
						Subsequent Election

					
5
				
	
					
						 

					
					
						4.4.

					
					
						Special Rules

					
6
				
	
					
						 

					
					
						 

					
					
						4.4.1.

					
					
						Specified Employee Exception

					
6
				
	
					
						 

					
					
						 

					
					
						4.4.2.

					
					
						Cash-Out of Small Amounts

					
6
				
	
					
						 

					
					
						4.5.

					
					
						Medium of Payments

					
6
				
	
					
						 

					
					
						4.6.

					
					
						Delay in Distributions

					
6
				
	
					
						 

					
					
						4.7.

					
					
						Acceleration of Distributions

					
6
				

		 

		

			 

		

		

			i

		

		

			 

		

 

	
					
						

					
						 

					
					
						4.8.

					
					
						When a Payment is Deemed to be Made

					
7
				
	
					
						Article 5

					
					
						DEATH BENEFITS

					
7
				
	
					
						 

					
					
						5.1.

					
					
						Death Benefits

					
7
				
	
					
						 

					
					
						 

					
					
						5.1.1.

					
					
						Benefits When Participant Dies Before Commencement of Payments

					
7
				
	
					
						 

					
					
						 

					
					
						5.1.2.

					
					
						Benefits When Participant Dies After Commencement of Payments

					
8
				
	
					
						 

					
					
						 

					
					
						5.1.3.

					
					
						Medium of Payments

					
8
				
	
					
						 

					
					
						 

					
					
						5.1.4.

					
					
						Cash-Out of Small Amounts

					
8
				
	
					
						 

					
					
						5.2.

					
					
						Designation of Beneficiary

					
8
				
	
					
						 

					
					
						 

					
					
						5.2.1.

					
						 

					
					
						Persons Eligible to Designate

					
8
				
	
					
						 

					
					
						 

					
					
						5.2.2.

					
					
						Form and Method of Designation

					
8
				
	
					
						 

					
					
						 

					
					
						5.2.3.

					
					
						No Effective Designation

					
8
				
	
					
						 

					
					
						 

					
					
						5.2.4.

					
					
						Successor Beneficiary

					
8
				
	
					
						Article 6

					
					
						CLAIMS AND REVIEW PROCEDURES

					
9
				
	
					
						 

					
					
						6.1.

					
					
						Application for Benefits

					
9
				
	
					
						 

					
					
						6.2.

					
					
						Claims and Review Procedures

					
9
				
	
					
						 

					
					
						 

					
					
						6.2.1.

					
					
						Initial Claim

					
9
				
	
					
						 

					
					
						 

					
					
						6.2.2.

					
					
						Notice of Initial Adverse Determination

					
9
				
	
					
						 

					
					
						 

					
					
						6.2.3.

					
					
						Request for Review

					
9
				
	
					
						 

					
					
						 

					
					
						6.2.4.

					
					
						Claim on Review

					
9
				
	
					
						 

					
					
						 

					
					
						6.2.5.

					
					
						Notice of Adverse Determination for Claim on Review

					
10
				
	
					
						 

					
					
						6.3.

					
					
						Claims Rules

					
10
				
	
					
						 

					
					
						6.4.

					
					
						Deadline to File Claim

					
11
				
	
					
						 

					
					
						6.5.

					
					
						Exhaustion of Administrative Remedies

					
11
				
	
					
						 

					
					
						6.6.

					
					
						Arbitration

					
11
				
	
					
						 

					
					
						6.7.

					
					
						Deadline to File an Arbitration Action

					
11
				
	
					
						 

					
					
						6.8.

					
					
						Knowledge of Fact by Participant Imputed to Beneficiary

					
11
				
	
					
						 

					
					
						6.9.

					
					
						Deferral of Payment

					
11
				
	
					
						Article 7

					
					
						ADMINISTRATION

					
11
				
	
					
						 

					
					
						7.1

					
					
						Administrator

					
11
				
	
					
						 

					
					
						 

					
					
						7.1.1.

					
					
						Delegation

					
11
				
	
					
						 

					
					
						 

					
					
						7.1.2.

					
					
						Automatic Removal

					
11
				
	
					
						 

					
					
						 

					
					
						7.1.3.

					
					
						Conflict of Interest

					
12
				
	
					
						 

					
					
						 

					
					
						7.1.4.

					
					
						Binding Effect

					
12
				
	
					
						 

					
					
						 

					
					
						7.1.5.

					
					
						Third-Party Service Providers

					
12
				
	
					
						 

					
					
						7.2.

					
					
						Benefits Not Transferable

					
12
				
	
					
						 

					
					
						7.3.

					
					
						Benefits Not Secured

					
12
				
	
					
						 

					
					
						7.4.

					
					
						RLI’s Obligations

					
12
				
	
					
						 

					
					
						7.5.

					
					
						Withholding Taxes

					
12
				
	
					
						 

					
					
						7.6.

					
					
						Service of Process

					
12
				
	
					
						 

					
					
						7.7.

					
					
						Limitation on Liability

					
12
				
	
					
						Article 8

					
					
						AMENDMENT AND TERMINATION

					
12
				
	
					
						 

					
					
						8.1.

					
					
						Amendment

					
12
				
	
					
						 

					
					
						8.2.

					
					
						Termination

					
12
				
	
					
						Article 9

					
					
						MISCELLANEOUS

					
13
				
	
					
						 

					
					
						9.1.

					
					
						Effect on Other Plans

					
13
				
	
					
						 

					
					
						9.2.

					
					
						Effect on Employment

					
13
				
	
					
						 

					
					
						9.3.

					
					
						Disqualification

					
13
				
	
					
						 

					
					
						9.4.

					
					
						Rules of Document construction

					
13
				
	
					
						 

					
					
						9.5.

					
					
						References to Laws

					
13
				
	
					
						 

					
					
						9.6.

					
					
						Choice of Law

					
13
				
	
					
						 

					
					
						9.7.

					
					
						Binding Effect

					
13
				

		
			 
		

		
			 
		

		
			

		 

		

			 

		

		

			ii

		

		

			 

		

 

		

		
			RLI CORP. EXECUTIVES
		

		
			DEFERRED COMPENSATION PLAN
		

		
			 
		

		
			ARTICLE 1
		

		
			 
		

		
			INTRODUCTION
		

		
			 
		

		
			1.1.Establishment.  RLI established the RLI Corp. Executives Deferred Compensation Plan effective January 1, 2005. Prior to that date, RLI provided similar deferred compensation opportunities to a select group of executives under certain Prior Agreements. All obligations under the Prior Agreements (including any predecessor arrangements) will be satisfied under the Prior Agreements, rather than under this Plan. RLI hereby restates the Plan, effective January 1, 2009, to comply with the requirements of the final regulations issued under Section 409A of the Code (“Section 409A”) on April 10, 2007.
		

		
			 
		

		
			This restatement applies, to amounts deferred under the Plan on or after January 1, 2009 (the “Restatement Date”), and to the payment of all amounts deferred under the Plan (whether such amounts were deferred before, on, or after the Restatement Date) that have not yet been distributed as of the Restatement Date. Except as set forth in Article 6, no amount deferred under the Plan is intended to be “grandfathered” under Section 409A.
		

		
			 
		

		
			The amendment effective May 4, 2017, was to make clear how partial (or fractional) shares are paid in a single or final payment.
		

		
			 
		

		
			The obligation of RLI to make payments under the Plan constitutes an unsecured (but legally enforceable) promise of RLI to make such payments and no person, including any Participant or Beneficiary, shall have any lien, prior claim or other security interest in any property of RLI as a result of the Plan.
		

		
			 
		

		
			1.2.Purpose.  The purpose of the Plan is to attract and retain qualified executives and to provide them with an opportunity to save on a pre-tax basis and accumulate tax-deferred income to achieve their financial goals.
		

		
			 
		

		
			1.3.Definitions.  When the following terms are used herein with initial capital letters, they shall have the following meanings:
		

		
			 
		

		
			1.3.1.Account  - the separate recordkeeping account (unfunded and unsecured) maintained for each Participant in connection with the Participant’s participation in the Plan.
		

		
			 
		

		
			1.3.2.Affiliate  - a business entity which is under a “common control” with RLI or which is a member of an “affiliated service group” that includes RLI, as those terms are defined in Code § 414(b), (c) and (m).
		

		
			 
		

		
			1.3.3.Base Salary – the Participant’s total salary and wages from all Affiliates, including any amount that would be included in the definition of Base Salary but for the individual’s election to defer some of such Participant’s salary pursuant to the Plan or any other deferred compensation plan established by an Affiliate; but excluding disability pay and any other remuneration paid by Affiliates, such as overtime, incentive compensation, stock options, distributions of compensation previously deferred, restricted stock, allowances for expenses (including moving, travel expenses, and automobile allowances), and fringe benefits whether payable in cash or in a form other than cash. In the case of an individual in a plan sponsored by an Affiliate that is described in Section 401(k), 125 or 132(f) of the Code, the term Base Salary shall include any amount that would be included in the definition of Base Salary but for the individual’s election to reduce such individual’s salary and have the amount of the reduction contributed to or used to purchase benefits under such plan.
		

		
			 
		

		
			1.3.4.Beneficiary - the person or persons designated as such under Sec. 5.2.
		

		
			 
		

		
			1.3.5.Board - the Board of Directors of RLI.
		

		
			 
		

		
			1.3.6.Chief Executive Officer - the Chief Executive Officer of RLI.
		

		
			 
		

		
			1.3.7.Code - the Internal Revenue Code of 1986, as the same may be amended from time to time.
		

		
			 
		

		
			1.3.8.Committee - the Executive Resources Committee of the Board.
		

		
			 
		

		
			1.3.9.Deferral Eligible Amounts -  with respect to a Participant for any period, means the sum of such Participant’s Base Salary and Incentive Compensation for such period.
		

		
			

		 

		

			 

		

		

			1

		

		

			 

		

 

		

		
			 
		

		
			1.3.10.Employee - a common-law employee of RLI or an Affiliate (while it is an Affiliate).
		

		
			 
		

		
			1.3.11.ERISA - the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time. 
		

		
			 
		

		
			1.3.12.Incentive Compensation - the total remuneration of the Participant of the Participant from all Affiliates under the various incentive compensation programs maintained by Affiliates, including, but not limited to, amounts received under the Market Value Potential (“MVP”) Executive Incentive Program and the Underwriting Profit Program (“UPP”), but excluding any other type of remuneration paid by Affiliates, such as Base Salary, overtime, stock options, distributions of compensation previously deferred, restricted stock, allowances for expenses, and fringe benefits. The Committee, from time to time, shall designate those items of a Participant’s Compensation deemed to be Incentive Compensation.
		

		
			 
		

		
			1.3.13.Participant – an eligible Employee who enrolls as a Participant in the Plan under Sec. 2.3. An Employee who becomes a Participant shall remain a Participant in the Plan until the earlier of the following:
		

		
			 
		

		
			(a)The complete payment of the Participant’s Account balance after the Participant’s Termination of Employment; or
		

		
			 
		

		
			(b)The Participant’s death.
		

		
			 
		

		
			1.3.14.Performance-Based Compensation  – the Incentive Compensation of the Participant for a period where the amount of, or entitlement to, the Incentive Compensation is contingent on the satisfaction of pre-established organizational or individual performance criteria relating to a performance period of at least 12 consecutive months. Organizational or individual performance criteria are considered pre-established if established in writing by no later than 90 days of the commencement period of service to which the criteria relate, provided that the outcome is substantially uncertain at the time the criteria are established. Performance-Based Compensation may include payment based on performance criteria that are not approved by the Board or the Compensation Committee of the Board or by the stockholders of the Company. Performance-Based Compensation does not include any amount or portion of any amount that will be paid either regardless of performance, or based upon a level of performance that is substantially certain to be met at the time the criteria are established.
		

		
			 
		

		
			1.3.15.Plan - the unfunded deferred compensation plan that is set forth in this document, as the same may be amended from time to time. The name of the Plan is the “RLI Corp. Executives Deferred Compensation Plan.”
		

		
			 
		

		
			1.3.16.Prior Agreement - an individual agreement entered into by an Employee and RLI to provide deferred compensation opportunities to the Employee.
		

		
			 
		

		
			1.3.17.RLI - RLI Corp. and any Successor Corporation.
		

		
			 
		

		
			1.3.18.RLI Stock  - the common stock of RLI.
		

		
			 
		

		
			1.3.19.Specified Employee - means an employee of an Affiliate who is subject to the six-month delay rule described in Section 409A(2)(B)(i) of the Code. RLI shall establish a written policy for identifying Specified Employees in a manner consistent with Section 409A, which policy may be amended by RLI from time to time as permitted by Section 409A.
		

		
			 
		

		
			1.3.20.Successor Corporation - any entity that succeeds to the business of RLI through merger, consolidation, acquisition of all or substantially all of its assets, or any other means and which elects before or within a reasonable time after such succession, by appropriate action evidenced in writing, to continue the Plan.
		

		
			 
		

		
			1.3.21.Termination of Employment -  with respect to a Participant, means the Participant’s separation from service with all Affiliates, within the meaning of Section 409A(a)(2)(A)(i) of the Code and the regulations under such section. Solely for this purpose, a Participant who is an eligible Employee will be considered to have a Termination of Employment when the Participant dies, retires, or otherwise has a termination of employment with all Affiliates. The employment relationship is treated as continuing intact while the Participant is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six months, or if longer, so long as the individual retains a right to reemployment with an Affiliate under an applicable statute or by contract. For purposes hereof, a leave of absence constitutes a bona fide leave of absence only if there is a reasonable expectation that the 

		 

		

			 

		

		

			2

		

		

			 

		

 

Participant will return to perform services for an Affiliate. If the period of leave exceeds six months and the individual does not retain a right to reemployment under an applicable statute or by contract, the employment relationship is deemed to terminate on the first date immediately following such six-month period. Notwithstanding the foregoing, where a leave of absence is due to any medically determinable physical or mental impairment that can be expected to last for a continuous period of not less than six months, where such impairment causes the employee to be unable to perform the duties of such employee’s position of employment or any substantially similar position of employment, RLI may substitute a 29-month period of absence for such six-month period.
		

		
			 
		

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

		
			 
		

		
			Notwithstanding anything in Section 1.3.2 to the contrary, in determining whether a Participant has had a Termination of Employment with an Affiliate, an entity’s status as an “Affiliate” shall be determined substituting “50 percent” for “80 percent” each place it appears in Section 1563(a)(1),(2), and (3) and in Treasury Regulation Section 1.414(c)-2.
		

		
			 
		

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

		
			 
		

		
			1.3.22.Vested – non-forfeitable.
		

		
			 
		

		
			1.3.23.Year - the calendar year.
		

		
			 
		

		
			1.4.“Top-Hat” Plan.  The Plan is intended to be a “top-hat” plan – that is, an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated individuals within the meaning of ERISA §§ 201(2), 301(a)(3) and 401(a)(1), which is exempt from Parts 2, 3 and 4 of Title I of ERISA. The Plan also is a nonqualified deferred compensation plan subject to Code § 409A. To the extent any provision of the Plan does not satisfy the requirements contained in Code § 409A or in any regulations or other guidance issued by the Treasury Department under Code § 409A, such provision will be applied in a manner consistent with such requirements, regulations or guidance, notwithstanding any contrary provision of the Plan or any inconsistent election made by a Participant.
		

		
			 
		

		
			ARTICLE 2
		

		
			 
		

		
			PARTICIPATION
		

		
			 
		

		
			2.1.Eligibility and Selection.  The following Employees shall be eligible to enroll as Participants in the Plan:
		

		
			(a)Employees with the titles:  Chairman of the Board, Chief Executive Officer, President and Senior Vice President; and
		

		
			 
		

		
			(b)Such other Employees as the Committee, in its sole discretion, shall determine from time to time, provided that each such Employee must;
		

		
			 
		

			
	
			
				 (1)
			

			
	
			
			Have the title of Vice President or above, and

		
			 
		

			
	
			
				 (2)
			

			
	
			
			Be expected to have compensation in excess of the Code § 401(a)(17) limit in the Participant’s initial Year of eligibility.

		
			 
		

		
			2.2.Notification.  RLI shall provide each eligible Employee with (i) written notification of the Employee’s eligibility to participate in the Plan, and (ii) either copy of the Plan or written notification that such a copy is available upon request.
		

		
			 
		

		
			2.3.Enrollment.  An eligible Employee will be allowed to enroll in the Plan during the thirty (30) day period coinciding with and following the date the Employee is notified of the Employee’s eligibility to participate in accordance with Sec. 2.2. Such an enrollment will be effective as of the date it is made. Thereafter, an eligible Employee may elect to enroll for a Year during the enrollment period established by RLI for such Year, which enrollment period will be a period of not less than thirty (30) days that ends not later than the last day of the prior Year. Enrollment must be made in such manner and in accordance 

		 

		

			 

		

		

			3

		

		

			 

		

 

with such rules as may be prescribed for this purpose by RLI (including by means of a voice response or other electronic system under circumstances authorized by RLI).
		

		
			 
		

		
			2.4.Elective Deferrals.
		

		
			 
		

		
			2.4.1.Elections.  A Participant may elect to reduce Deferral Eligible Amounts by any dollar amount or whole percent, but not more than one-hundred percent (100%). A separate reduction amount or percentage may apply to base compensation and to bonuses. An election must be made in such manner and in accordance with such rules as may be prescribed for this purpose by RLI (including by means of a voice response or other electronic system under circumstances authorized by RLI). An election must be made as part of the enrollment described in Sec. 2.3.
		

		
			 
		

		
			2.4.2.Elections Relate to Services Performed After the Election and Are Irrevocable.  An election will apply to all Deferral Eligible Amounts attributable to services performed in a given Year, regardless of when such Deferral Eligible Amounts would otherwise be payable to the Participant (for example, an election to defer a bonus attributable to services performed in a given Year but payable in the next Year, must be made as part of the enrollment election made prior to the Year in which the services are performed). However, an election will only be effective to defer Deferral Eligible Amounts earned after the election is made, and not before. For example, an election made in connection with a mid-year enrollment under Sec. 2.3 will only be effective for Deferral Eligible Amounts attributable to services performed on and after the effective date of the enrollment as provided in Sec. 2.3. An election will apply solely with respect to the given Year – that is, an election will not automatically be carried over and applied to the next Year.
		

		
			 
		

		
			Notwithstanding the foregoing, elections for Incentive Compensation that is Performance-Based Compensation must be completed and submitted to the Company not later than six months before the end of the performance period for the Incentive Compensation; provided, however, that in order for such an election to be valid, the a Participant must perform services continuously from the beginning of the performance period (or the date the performance criteria are established, if later) through the date the election is entered into, and provided further, that in no event may an election be effective to defer Incentive Compensation after the Incentive Compensation has become reasonably ascertainable. For purposes hereof, if Incentive Compensation is a specific or calculable amount, the Incentive Compensation is readily ascertainable if and when the amount is first substantially certain to be paid. If Incentive Compensation is not a specific or calculable amount, the Incentive Compensation, or any portion thereof, is readily ascertainable when the amount is both calculable and substantially certain to be paid. Accordingly, in general, any minimum amount that is both calculable and substantially certain to be paid will be treated as readily ascertainable. 
		

		
			 
		

		
			In general, an election shall become irrevocable as of the last day of the enrollment period applicable to it. However, if a Participant incurs an “unforeseeable emergency,” as defined in Section 4.7(h), or becomes entitled to receive a hardship distribution pursuant to Treas. Reg. Sec. 1.401(k)-1(d)(3) after the election otherwise becomes irrevocable, the election shall be cancelled as of the date on which the Participant is determined to have incurred the unforeseeable emergency or becomes eligible to receive the hardship distribution and no further deferrals will be made under it. In addition, if a Participant becomes “disabled” (as defined below), RLI may, in its discretion, cancel the Participant’s election then in effect, provided that such cancellation is made no later than end of the Plan Year, or if later, the 15th day of the third month following the date on which the Participant becomes disabled, and provided further that RLI does not allow the Participant a direct or indirect election regarding the cancellation. For purposes of the preceding sentence, “disability” means any medically determinable physical or mental impairment resulting in the Participant’s inability to perform the duties required by the Participant’s position or any substantially similar position, where such impairment can be expected to result in death or can be expected to last for a continuous period of not less than six months.
		

		
			 
		

		
			2.4.3.Limits.  RLI may, in its sole discretion, limit the minimum or maximum amount of deferrals that are allowed under the Plan by any Participant or any group of Participants, provided that such limit is established prior to the beginning of the Year or prior to enrollment of the affected Participant.
		

		
			 
		

		
			ARTICLE 3
		

		
			 
		

		
			ACCOUNTS
		

		
			 
		

		
			3.1.Accounts.  RLI shall establish and maintain a separate Account for each Participant. The Account shall be for recordkeeping purposes only and shall not represent a trust fund or other segregation of assets for the benefit of the Participant. The balance of each Participant’s Account will be maintained in full and fractional shares of RLI Stock.
		

		
			 
		

		
			

		 

		

			 

		

		

			4

		

		

			 

		

 

		

		
			3.2.Credits to Accounts.  Each Participant’s Account shall be credited from time to time as provided in this section.
		

		
			 
		

		
			3.2.1.Elective Deferrals.  Each Deferral Eligible Amount which the Participant has elected to defer under the Plan shall be credited to the Participant’s Account on, or as soon as administratively practicable after, the date it would otherwise be paid to the Participant. The cash amount shall be converted to RLI Stock credits, equal to the number of full and fractional shares that could be purchased with such amount on, or as soon as administratively feasible after, the date such amount is credited to the Participant’s Account.
		

		
			 
		

		
			3.2.2.Dividends and Other Adjustments.  The Participant’s Account shall be credited with additional RLI Stock credits, equal to the number of full and fractional shares of RLI Stock that could be purchased with any cash dividends which would be payable on the RLI Stock credited to the Participant’s Account. For this purposes, the share price on, or as soon as administratively practicable after, the date the dividend is paid will be used. The Account also will be adjusted for any stock split, redemption or similar event, in a manner determined to be reasonable by RLI.
		

		
			 
		

		
			3.3.Charges to Accounts.  As of the date any Plan benefit measured by the Account is paid to the Participant or the Participant’s Beneficiary, the Account shall be charged with the amount of such benefit payment.
		

		
			 
		

		
			ARTICLE 4
		

		
			 
		

		
			BENEFITS
		

		
			 
		

		
			4.1.Vesting.   The Participant’s Account shall be fully (100%) Vested.
		

		
			 
		

		
			4.2.Payment of Plan Benefits on Termination of Employment - General Rule.  If the Participant has an Account balance at Termination of Employment, RLI shall pay that balance to the Participant in five (5) annual installments, as follows:
		

		
			 
		

			
	
			
				 (a)
			

			
	
			
			Time.  The first installment shall be paid on the January 1 following the Year in which the Participant’s Termination of Employment occurs. The remaining installments shall be paid on each subsequent January 1.

		
			 
		

			
	
			
				 (b)
			

			
	
			
			Amount.  The amount of each installment shall be determined using a “fractional” method – by multiplying the Participant’s Account balance immediately before the installment payment date by a fraction, the numerator of which is one and the denominator of which is the number of installments remaining (including the installment in question). The result shall be rounded down to the next lower full share of RLI Stock, except for the final installment, which shall distribute the final shares and pay cash in lieu of any partial share.

		
			 
		

		
			4.3.Changing Payment Elections.
		

		
			 
		

		
			4.3.1.General Rule.  A Participant may elect to change the number of annual installments the Participant receives under the Plan to ten (10) or fifteen (15) installments, subject to the rules below. Any such election must be made in such manner and in accordance with such rules as may be prescribed for this purpose by RLI (including by means of a voice response or other electronic system under circumstances authorized by RLI). The installments shall commence on the date specified in Sec. 4.2(a), unless otherwise postponed by this Article 4, and the amount of each installment shall be determined under the fractional method described in Sec. 4.2(b).
		

		
			 
		

		
			4.3.2.Election upon Initial Plan Enrollment.  An election to extend the number of installments may be made as part of the Participant’s initial enrollment in the Plan, as described in Sec. 2.3.
		

		
			 
		

		
			4.3.3.Subsequent Election.  If a Participant did not elect to extend the number of installments upon initial enrollment, or if the Participant wants to further change the number of installments after becoming a Participant, such individual may elect to change the number of installments in accordance with the following rules:
		

		
			 
		

		
			(a)The election must be received by RLI in writing and in proper form and must not take effect for at least 12 months from the date on which it is submitted to RLI;
		

		
			 
		

		
			(b)The election must be submitted to RLI at least 12 months prior to the specified date of distribution; and 
		

		
			 
		

		
			(c)The commencement of installments must be delayed at least five (5) years from the date payments would otherwise commence without this subsequent election.
		

		
			 
		

		
			

		 

		

			 

		

		

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			4.4.Special Rules. 
		

		
			 
		

		
			4.4.1.Specified Employee Exception.  If a Participant is a Specified Employee, the Participant’s initial installment (or lump-sum payment, if applicable) shall be delayed to the later of the January 1 following the Year in which the Participant’s Termination of Employment occurs or the first day of the seventh month following the Participant’s Termination of Employment. This delay shall not apply in the event of the Participant’s death. Any remaining annual installments shall be paid as described in Sec. 4.2(a) and Sec. 5.1. 
		

		
			 
		

		
			4.4.2.Cash-Out of Small Amounts.  Any contrary provision or election notwithstanding, if the Participant’s Account balance is less than one hundred thousand dollars ($100,000) as of the date installments are to commence, the Account shall be paid to the Participant in a single lump-sum, as full settlement of all benefits due under the Plan; provided that, for purposes of applying the one hundred thousand dollar ($100,000) cash-out limit, all nonqualified deferred compensation amounts payable to the Participant by RLI and its Affiliates shall be aggregated if and to the extent required under Code § 409A or any regulations or other guidance issued by the Treasury Department thereunder.
		

		
			 
		

		
			4.5.Medium of Payments.    All payments to a Participant shall be made in shares of RLI Stock, except for a cash payment in lieu of a partial share as may be necessary:  in the final payment as provided in Section 4.2(b); or in a single payment as provided in Sections 4.4.2 and 5.1.4. Unless the shares have been registered under the Securities Act of 1933 (the “Act”), are otherwise exempt from the registration requirements of the Act, are the subject of a favorable no action letter issued by the Securities and Exchange Commission, or are the subject of an opinion of counsel acceptable to RLI to the effect that such shares are exempt from the registration requirements of the Act, the certificates representing such shares shall contain a legend precluding the transfer of such shares except in accordance with the provisions of Rule 144 of the Act, as the same may be amended from time to time.
		

		
			 
		

		
			4.6.Delay in Distributions.  A payment under the Plan may be delayed by RLI under any of the following circumstances so long as all payments to similarly situated Participants are treated on a reasonably consistent basis:
		

		
			 
		

			
	
			
				 (a)
			

			
	
			
			RLI reasonably anticipates that if such payment were made as scheduled, RLI’s deduction with respect to such payment would not be permitted under Section 162(m) of the Code, provided that the payment is made either during the first Plan Year in which RLI reasonably anticipates, or should reasonably anticipate, that if the payment is made during such year, the deduction of such payment will not be barred by application of Section 162(m) or during the period beginning with the date of the Participant’s Termination of Employment and ending on the later of the last day of RLI’s fiscal year in which the Participant has a Termination of Employment or the 15th day of the third month following the Termination of Employment.

		
			 
		

			
	
			
				 (b)
			

			
	
			
			RLI reasonably anticipates that the making of the payment will violate Federal securities laws or other applicable law, provided that the payment is made at the earliest date at which RLI reasonably anticipates that the making of the payment will not cause such violation.

		
			 
		

		
			(c)Upon such other events as determined by RLI and according to such terms as are consistent with Section 409A or are prescribed by the Commissioner of Internal Revenue.
		

		
			 
		

		
			4.7Acceleration of Distributions.  RLI may, in its discretion, distribute all or a portion of a Participant’s Accounts at an earlier time and in a different form than specified as otherwise provided in this Article 4, under the circumstances described below:
		

		
			 
		

			
	
			
				 (a)
			

			
	
			
			As may be necessary to fulfill a Domestic Relations Order. Distributions pursuant to a Domestic Relations Order shall be made according to administrative procedures established by RLI.

		
			 
		

			
	
			
				 (b)
			

			
	
			
			To the extent reasonably necessary to avoid the violation of ethics laws or conflict of interest laws pursuant to Section 1.409A-3(j)(ii) of the Treasury regulations.

		
			 
		

			
	
			
				 (c)
			

			
	
			
			To pay FICA on amounts deferred under the Plan and the income tax resulting from such payment.

		
			 
		

			
	
			
				 (d)
			

			
	
			
			To pay the amount required to be included in income as a result of the Plan’s failure to comply with Section 409A.

		
			 
		

			
	
			
				 (e)
			

			
	
			
			If RLI determines, in its discretion, that it is advisable to liquidate the Plan in connection with a termination of the Plan subject to the requirements of Section 409A.

		
			

		 

		

			 

		

		

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				 (f)
			

			
	
			
			As satisfaction of a debt of the Participant to an Affiliate, where such debt is incurred in the ordinary course of the service relationship between the Affiliate and the Participant, the entire amount of the reduction in any Plan Year does not exceed $5,000, and the reduction is made at the same time and in the same amount as the debt otherwise would have been due and collected from the Participant.

		
			 
		

			
	
			
				 (g)
			

			
	
			
			To pay state, local or foreign tax obligations that may arise with respect to amounts deferred under the Plan and the income tax resulting from such payment.

		
			 
		

			
	
			
				 (h)
			

			
	
			
			If the Participant has an unforeseeable emergency. For these purposes an “unforeseeable emergency” is a severe financial hardship to the Participant, resulting from an illness or accident of the Participant, the Participant’s spouse, the Beneficiary, or the Participant’s dependent (as defined in Section 152, without regard to Section 152(b)(1), (b)(2), and (d)(1)(B) of the Code); loss of the Participant’s property due to casualty (including the need to rebuild a home following damage to a home not otherwise covered by insurance); or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. For example, the imminent foreclosure of or eviction from the Participant’s primary residence may constitute an unforeseeable emergency. In addition, the need to pay for medical expenses, including non-refundable deductibles, as well as for the cost of prescription drug medication, may constitute an unforeseeable emergency. Finally, the need to pay for funeral expenses of a spouse, Beneficiary, or a dependent (as defined in Section 152, without regard to 152(b)(1), (b)(2), and (d)(1)(B) of the Code) may also constitute an unforeseeable emergency. Except as otherwise provided in this paragraph (h), the purchase of a home and the payment of college tuition are not unforeseeable emergencies. Whether a Participant is faced with an unforeseeable emergency permitting a distribution under this paragraph (h) is to be determined based on the relevant facts and circumstances of each case, but, in any case a distribution on account of an unforeseeable emergency may not be made to the extent that such emergency is or may be relieved through reimbursement or compensation from insurance or otherwise, by liquidation of the Participant’s assets, to the extent the liquidation of such assets would not cause severe financial hardship, or by cessation of Elective Deferrals.

		
			Distributions because of an unforeseeable emergency must be limited to the amount reasonably necessary to satisfy the emergency need (which may include amounts necessary to pay any Federal, state, local, or foreign income taxes or penalties reasonably anticipated to result from the distribution). A determination of the amounts reasonably necessary to satisfy the emergency need must take into account any additional compensation that is available due to cancellation of the Participant’s election as a result of this paragraph (h).
		

		
			 
		

		
			Notwithstanding anything in this Section 4.7 to the contrary, except for a Participant’s election to request a distribution due to an unforeseeable emergency under paragraph (h), above (which the Participant, in the Participant’s discretion, may elect to make or not make), RLI shall not provide the Participant with discretion or a direct or indirect election regarding whether a payment is accelerated pursuant to this Section 4.7.
		

		
			 
		

		
			4.8When a Payment is Deemed to be Made.  Any payment that is due to be distributed as of a particular date pursuant to the provisions of the Plan, will be deemed to be distributed as of that date if it is distributed on such date or a later date within the same calendar year, or, if later, by the 15th day of the third calendar month following the date, and the Participant is not permitted, directly or indirectly, to designate the calendar year of payment. Further, a payment will be treated as made on a date if it is made no earlier than 30 days before the date, and the Participant is not permitted, directly or indirectly, to designate the calendar year of payment. For purposes of the foregoing, if the payment is required to be made during a period of time, the specified date is treated as the first day of the period of time.
		

		
			 
		

		
			 
		

		
			ARTICLE 5
		

		
			 
		

		
			DEATH BENEFITS
		

		
			 
		

		
			5.1.Death Benefits.
		

		
			 
		

		
			5.1.1.Benefits When Participant Dies Before Commencement of Payments.  If the Participant dies before installments commence, the Participant’s Account balance shall be paid to the Participant’s Beneficiary as follows:
		

		
			 
		

		
			

		 

		

			 

		

		

			7

		

		

			 

		

 

		

		
			(a)If the Participant has made a valid election under Sec. 4.4, payments shall be made in ten (10) or fifteen (15) annual installments, as elected by the Participant.
		

		
			 
		

		
			(b)Otherwise, payments shall be made in five (5) annual installments.
		

		
			 
		

		
			The first installment shall be paid on the January 1 following the Year in which the Participant’s death occurs. The remaining installments shall be paid on each subsequent January 1. The amount of each installment shall be determined using the “fractional” method described in Sec. 4.2(b).
		

		
			 
		

		
			5.1.2.Benefits When Participant Dies After Commencement of Payments.  If the Participant dies after installments commence and the Participant has an Account balance at death, the remaining Account balance shall be paid to the Participant’s Beneficiary in the same manner as if the Participant were still living.
		

		
			 
		

		
			5.1.3.Medium of Payments.  All payments to a Beneficiary shall be made in shares of RLI Stock, except for a cash payment in lieu of a partial share as may be necessary in the final payment, subject to any legend precluding transfer that is required under Sec. 4.6.
		

		
			 
		

		
			5.1.4.Cash-Out of Small Amounts.  Any contrary provision or election notwithstanding, if the amount payable to the Beneficiary is less than one hundred thousand dollars ($100,000) as of the date installments are to commence, the benefit shall be paid to the Beneficiary in a single lump-sum, as full settlement of all benefits due under the Plan, subject, however, to any limitation on such cash-out under Code § 409A or any regulations or other guidance issued by the Treasury Department thereunder.
		

		
			 
		

		
			5.2.Designation of Beneficiary.
		

		
			 
		

		
			5.2.1.Persons Eligible to Designate.  Any Participant may designate a Beneficiary to receive any amount payable under the Plan as a result of the Participant’s death, provided that the Beneficiary survives the Participant. The Beneficiary may be one or more persons, natural or otherwise. By way of illustration, but not by way of limitation, the Beneficiary may be an individual, trustee, executor, or administrator. A Participant may also change or revoke a designation previously made, without the consent of any Beneficiary named therein.
		

		
			 
		

		
			5.2.2.Form and Method of Designation.  Any designation or a revocation of a prior designation of Beneficiary shall be in writing on a form acceptable to RLI and shall be filed with RLI. RLI and all other parties involved in making payment to a Beneficiary may rely on the latest Beneficiary designation on file with RLI at the time of payment or may make payment pursuant to Sec. 5.2.3 if an effective designation is not on file, shall be fully protected in doing so, and shall have no liability whatsoever to any person making claim for such payment under a subsequently filed designation of Beneficiary or for any other reason.
		

		
			 
		

		
			Notwithstanding any provision of this Sec. 5.2 to the contrary, any Beneficiary designation made under the Prior Agreements will continue in effect under this Plan until modified by the Participant pursuant to this Sec. 5.2.
		

		
			 
		

		
			5.2.3.No Effective Designation.  If there is not on file with RLI an effective designation of Beneficiary by a deceased Participant, the Beneficiary shall be the person or persons surviving the Participant in the first of the following classes in which there is a survivor, share and share alike:
		

		
			 
		

		
			(a)The Participant’s spouse. (A “spouse” is a person of the opposite sex to whom the Participant is legally married, including a common-law spouse if the marriage was entered into in a state that recognizes common-law marriages and RLI has received acceptable proof and/or certification of common-law married status.)
		

		
			 
		

		
			(b)The Participant’s then living descendants, per stirpes.
		

		
			 
		

		
			(c)The Participant’s estate.
		

		
			 
		

		
			Determination of the identity of the Beneficiary in each case shall be made by RLI.
		

		
			 
		

		
			5.2.4.Successor Beneficiary.  If a Beneficiary who survives the Participant subsequently dies before receiving the complete payment to which the Beneficiary was entitled, the successor Beneficiary, determined in accordance with the provisions of this section, shall be entitled to the payments remaining. The successor Beneficiary shall be the person or persons surviving the Beneficiary in the first of the following classes in which there is a survivor, share and share alike:
		

		
			 
		

		
			

		 

		

			 

		

		

			8

		

		

			 

		

 

		

		
			(a)The Participant’s spouse. (A “spouse” is a person of the opposite sex to whom the Participant is legally married, including a common-law spouse if the marriage was entered into in a state that recognizes common-law marriages and RLI has received acceptable proof and/or certification of common-law married status.)
		

		
			 
		

		
			(b)The Participant’s then living descendants, per stirpes.
		

		
			 
		

		
			(c)The Participant’s estate.
		

		
			 
		

		
			ARTICLE 6
		

		
			 
		

		
			CLAIMS AND REVIEW PROCEDURES
		

		
			 
		

		
			6.1.Application for Benefits.  Benefits shall be paid to Participants automatically (without a written request) at the time and in the manner specified in the Plan. Benefits shall be paid to a Beneficiary upon RLI’s receipt of a written request for the benefits, including appropriate proof of the Participant’s death and the Beneficiary’s identity and right to payment. This written request shall be considered a claim for the purposes of this article.
		

		
			 
		

		
			6.2.Claims and Review Procedures.  The claims and review procedures set forth in this article shall be the mandatory claims and review procedures for the resolution of disputes and disposition of claims filed under the Plan.
		

		
			 
		

		
			6.2.1.Initial Claim.  An individual may, subject to any applicable deadline, file with the Committee a written claim for benefits under the Plan in a form and manner prescribed by RLI.
		

		
			 
		

		
			(a)If the claim is denied in whole or in part, the Committee shall notify the claimant of the adverse benefit determination within ninety (90) days after receipt of the claim.
		

		
			 
		

		
			(b)The ninety (90) day period for making the claim determination may be extended for ninety (90) days if the Committee determines that special circumstances require an extension of time for determination of the claim, provided that the Committee notifies the claimant, prior to the expiration of the initial ninety (90) day period, of the special circumstances requiring an extension and the date by which a claim determination is expected to be made.
		

		
			 
		

		
			6.2.2.Notice of Initial Adverse Determination. A notice of an adverse determination shall set forth in a manner calculated to be understood by the claimant: 
		

		
			 
		

		
			(a)The specific reasons for the adverse determination;
		

		
			 
		

		
			(b)References to the specific provisions of the Plan (or other applicable document) on which the adverse determination is based;
		

		
			 
		

		
			(c)A description of any additional material or information necessary to perfect the claim and an explanation of why such material or information is necessary; and
		

		
			 
		

		
			(d)A description of the claims review procedures, including the time limits applicable to such procedures.
		

		
			 
		

		
			6.2.3.Request for Review.  Within ninety (90) days after receipt of an initial adverse benefit determination notice, the claimant may file with the Board a written request for a review of the adverse determination and may, in connection therewith submit written comments, documents, records and other information relating to the claim benefits.  Any request for review of the initial adverse determination not filed within ninety (90) days after receipt of the initial adverse determination notice shall be untimely.
		

		
			 
		

		
			6.2.4.Claim on Review.  If the claim, upon review, is denied in whole or in part, the Board shall notify the claimant of the adverse benefit determination within sixty (60) days after receipt of such a request for review.
		

		
			 
		

		
			(a)The sixty (60) day period for deciding the claim on review may be extended for sixty (60) days if the Board determines that special circumstances require an extension of time for determination of the claim, provided that the Board notifies the claimant, prior to the expiration of the initial sixty (60) day period, of the special circumstances requiring an extension and the date by which a claim determination is expected to be made.
		

		
			 
		

		
			

		 

		

			 

		

		

			9

		

		

			 

		

 

		

		
			(b)In the event that the time period is extended due to a claimant’s failure to submit information necessary to decide a claim on review, the claimant shall have sixty (60) days within which to provide the necessary information and the period for making the claim determination on review shall be tolled from the date on which the notification of the extension is sent to the claimant until the date on which the claimant responds to the request for additional information or, if earlier, the expiration of sixty (60) days.
		

		
			 
		

		
			(c)The Board's review of a denied claim shall take into account all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.
		

		
			 
		

		
			6.2.5.Notice of Adverse Determination for Claim on Review.  A notice of an adverse determination for a claim on review shall set forth in a manner calculated to be understood by the claimant:
		

		
			 
		

		
			(a)The specific reasons for the denial;
		

		
			 
		

		
			(b)References to the specific provisions of the Plan (or other applicable document) on which the adverse determination is based; and
		

		
			 
		

		
			(c)A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits.
		

		
			 
		

		
			6.3.Claims Rules. 
		

		
			 
		

		
			(a)No inquiry or question shall be deemed to be a claim or a request for a review of a denied claim unless made in accordance with the established claims and review procedures. RLI may require that any claim for benefits and any request for a review of a denied claim be filed on forms to be furnished by RLI upon request.
		

		
			 
		

		
			(b)All decisions on claims and on requests for a review of denied claims shall be made by RLI.
		

		
			 
		

		
			(c)Claimants may be represented by a lawyer or other representative at their own expense, but RLI reserves the right to (i) require the claimant to furnish written authorization and (ii) establish reasonable procedures for determining whether an individual has been authorized to act on behalf of a claimant. A claimant’s representative shall be entitled to copies of all notices given to the claimant.
		

		
			 
		

		
			(d)The decision of RLI on a claim and on a request for a review of a denied claim may be provided to the claimant in electronic form instead of in writing at the discretion of RLI.
		

		
			 
		

		
			(e)In connection with the review of a denied claim, the claimant or the claimant’s representative shall be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits.
		

		
			 
		

		
			(f)The time period within which a benefit determination will be made shall begin to run at the time a claim or request for review is filed in accordance with the claims and review procedures, without regard to whether all the information necessary to make a benefit determination accompanies the filing.
		

		
			 
		

		
			(g)The claims and review procedures shall be administered with appropriate safeguards so that benefit claim determinations are made in accordance with governing Plan documents and, where appropriate, the Plan provisions have been applied consistently with respect to similarly situated claimants.
		

		
			 
		

		
			(h)For the purpose of this article, a document, record, or other information shall be considered “relevant” if such document, record, or other information:  (i) was relied upon in making the benefit determination; (ii) was submitted, considered, or generated in the course of making the benefit determination, without regard to whether such document, record, or other information was relied upon in making the benefit determination; or (iii) demonstrates compliance with the administration processes and safeguards designed to ensure that the benefit claim determination was made in accordance with governing Plan documents and that, where appropriate, the Plan provisions have been applied consistently with respect to similarly situated claimants.
		

		
			 
		

		
			(i)RLI may, in its discretion, rely on any applicable statute of limitation or deadline as a basis for denial of any claim.
		

		
			 
		

		
			

		 

		

			 

		

		

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			6.4.Deadline to File Claim.  To be considered timely under the Plan’s claims and review procedures, a claim must be filed with the Committee within one (1) year after the claimant knew or reasonably should have known of the principal facts upon which the claim is based.
		

		
			 
		

		
			6.5.Exhaustion of Administrative Remedies.  The exhaustion of the claims and review procedures is mandatory for resolving every claim and dispute arising under the Plan. As to such claims and disputes no claimant shall be permitted to commence an arbitration action to recover Plan benefits or to enforce or clarify rights under the Plan or under any provision of the law, whether or not statutory, until the claims and review procedures set forth herein have been exhausted in their entirety.
		

		
			 
		

		
			6.6.Arbitration.  Any claim, dispute or other matter in question of any kind relating to the Plan which is not resolved by the claims and review procedures shall be settled by arbitration in accordance with the Federal Arbitration Act 9 U.S.C. §1, et seq. Notice of demand for arbitration must be made in writing to the opposing party within the time period specified in Sec. 6.7. In no event will a demand for arbitration be made after the date when the applicable statute of limitations would bar the institution of a legal or equitable proceeding based on such claim, dispute or other matter in question. The decision of the arbitrator(s) will be final and may be enforced in any court of competent jurisdiction. The arbitrator(s) may award reasonable fees and expenses to the prevailing party in any dispute hereunder and will award reasonable fees and expenses in the event that the arbitrator(s) find that the losing party acted in bad faith or with intent to harass, hinder or delay the prevailing party in the exercise of its rights in connection with the matter under dispute. The arbitration will take place in Peoria, Illinois, unless otherwise agreed by the parties.
		

		
			 
		

		
			6.7.Deadline to File an Arbitration Action.  No arbitration action to recover Plan benefits or to enforce or clarify rights under the Plan under or under any provision of the law, whether or not statutory, may be brought by any claimant on any matter pertaining to the Plan unless the action is commenced before the earlier of:
		

		
			 
		

		
			(a)Thirty (30) months after the claimant knew or reasonably should have known of the principal facts on which the claim is based, or
		

		
			 
		

		
			(b)Six (6) months after the claimant has exhausted the claims and review procedures.
		

		
			 
		

		
			6.8.Knowledge of Fact by Participant Imputed to Beneficiary.  Knowledge of all facts that a Participant knew or reasonably should have known shall be imputed to every claimant who is or claims to be a Beneficiary of the Participant or otherwise claims to derive an entitlement by reference to the Participant for the purpose of applying the previously specified periods.
		

		
			 
		

		
			6.9.Deferral of Payment.  If there is a dispute regarding a Plan benefit, RLI, in its sole discretion, may defer payment of the benefit until the dispute has been resolved.
		

		
			 
		

		
			ARTICLE 7
		

		
			 
		

		
			ADMINISTRATION
		

		
			 
		

		
			7.1.Administrator.  RLI shall be the administrator of the Plan. RLI shall control and manage the administration and operation of the Plan and shall make all decisions and determinations incident thereto. Except with respect to the ordinary day-to-day administration of the Plan, action on behalf of RLI must be taken by one of the following:
		

		
			 
		

		
			(a)The Board; or
		

		
			 
		

		
			(b)The Committee.
		

		
			 
		

		
			7.1.1.Delegation.  The ordinary day-to-day administration of the Plan may be delegated by the Chief Executive Officer to an individual or a committee. Such individual or committee shall have the authority to delegate or redelegate to one or more persons, jointly or severally, such functions assigned to such individual or committee as such individual or committee may from time to time deem advisable.
		

		
			 
		

		
			7.1.2.Automatic Removal.  If any individual or committee member to whom responsibility under the Plan is allocated is a director, officer or employee of RLI when responsibility is so allocated, then such individual shall be automatically removed as a member of a committee at the earliest time such individual ceases to be a director, officer or employee of RLI. This removal shall occur automatically and without any requirement for action by RLI or any notice to the individual so removed.
		

		
			 
		

		
			

		 

		

			 

		

		

			11

		

		

			 

		

 

		

		
			7.1.3.Conflict of Interest.  If any individual or committee member to whom responsibility under the Plan is allocated is also a Participant or Beneficiary, that individual or committee member shall have no authority as such member with respect to any matter specifically affecting such individual’s interest hereunder (as distinguished from the interests of all Participants and Beneficiaries or a broad class of Participants and Beneficiaries), all such authority being reserved exclusively to the other members to the exclusion of such individual, and such Participant or Beneficiary shall act only in an individual capacity in connection with any such matter.
		

		
			 
		

		
			7.1.4.Binding Effect.  The determination of the Board, the Committee or the Chief Executive Officer in any matter within its authority shall be binding and conclusive upon RLI and all persons having any right or benefit under the Plan.
		

		
			 
		

		
			7.1.5.Third-Party Service Providers.  RLI may from time to time appoint or contract with an administrator, record keeper or other third-party service provider for the Plan. Any such administrator, record keeper or other third-party service provider will serve in a nondiscretionary capacity and will act in accordance with directions given and procedures established by RLI.
		

		
			 
		

		
			7.2.Benefits Not Transferable.  No Participant or Beneficiary shall have the power to transmit, alienate, dispose of, pledge or encumber any benefit payable under the Plan before its actual payment to the Participant or Beneficiary. Any such effort by a Participant or Beneficiary to convey any interest in the Plan shall not be given effect under the Plan. No benefit payable under the Plan shall be subject to attachment, garnishment, execution following judgment or other legal process before its actual payment to the Participant or Beneficiary. 
		

		
			 
		

		
			7.3.Benefits Not Secured.  The rights of each Participant and Beneficiary shall be solely those of an unsecured, general creditor of RLI.  No Participant or Beneficiary shall have any lien, prior claim or other security interest in any property of RLI.
		

		
			 
		

		
			7.4.RLI’s Obligations.  RLI shall provide the benefits under the Plan. RLI’s obligation may be satisfied by distributions from a trust fund created and maintained by RLI, in its sole discretion, for such purpose. However, the assets of any such trust fund shall be subject to claims by the general creditors of RLI in the event RLI is (i) unable to pay its debts as they become due, or (ii) is subject to a pending proceeding as a debtor under the United States Bankruptcy Code.
		

		
			 
		

		
			7.5.Withholding Taxes.  RLI shall have the right to withhold (and transmit to the proper taxing authority) such federal, state or local taxes, including (but not limited to) FICA and FUTA taxes, as it may be required to withhold by applicable laws. Such taxes may be withheld from any benefits due under the Plan or from any other compensation to which the Participant is entitled from RLI and its Affiliates.
		

		
			 
		

		
			7.6.Service of Process.  The Chief Executive Officer is designated as the appropriate and exclusive agent for the receipt of service of process directed to the Plan in any legal proceeding, including arbitration, involving the Plan.
		

		
			 
		

		
			7.7.Limitation on Liability.  Neither RLI’s officers nor any member of its Board nor any individual or committee to whom RLI delegates responsibility under the Plan in any way secures or guarantees the payment of any benefit or amount which may become due and payable hereunder to or with respect to any Participant. Each Participant and other person entitled at any time to payments hereunder shall look solely to the assets of RLI for such payments as an unsecured, general creditor. After benefits have been paid to or with respect to a Participant and such payment purports to cover in full the benefit hereunder, such former Participant or other person(s), as the case may be, shall have no further right or interest in the other assets of RLI in connection with the Plan. Neither RLI nor any of its officers nor any member of its Board nor any individual or committee to whom RLI delegates responsibility under the Plan shall be under any liability or responsibility for failure to effect any of the objectives or purposes of the Plan by reason of the insolvency of RLI.
		

		
			 
		

		
			ARTICLE 8
		

		
			 
		

		
			AMENDMENT AND TERMINATION
		

		
			 
		

		
			8.1.Amendment.  RLI reserves the power to amend the Plan either prospectively or retroactively or both, in any respect, by action of its Board; provided that, no amendment shall be effective to reduce or divest benefits payable with respect to the Account of any Participant or Beneficiary without consent. No amendment of the Plan shall be effective unless it is in writing and signed on behalf of RLI by a person authorized to execute such writing. No oral representation concerning the interpretation or effect of the Plan shall be effective to amend the Plan.
		

		
			 
		

		
			8.2.Termination.  RLI reserves the right to terminate the Plan at any time by action of its Board; provided that, the termination of the Plan shall not reduce or divest benefits payable with respect to the Account of any Participant or Beneficiary 

		 

		

			 

		

		

			12

		

		

			 

		

 

or negate the Participant’s or Beneficiary’s rights with respect to such benefits. Any such termination will be done in accordance with the requirements of Section 409A.
		

		
			 
		

		
			ARTICLE 9
		

		
			 
		

		
			MISCELLANEOUS
		

		
			 
		

		
			9.1.Effect on Other Plans.  This Plan shall not alter, enlarge or diminish any person’s rights or obligations under any other benefit plan maintained by RLI or any Affiliate.
		

		
			 
		

		
			9.2.Effect on Employment.  Neither the terms of this Plan nor the benefits hereunder nor the continuance thereof shall be a term of the employment of any Employee. RLI shall not be obliged to continue the Plan. The terms of this Plan shall not give any Employee the right to be retained in the service of RLI or any Affiliate.
		

		
			 
		

		
			9.3.Disqualification.  Notwithstanding any other provision of the Plan or any designation made under the Plan, any individual who feloniously and intentionally kills a Participant shall be deemed for all purposes of the Plan and all elections and designations made under the Plan to have died before such Participant. A final judgment of conviction of felonious and intentional killing is conclusive for this purpose. In the absence of a conviction of felonious and intentional killing, RLI shall determine whether the killing was felonious and intentional for this purpose.
		

		
			 
		

		
			9.4.Rules of Document Construction.  Whenever appropriate, words used herein in the singular may be read in the plural, or words used herein in the plural may be read in the singular; and the words “hereof,” “herein” or “hereunder” or other similar compounds of the word “here” shall mean and refer to the entire Plan and not to any particular article, section or paragraph of the Plan unless the context clearly indicates to the contrary. The titles given to the various articles and sections of the Plan are inserted for convenience of reference only and are not part of the Plan, and they shall not be considered in determining the purpose, meaning or intent of any provision hereof. Written notification under the Plan shall include such other methods (for example, facsimile or e-mail) as RLI, in its sole discretion, may authorize from time to time.
		

		
			 
		

		
			9.5.References to Laws.  Any reference in the Plan to a statute shall be considered also to mean and refer to the applicable regulations for that statute. Any reference in the Plan to a statute or regulation shall be considered also to mean and refer to any subsequent amendment or replacement of that statute or regulation.
		

		
			 
		

		
			9.6.Choice of Law.     The Plan has been executed in the State of Illinois and has been drawn in conformity to the laws of that state and shall, except to the extent that federal law is controlling, be construed and enforced in accordance with the laws of the State of Illinois (without regard to its conflict of law principles).
		

		
			 
		

		
			9.7.Binding Effect.  The Plan shall be binding upon and inure to the benefit of the successors and assigns of RLI, and the Beneficiaries, personal representatives and heirs of the Participant.
		

		
			 
		

		
			IN WITNESS WHEREOF, RLI has cause the Plan to be executed by its duly authorized officers as of the 4th day of May, 2017.
		

		
			 
		

			
					
						 

					
					
						 

				
	
					
						 

					
					
						RLI Corp.

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						By: Jeffrey D. Fick

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						Its: Senior Vice President, Chief Legal Officer

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						And

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						By: Jean M. Stephenson

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						Its: Vice President, Corporate Secretary

				

		
			 
		

		
			 
		

		 

		

			 

		

		

			13rli_Ex10-7

		
			Exhibit 10.7
		

		
			 
		

		
			RLI CORP. ANNUAL INCENTIVE COMPENSATION PLAN
		

		
			 
		

		
			EFFECTIVE FEBRUARY 7, 2018
		

		
			 
		

		
			I.ESTABLISHMENT AND PURPOSE
		

		
			 
		

		
			RLI Corp. (the “Company”) established the RLI Incentive Compensation Plan (the “Plan”), effective January 1, 2006, for the benefit of its employees and employees of its Affiliates.  The Plan was intended to amend, consolidate and restate certain prior incentive compensation plans established by the Company.  The terms of the Plan, as set forth herein, shall apply to Awards granted under the Plan on and after the Effective Date.  Except as otherwise provided, Awards granted under the Company’s incentive compensation plans in effect prior to the Effective Date shall be governed by the terms of such plans.  
		

		
			 
		

		
			The Company previously restated the Plan, effective January 1, 2009, to comply with the requirements of the final regulations issued under Section 409A (“Section 409A”) of the Internal Revenue Code of 1986, as amended (“Code”); again, effective January 1, 2010, to amend the Plan’s definition of “Retirement”, to amend provisions of the Plan relating to the designation of Plan beneficiaries, to change the term “Board Approval Limit” to “Committee Approval Limit”, and to clarify the application of the maximum Award provision; again, effective January 1, 2011 to expand the Plan’s definition of “Performance Goals” and to expand the circumstances under which a Participant may be considered to have a “Retirement” under the Plan; again effective January 1, 2016, to provide for Bonus Banks and other contingent deferred payments of Awards to become vested upon a Change in Control, to further expand the Plan’s definition of “Performance Goals” and in certain other clarifying respects; and again for Performance Periods beginning on or after January 1, 2018 to reflect the revision of Code section 162(m) to remove the performance based compensation exception in that section.
		

		
			 
		

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

		
			 
		

		
			The Plan provides for incentive payments to employees based upon the achievement of pre-established performance goals.  The performance goals may be annual, partial-year or multi-year goals.  The Company may adopt a variety of bonus and incentive programs under the Plan.
		

		
			 
		

		
			II.DEFINITIONS
		

		
			 
		

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

		
			 
		

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

		
			 
		

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

		
			 
		

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

		
			 
		

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

		
			 
		

		
			2.5“Bonus Payment Date” means the date on which Awards with respect to a Performance Period are paid, which shall not be later than March 15th of the year following the applicable Performance Period except to the extent the payment of such Award is credited to a Participant’s Bonus Bank or otherwise deferred pursuant to the terms of the RLI Corp. Executive Deferred Compensation Plan.  
		

		
			 
		

		
			2.6“Bonus Pool” means an amount available for distribution to Participants who have been assigned an interest in the Bonus Pool (e.g. the Market Value Potential bonus pool arrangement in effect as of the Effective Date).  
		

		
			 
		

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

		
			 
		

		
			2.8“Change in Control” means each of the following: 
		

		
			 
		

		
			

		 

		

			 

		

		

			1

		

 

		

		
			(i) The date any “Person,” within the meaning of Section 13(d) or 14(d) under the Securities Exchange Act of 1934, as amended (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% 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 shall not 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% or more of the shares of the Company then outstanding; provided, however, that if a Person becomes the Beneficial Owner of 30% or more of the shares of the Company then outstanding by reason of share purchases by the Company and shall, after such share purchases by the Company, become the Beneficial Owner of any additional shares of the Company, then a Change in Control shall 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 shall have occurred by reason of this paragraph unless either:
		

			
	
			
				 (A)
			

			
	
			
			the stockholders 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 shall constitute a majority of the total number of directors of the Company as fixed by its By-Laws.
		

		
			 
		

		
			The Committee shall have full and final authority, which shall 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.
		

		
			In addition, if a Change in Control constitutes a payment event with respect to any Award which provides for the deferral of compensation and is subject to Code Section 409A, the transaction or event described in paragraph (i), (ii), (iii) or (iv) with respect to such Award must also constitute a “change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5) to the extent required by Section 409A.
		

		
			 
		

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

		
			 
		

		
			2.10“Committee” means the Executive Resources Committee of the Board, as constituted at the relevant time. 
		

		
			 
		

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

		
			 
		

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

		
			 
		

		
			2.13“Disability or Disabled,” with respect to a Participant, means that: (a) the Participant (i) satisfies the requirements to receive long-term disability benefits under the Company-sponsored group long-term disability plan in which the Participant participates without regard to any waiting periods, and (ii) the Participant is unable to engage in any substantial gainful activity by reasons of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; or (b) the Participant has been determined by the Social Security Administration to be eligible to receive Social Security disability benefits.  A Participant shall not be considered to be “Disabled” unless the Participant furnishes proof of the Disability to the Company in such form and manner as the Company may require.
		

		
			

		 

		

			 

		

		

			2

		

 

		

		
			 
		

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

		
			 
		

		
			2.15“Effective Date” means January 1, 2016.
		

		
			 
		

		
			2.16“Executive Officer” means those employees designated by the Board to be Executive Officers of the Company for purposes of Section 16 of the Securities Exchange Act of 1934.
		

		
			 
		

		
			2.17“Fiscal Year” means the calendar year.
		

		
			 
		

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

		
			 
		

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

		
			 
		

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

		
			 
		

		
			Performance Goals must be established by the Committee (for Executive Officers) and by the Plan Administrative Committee (for all participants). A Performance goal may provide the method for computing the amount of compensation payable if the goal is attained or may permit discretion to assess the achievement level.  The Committee may adjust Performance Goals or performance results to prevent dilution or enlargement of an Award as a result of extraordinary events or circumstances as determined by the Committee or to exclude the effects of extraordinary, unusual or nonrecurring events, changes in accounting principles, discontinued operations, acquisitions, divestitures and material restructuring charges.
		

		
			 
		

		
			Performance Goals may be based, but are not required to be based, on one or more performance criteria, including without limitation the following, and may be based on attainment of a particular level of, or on a positive change in, such criteria:   revenue, revenue per employee, earnings before income tax (profit before taxes), earnings before interest and income tax, net earnings (profit after taxes), earnings per employee, earnings per share, operating income, total shareholder return, stock price, market share, return on equity, return on capital, before-tax return on net assets, after-tax return on net assets, economic value added (economic profit), market value potential, underwriting profit, price-to-book ratio, price-to-earnings ratio, combined ratio, book value, book value per share, net operating cash flow, investment income, comprehensive earnings, gross written premium, net written premium, sales, costs, expense ratio, loss ratio, operating leverage, dividends paid, contribution from new products, customer satisfaction and employee satisfaction.  Such criteria may relate to one or any combination of two or more of Company, Affiliate, division or individual performance.  
		

		
			 
		

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

		
			 
		

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

		
			 
		

		
			2.23“Retirement,” of a Participant, means the Participant’s Termination of Employment with the Company and all Affiliates on or after the Participant’s Normal Retirement Date.   In addition, the Committee or the Administrative Committee may specify, in its discretion, in a written Award agreement, policy or guideline that the Participant will be considered to have had a “Retirement”, and accordingly not forfeit otherwise forfeitable Plan benefits, if the Participant satisfies the terms of a non-competition covenant or under such other terms and conditions as specified by the Committee in its discretion.
		

		
			 
		

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

		
			

		 

		

			 

		

		

			3

		

 

		

		
			 
		

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

		
			 
		

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

		
			 
		

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

		
			 
		

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

		
			 
		

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

		
			 
		

		
			III.ADMINISTRATION
		

		
			 
		

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

		
			 
		

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

		
			 
		

		
			3.3Committee’s Sole Authority with Respect to Executive Officers; Amendment or Termination of Plan.  Notwithstanding anything in the Plan to the contrary, in the case of Awards to Executive Officers, the Committee has retained the sole and exclusive authority to (i) establish the applicable Performance Goals, (ii) determine the achievement of the applicable Performance Goals, and (iii) adjust the amount of the Awards pursuant to Section 5.2 and 5.3.  The Committee shall have sole and 

		 

		

			 

		

		

			4

		

 

exclusive authority to modify, suspend, terminate or reinstate the Plan.  The Committee’s authority under this paragraph 3.3 is subject to review and approval by the Board. 
		

		
			 
		

		
			IV.ELIGIBILITY TO PARTICIPATE
		

		
			 
		

		
			Participation in the Plan is limited to Eligible Employees.  Prior to or during a Performance Period, the Committee, or the Plan Administrative Committee, as appropriate, shall determine which employees are Eligible Employees for the Performance Period.  The Committee has final authority to approve or disapprove the selection of any Eligible Employee.  An Eligible Employee shall become a Participant only upon approval by the Committee or Plan Administrative Committee and compliance with such terms and conditions as the Committee or Plan Administrative Committee may from time to time establish for the implementation of the Plan.
		

		
			 
		

		
			V.CALCULATION OF AWARDS
		

		
			 
		

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

		
			 
		

		
			5.1Establishing Performance Goals and Target Performance Awards and Committee Approval Limits.  Prior to or during a Performance Period, the Committee (in the case of Participants who are Executive Officers) and the Plan Administrative Committee, or its delegate, (in the case of all other Participants), shall establish the Performance Goal or Goals and each Participant’s Target Performance Award.  Alternatively the Committee (in the case of Participants who are Executive Officers) and the Plan Administrative Committee, or its delegate (in the case of all other Participants), may establish a Bonus Pool for one or more Participants and assign Participants an interest in the Bonus Pool.  In addition, the Committee shall establish a Committee Approval Limit for each Award made to an Executive Officer.
		

		
			 
		

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

		
			 
		

		
			5.3 Adjustments and Certifications of Awards.  Once the determination in section 5.2 is made, the Committee, in the case of a Participant who is an Executive Officer, and the Plan Administrative Committee or its delegate in all other cases, shall:
		

		
			 
		

		
			(a)Review the amount of each Award and make any adjustments it, in its sole discretion, deems appropriate to the amount of the Award.  In general, each Participant’s Award will be the amount pre-established (when the Performance Goals were established) for achievement of the Performance Goals at the achievement levels described in Section 5.1.  However, at the discretion of the Committee (in the case of Executive Officers) or Plan Administrative Committee (in the case of all other Participants), this amount may be increased or decreased based upon such objective or subjective criteria, as such Committee or Plan Administrative Committee deems appropriate.  
		

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

		
			 
		

		
			VI.PAYMENT OF AWARDS
		

		
			 
		

		
			6.1Timing of Award Payment.  Except as provided in Section 6.2 or as otherwise provided in the underlying written Award, program, guideline or other similar arrangement, a Participant’s Award for a Performance Period shall be paid in a cash lump sum to him or her on the Bonus Payment Date immediately following the end of the Fiscal Year in which the Performance Period ends.  A Participant who is also eligible to Participate in the RLI Corp. Executive Deferred Compensation Plan may elect to defer some or all of any amount otherwise payable to him or her under this Section 6.1 to the extent permitted by such plan.
		

		
			 
		

		
			6.2Bonus Bank.  Prior to the beginning of a Performance Period, the Committee may specify that a portion of an Award will be credited to a Bonus Bank.  Any such Award will be in writing and shall specify a fixed schedule of payments and such other terms and conditions as the Committee or Plan Administrative Committee may choose.  The terms of the Award may provide that amounts credited to the Bonus Bank may be reduced if Performance Goals in a subsequent Performance Period are 

		 

		

			 

		

		

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not met.  Amounts deposited to the Bonus Bank will be credited with interest equivalent to the interest rate on three-year U.S. Government Treasury Bills in effect at the beginning of the fiscal year.  
		

		
			 
		

		
			6.3Change in Employment Status During Performance Period.  Except as provided in this Section 6.3 or as otherwise provided in the underlying written Award, program, guideline or other similar arrangement, in order to receive a payment, a Participant must be employed by the Company or Affiliate on (i) the date of actual payment with respect to an Award that is not held under a Bonus Bank, and (ii) the date of actual payout from a Bonus Bank arrangement.  If the Participant dies or becomes Disabled or has a Termination of Employment due to Retirement during a Performance Period, the Participant (or the Participant’s beneficiary in the case of the Participant’s death) will be entitled to receive a pro rata portion of the Award (that is not held under a Bonus Bank), but only if the Award expressly provides for such payment.   In such case, the payment of the Award will be made at the same time as if the Participant had remained employed through the date of payment. 
		

		
			 
		

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

		
			 
		

		
			Notwithstanding the terms of any written Award agreement, policy or guideline, upon a Change in Control, any amounts then credited to such Participant’s Bonus Bank and any other amounts earned during any full or partial Performance Period commencing prior to such Change in Control, including those amounts that are subject to subsequent conditions, shall not be subject to forfeiture or reduction, except in the event of a termination of such Participant’s employment for Cause or pursuant to Section 6.5.  Such amounts shall be payable to such Participant at the time and form prescribed by the written Award agreement, policy or guideline, in accordance with Code Section 409A.  
		

		
			 
		

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

		
			 
		

		
			6.5Forfeiture.  All Awards paid to the Chief Executive Officer and Chief Financial Officer of the Company under this Plan are subject to forfeiture as provided in Section 304 of the Sarbanes-Oxley Act of 2002, and the implementing rules and regulations.  In addition, the Company reserves the right to require a Participant to forfeit or return to the Company any cash or other amount received under an Award under the Plan to the extent required by law, under any applicable exchange listing standard or under any applicable policy adopted by the Company that is designed to meet any legal obligations or obligations under any applicable exchange listing standard.
		

		
			 
		

		
			6.6Code Section 409A Compliance and Payment Grace Period.   The Plan (and any underlying Award, policy, guideline or other similar arrangement) is intended to comply in form and operation with Code Section 409A and the regulations promulgated thereunder.   Notwithstanding any provision to the contrary, if any amount payable under the Plan (or any underlying Award, policy, guideline, or other similar arrangement) constitutes deferred compensation, within the meaning of Code Section 409A, and becomes payable to a Specified Employee as a result of the Specified Employee’s Termination of Employment, the payment will be deferred (if not already deferred) until the earlier to occur of (i) the first day of the seventh month following such employee’s Termination of Employment or (ii) the date of such employee’s death.   Consistent with the requirements of Section 409A, a Plan distribution that is a “short-term deferral” exempt from Section 409A shall be deemed to be paid on the Bonus Payment Date if it is 

		 

		

			 

		

		

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paid no earlier than January 1st immediately preceding, and no later than the March 15th immediately following, the Bonus Payment Date.
		

		
			 
		

		
			VII.MISCELLANEOUS
		

		
			 
		

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

		
			 
		

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

		
			 
		

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

		
			 
		

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

		
			 
		

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

		
			 
		

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

		
			 
		

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

		
			 
		

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

		
			 
		

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

		
			 
		

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

		
			 
		

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

		
			 
		

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

		
			 
		

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

		
			 
		

			
					
						ay

					
					
						 

				
	
					
						Date:  February  7, 2018 

					
					
						RLI CORP.

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						By /s/ Jonathan E. Michael                    

				
	
					
						 

					
					
						Chief Executive Officer

				

		
			 
		

		 

		

			 

		

		

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