Harleysville Group Inc. Supplemental Retirement Plan (Amended and Restated as of March 31, 2006)

Summary

This agreement is between Harleysville Group Inc. and certain management employees, providing supplemental retirement benefits beyond the company's standard pension plan. The plan is designed for a select group of highly compensated employees and is administered by the company's Compensation and Personnel Development Committee. It outlines eligibility, benefit formulas, and conditions for receiving additional retirement payments, especially for those in higher pay grades or with specific service histories. The plan is non-qualified and unfunded, and benefits are subject to certain limits and reductions based on age, years of service, and other factors.

EX-10.1 2 hgisupplementalretirement.txt HGI SUPPLEMENTAL RETIREMENT PLAN Exhibit 10.1 HARLEYSVILLE GROUP INC. SUPPLEMENTAL RETIREMENT PLAN AMENDED AND RESTATED AS OF MARCH 31, 2006 ARTICLE I - PURPOSE This Supplemental Retirement Plan (hereinafter referred to as the "Plan") is intended to supplement the retirement benefits payable to certain management Employees of Harleysville Group Inc. (hereinafter the "Company"), from the Pension Plan of Harleysville Group Inc. and Associated Employees through a non-qualified unfunded deferred compensation plan. It is further intended that this Plan shall be a Plan that is made available only to a select group of management and highly compensated employees pursuant to the Employment Retirement Income Security Act of 1974. ARTICLE II - DEFINITIONS For the purposes of this Plan, the definitions found in the Company's qualified Pension Plan shall govern except that the following terms shall have the meanings set forth below: (A)"Board" shall mean the Board of Directors of the Company. (B)"Committee" shall mean the Compensation and Personnel Development Committee of the Board of Directors. (C)"Compensation" shall mean, for Article V, average annual base salary during the most recent five years prior to retirement or March 31, 2006, whichever is earlier, and for Article VI, shall mean the average annual base salary, whether actually paid or deferred, and the average amount of all payments, whether actually paid or deferred, made pursuant to any annual incentive plan of the Company, during the most recent five years prior to retirement or March 31, 2006, whichever is earlier. (D)"Pension Plan" means the qualified and funded defined benefit pension plan adopted by the Company as of January 1, 1953 and as amended thereafter from time to time. (E)"Retirement" shall mean termination of employment under such circumstances that a Participant is entitled to an immediate benefit from the Pension Plan whether or not benefits commence on such date. As set forth in the Pension Plan, a disabled employee is entitled to accrue benefits under the Pension Plan until his or her Normal Retirement date. Notwithstanding the foregoing, the term "retirement" for the purposes of this plan only shall be deemed to include 1) termination of employment following a "change of control" as defined in section 409A of the Internal Revenue Code. (F) Section 16 Officer shall mean the President or any individual designated by the Board of Directors as a Section 16 Officer. (G)"Social Security Benefit" shall mean the benefit payable at age 65 for an age 65 employee. For retirement ages between 62 and 65, the Social Security Benefit will be the benefit payable at retirement age. For retirement prior to age 62, the Social Security Benefit will be the benefit payable at age 62 reduced by 5/9 of 1% for each month that the benefit commencement date precedes age 62. ARTICLE III - ADMINISTRATION The responsibility for the implementation and administration of this Plan is delegated to the Committee. The Committee shall interpret the Plan and establish 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 Participants and any person claiming through or under any Participant, unless otherwise determined by the Board of Directors. ARTICLE IV - EFFECTIVE DATES The Plan was adopted as of January 1, 1992, amended and restated on May 25, 1994, and amended and restated on November 17, 1999, and amended and restated as of March 31, 2006. ARTICLE V - OFFSET FORMULA A. All employees of the Company who (1) were in paygrade 20 and above and in active employment on December 31, 1991 or (2) retired from the Company during the period January 1, 1989 through December 31, 1991 and were in paygrade 20 or above, shall be Participants in the Plan and eligible for benefits under the benefit formula set forth in Article VI.A; provided, however, that otherwise eligible employees who retired in the period January 1, 1989 through December 31, 1991 and received benefits under other specialized Company supplemental retirement programs are not eligible for participation in this Plan. B. Upon his or her Retirement, a Participant meeting the qualifications of Article V.A shall be entitled to a benefit from this plan. The amount of the benefit shall be (1) the benefit that a Participant would have accrued upon the retirement under the Pension Plan formula(s) in effect on December 31, 1988 applicable to that Participant assuming that such formula(s) had stayed in effect until the Participant's Retirement, less (2) the benefit which the Participant has accrued upon Retirement under the Pension Plan formula in effect at the time of Retirement. All terms and conditions of the Pension Plan in effect on December 31, 1988 shall govern the benefit calculated under the formula(s) in effect on said date; provided, however, that it is further expressly intended that the calculation under (1) above shall not employ any limit on compensation required by Section 401(a)(17) of the Internal Revenue Code (or its equivalent) for qualified plans applicable to plan years commencing on or after January 1, 1989; and that any benefit so calculated shall not be limited by the application of Section 415 of the Internal Revenue Code (or its equivalent). ARTICLE VI - STEP-RATE FORMULA A. All employees of the Company who are in paygrade 20 and above or upon Retirement or on March 31, 2006, whichever is earlier, shall be Participants in the Plan and eligible for benefits under the benefit formula set forth in this Article VI. B. Upon his or her Retirement, a Participant meeting the qualifications of this Article V.B may be entitled to a benefit from this Plan. The amount of the benefit shall be (1) the benefit that would have accrued at Retirement or at March 31, 2006, whichever is earlier, under the Pension Plan formula in effect on date of hire, without the application of any limitation on compensation pursuant to Section 401(a)(17) of the Internal Revenue Code (or its equivalent) and without the application of any limitation on benefits required by Section 415 of the Internal Revenue Code (or its equivalent) less (2) the benefit that the Participant has accrued upon Retirement under the Pension Plan formula in effect at the time of Retirement. Notwithstanding the foregoing, the maximum benefit ("Maximum Benefit") calculated under (1) shall be reduced, if necessary, in order that the sum of (a) the Social Security Benefit, (b) the benefits payable under the Pension Plan, and (c) the benefits payable under this Plan shall not exceed 1.85% of a Participant's Compensation times the years of service with the Company as of March 31, 2006, up to a maximum of 25 years. C. The Maximum Benefit shall be reduced by the early retirement factors that apply under the Pension Plan step-rate formula which are (8%) per year from age 65 to age 62 and 4% per year thereafter. D. Notwithstanding the foregoing, if an employee is a Section 16 Officer or has been such within the past two years, then the Maximum Benefit shall not be reduced under "C" above if the Participant has at least twenty years of service and retires at or after age 62, and benefits shall be reduced by 4% per year if the Participant has at least 20 years of service and retires prior to age 62 but no earlier than age 60. The Social Security Benefit utilized in the determination of Maximum Benefit shall be the benefit payable at age 62. If the benefits under this Plan commence prior to age 62, the Social Security Benefit utilized shall be the benefit payable at 62, reduced by 5/9 of 1% for each month that the benefit commencement date precedes age 62. The Maximum Benefit shall further be reduced by 4% per year if retirement occurs prior to age 62 but no earlier than age 60. ARTICLE VII -ELIGIBILITY FOR BENEFITS UNDER ARTICLES V AND VI A Participant that qualifies for benefits under both Article V and VI receive the greater of the two benefits. ARTICLE VIII - PAYMENT OF BENEFITS Any benefits payable to a Participant under this Plan shall commence as of the date that benefits commence under the Pension Plan, be paid on the same payment schedule as payments under the Pension Plan, and shall be the same form of benefit selected under the Pension Plan, i.e., single life, joint and survivor, etc. The surviving beneficiary, if any, of a Participant shall be the same as under the Pension Plan. If an individual entitled to receive any benefits hereunder is determined by the Committee or is adjudged to be legally incapable of giving valid receipt and discharge for such benefits, they shall be paid to the duly appointed and acting guardian, if any, and if no such guardian is appointed and acting, to such persons as the Committee may designate. Such payment shall, to the extent made, be deemed a complete discharge for such payments under this Plan. ARTICLE IX - SOURCE OF BENEFITS Benefits under this Plan shall not be prefunded, but shall be payable by the Company when they become due from the general assets of the Company as provided herein, and the Participant's interest in his or her benefits under this Plan (and the interest of any beneficiary) shall not be greater than that of an unsecured creditor of the Company. Any funds reserved by the Company to pay any benefits due hereunder shall not be considered as held in trust for the exclusive benefit of Participants. The Company only has a contractual obligation to make payment of the benefit when due. ARTICLE X - AMENDMENT AND TERMINATION The Board may at any time, or from time to time, amend this Plan in any respect or terminate this Plan without restriction and without consent of any Participant or beneficiary, provided, that any such amendment or termination shall not impair the right of any Participant or any surviving beneficiary of any then deceased Participant to receive benefits earned hereunder prior to such amendment or termination without the consent of such Participant or such surviving beneficiary and shall not accelerate payments. No beneficiary of a Participant shall have any right to benefits under this Plan or any other interest herein before becoming a surviving beneficiary. ARTICLE XI -PROHIBITION OF ALIENATION Any amounts accrued by a Participant hereunder may not be voluntarily or involuntarily assigned, anticipated, or alienated and shall not be subject to attachment, levy or encumbrance. ARTICLE XII - 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 therein or thereunder, shall be governed by, and determined exclusively and solely in accordance with the laws of the Commonwealth of Pennsylvania. ARTICLE XIII - COSTS OF THE PLAN The expenses incurred in administering this Plan, including any Committee fees, any charges by the Company's independent auditors, or any other costs, shall be borne by the Company and shall not be charged against the benefit of any Participant. ARTICLE XIV - 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 26TH DAY OF JANUARY, 2006. HARLEYSVILLE GROUP INC. By: /s/ Michael L. Browne ------------------------- Michael L. Browne President & CEO ATTEST: /s/ Robert A. Kauffman - ------------------------------------------- Robert A. Kauffman, Secretary