Exhibit 10.1
HARLEYSVILLE GROUP INC.
NON-QUALIFIED DEFERRED COMPENSATION PLAN
AMENDED AND RESTATED AS OF JANUARY 1, 2006
ARTICLE I - PURPOSES
Harleysville Group Inc. (the "Company") sponsors two cash incentive plans
for senior management (the Long Term Incentive Plan and the Senior Management
Incentive Plan), a Non-Qualified Salary Deferral Arrangement, and an
Non-Qualified Excess Contribution and Match Program for executives whose
benefits under the Harleysville Retirement Savings Plan ("Retirement Plan") are
affected by federal tax law. The two incentive plans and the salary deferral
plan permit employees eligible for those plans, if such employees are part of a
select group of management or highly compensated employees, to defer the receipt
of such compensation. The excess contribution and match plan provides a deferred
company contribution and match if an employee, who is part of a select group of
management or highly compensated employee, is prevented by the 401(a)
compensation limits and discrimination tests, or 401(k) and 401(m)
discrimination tests from obtaining a full company contribution or match in the
Company's qualified Retirement Plan. This Non-Qualified Deferred Compensation
Plan is intended to provide an administratively convenient arrangement with
consistent rules whereby participants in these plans can: 1) defer compensation
that would otherwise be available under the Company's Senior Management
Incentive Plan, Long Term Incentive Plan, and Non-Qualified Salary Deferral
Arrangement, and, 2) achieve earnings commensurate with the employee's
investment risk tolerance on compensation deferred, and, where applicable,
amounts credited to an employee under the Company's Non-Qualified Excess
Contribution and Match Program. This Plan is intended to be made a part of each
such plan and incorporated by reference in each such plan. It is further
intended that this Plan be unfunded for tax purposes and for purposes of Title I
of E.R.I.S.A. This Plan replaces any and all previous non-qualified unfunded
deferred compensation plan or arrangements of Company for certain management
employees of Company.
ARTICLE II - ADMINISTRATION
The responsibility for the implementation and administration of this Plan
is delegated to the Committee which shall be the Harleysville Retirement Savings
Plan Administrative Committee. The Committee shall interpret the Plan and
establish the rules and regulations governing its administration. Any decision
or action made or taken by the Committee, arising out of or in connection with
the construction, administration, interpretation and effect of the Plan and of
its rules and regulations, shall be conclusive and binding upon all employees
who have sub-accounts established hereunder ("Participants") and any person
claiming through or under any Participant, unless otherwise determined by the
Board of Directors of Company.
ARTICLE III - EFFECTIVE DATE
The Plan was effective January 1, 1994, was amended and restated November
17, 1999 and amended and restated as of January 1, 2006.
ARTICLE IV - PARTICIPATION
An Officer in paygrade 20 or over may be a Participant in the Plan. All
members of management entitled to benefit under a Non-Qualified Excess
Contribution and Match Program shall also be Participants in this Plan. To defer
compensation, each employee must indicate in writing that he or she wishes to
participate prior to December 31 of the Calendar Year preceding the Calendar
Year in which the compensation to be deferred is earned or paid, whichever
occurs first, unless a Participant becomes eligible for a plan for the first
time, in which case he or she has 30 days after initial notice of eligibility
for a plan to elect to become a Participant. The Committee shall prepare
appropriate forms and may amend them from time to time as it finds appropriate.
Upon becoming eligible to be a participant in a plan, a prospective Participant
shall receive a copy of this Plan and the pertinent forms.
ARTICLE V - AMOUNT AND TIMING OF DEFERRALS
A Participant may specify any amount of compensation from salary or bonus
payment to be deferred. If salary is deferred, the amount so specified shall be
deferred pro-rata throughout the specified Calendar Year and, for all deferrals,
may not be changed during the year by the Participant.
ARTICLE VI - PARTICIPANT ACCOUNTS
(A)Cash equal to any amount deferred or contributed pursuant hereto shall
be set aside by Company and delivered by Company to Fidelity Institutional
Retirement Services Company ("Fidelity") for investment in the Fidelity family
of mutual funds or in a self-directed brokerage account through Fidelity
Brokerage. The amounts so delivered and earnings thereon ("Amounts"),
nevertheless, shall remain part of the general assets of the Company and said
Amounts shall be held by Fidelity in the name of Company which shall retain full
title to them and be owner and beneficiary thereof. The Amounts shall not be
considered as held in trust for Participants and Company has only a contractual
obligation to make payment of the Amounts credited to a Participant when due.
The Amounts are subject to the claims of general creditors of the Company and a
Participant is only an unsecured general creditor with regard to any Amounts.
The Company is responsible for payment of any taxes due on the Amounts and
Company will include all the income, deductions and credits pertaining to the
Amounts in computing its taxable income and financial statements.
(B)Amounts credited to each Participant shall be placed into a sub-account
for each Participant by Fidelity and shall be invested by the Participant in the
Fidelity Mutual Fund(s) that the Committee has selected to offer or individual
securities through the Fidelity Brokerage and in such increments as permitted
from time to time under rules promulgated by Fidelity relating to institutional
retirement investments. It is anticipated (but not guaranteed) that the mutual
fund selections and investment rules of this Plan will generally follow those
applicable to Company's Retirement Plan. A Participant shall bear all investment
risk and sub-account balances for Participants shall reflect investment gains
and losses. All Participants will receive the current Plan rules on investing,
which may be changed by the Committee from time to time and which shall be
incorporated by reference and be considered an integral part hereof, provided
that such rules shall not be inconsistent with this Plan. No participant shall
select Harleysville Group Inc. securities as an investment under the
self-directed brokerage account option.
(C)All sub-accounts shall be valued every business day by Fidelity. The
value as determined by Fidelity shall be final and binding on the Company and
Participants and their beneficiaries.
(D)Loans are not available from the sub-accounts.
(E)Balances in existing deferral accounts as of December 31, 1993 will be
transferred to this Plan.
ARTICLE VII - PAYMENT OF BENEFITS
Any Amounts shall be credited to the sub-account established for each
Participant by the Company and shall not be paid to the Participant until said
Participant dies, ceases employment having attained the age of 55 and 10 Years
of Service or 62 and 5 Years of Service under the Retirement Plan
("Retirement"), becomes permanently and totally disabled, or otherwise
terminates employment with the Company. At said time, the amounts credited to
the Participant's Sub-Account will be paid or will commence to be paid to the
Participant by July 31st of the next year following termination of employment in
accordance with the following chart, but in no event sooner than six months
after termination of employment, except that in the case of termination of
employment for other than Retirement, death, or disability any amount payable
shall be payable six months after termination in a lump sum:
Participant's Total
Sub-Account Balance
at Beginning of Distribution Payout Period
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Under $50,000 Lump Sum
$50,000 to $200,000 5 AnnualInstallments
$200,000 to $500,000 10 AnnualInstallments
$500,000 to $1,000,000 15 Annual Installments
over $1,000,000 20 Annual Installments
This schedule shall apply to all funds in the sub-account regardless of
when amounts were deferred. Notwithstanding the foregoing, each Participant upon
first becoming eligible for the Plan (or within 30 days after the November 17,
1999 Amendment and Restatement) may elect on a one-time irrevocable basis (1) to
have the commencement of a payout period delayed for 5 years and/or (2) to have
balances that are scheduled to be paid out over 5 or more years to be paid out
over any other payout period included in the above chart. For 30 days after
November 17, 1999, Participants may also elect to retain the payout schedule in
effect on November 16, 1999. Annual Installments shall be equal to the figure
developed by dividing the cash value of the sub-account on the January valuation
day each year (chosen by the Committee) by the number of years left in the
payout period. The Company may, from time to time, adjust the balance levels
that trigger the Payout Periods to reflect inflation. In the case of a lump sum
payment, any reasonable valuation date selected by the Company shall be binding
on the Participant.
Notwithstanding the foregoing, payouts for all Participants, once
commenced, shall continue in accordance with the payout schedule in existence at
commencement of the payout period.
Payments shall be made by Company (not by Fidelity) and are subject to all
applicable withholding and related taxes.
In the event of a Participant's death prior to full payment of his or her
sub-account, payment will thereafter be made in accordance with the applicable
Payout Period to the Participant's beneficiary or contingent beneficiary or, if
no beneficiary of the Participant is then living, then to the Participant's
estate in a lump sum. A Participant's beneficiary and contingent beneficiary
shall be that person or persons named by the Participant to be such in the most
recent written beneficiary designation executed by the Participant. In the event
a Participant becomes disabled, or, is judged incompetent, or in the judgment of
the Committee, unqualified to manage his or her affairs, the Committee may
direct that payment to any amounts due be made to the legal guardian of such
Participant or, if none has been appointed, to his or her spouse or adult child
or any other person or any institution who is caring for such Participant; and
any payment so made shall to the extent thereof fully release and discharge the
Committee and the Company from any further liability to the Participant.
Notwithstanding the foregoing, the Committee may accelerate distribution of
funds to a Participant in the event of an unforeseeable emergency, which shall
be defined as only:
1. a severe financial hardship to the Participant caused by an illness or
accident of the Participant, the Participant's spouse or a dependent
of the Participant (as defined in Code Section 152(a));
2. a loss of the Participant's property due to casualty; or
3. other similar extraordinary and unforeseeable circumstances arising
as a result of events beyond the Participant's control.
Distribution may not be made to the extent the unforeseeable emergency may
be relieved through reimbursement or compensation from insurance or otherwise by
liquidation of Participant's assets (to the extent such liquidation would not
itself cause severe financial hardship), or by cessation of deferrals under the
Plan. College tuition or the costs of purchasing a home are not considered
unforeseeable emergencies.
The amount withdrawn as a result of a financial hardship must be limited to
the amount reasonably needed to satisfy the emergency.
The valuation of the Amounts on account of hardship shall be made as of the
day the Committee approves the hardship withdrawal.
Payments for any reason shall be drawn pro-rata from the mutual funds in
which a Participant has invested his or her Amounts. For the purposes of this
paragraph, a self-directed brokerage account shall be considered a single mutual
fund.
In the event of a "Change in Control", as defined in Section 409A of the
Internal Revenue Code, a Participant will receive immediately, in cash or in
kind, the full amount of the balance of his or her accounts.
ARTICLE VIII - AMENDMENT AND TERMINATION
The Company reserves the right to modify, amend, alter or terminate this
Plan at any time and in any way. If the Plan is terminated, all Amounts credited
to a Participant will be immediately distributed, in cash or in kind, to such
Participant.
ARTICLE IX - BINDING ARRANGEMENT
This Plan shall be binding upon and inure to the benefit of the Company,
its successors, and each participant and his or her heirs, executors,
administrators and legal representatives.
ARTICLE X - PROHIBITION OF ALIENATION
Any Amounts may not be voluntarily or involuntarily assigned, anticipated,
or alienated by the Participant and shall not be subject to attachment, levy or
encumbrance by a creditor of a Participant. The right of the Participant to a
sub-account shall be not greater than the right of any unsecured general
creditor of the Company.
ARTICLE XI - GOVERNING LAW
The place of administration of this Plan shall be conclusively deemed to be
within the Commonwealth of Pennsylvania and the validity, construction,
interpretation, administration and effect of this Plan, and any of its rules and
regulations, and the rights of any and all persons having or claiming to have an
interest herein or hereunder, shall be governed by, and determined exclusively
and solely in accordance with the laws of the Commonwealth of Pennsylvania,
unless pre-empted by the laws of the Federal Government.
ARTICLE XII - COSTS OF THE PLAN
The expenses incurred in administering this Plan, including any Committee
fees, taxes payable on earnings in the sub-accounts prior to distribution, fees
payable to Fidelity, any charges by the Company's independent auditors, legal
fees or any other costs, shall be borne by the Company and shall not be charged
against the credits in each sub-account, except that any fees for the
self-directed brokerage account shall be paid by a Participant from funds within
his or her account or otherwise and all commissions payable for activity in a
self-directed brokerage account will be assessed against that account.
ARTICLE XIII - NO EMPLOYMENT CONTRACT
Neither the establishment of this Plan nor any action taken hereunder shall
be construed as giving any Participant any right to be retained in the employ of
the Company, and all Participants shall remain subject to discharge to the same
extent as if the Plan had never been adopted.
TO RECORD THE ADOPTION OF THIS PLAN, THE COMPANY HAS CAUSED ITS AUTHORIZED
OFFICERS TO AFFIX THE CORPORATE NAME AND SEAL HERETO THIS 24TH DAY OF FEBRUARY,
2006.
HARLEYSVILLE GROUP INC.
By:/s/ Michael L. Browne
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Michael L. Browne
President and Chief Executive Officer
ATTEST:
/s/ Robert A. Kauffman
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Robert A. Kauffman, Secretary