Exhibit 10.1
HARLEYSVILLE GROUP INC.
SENIOR EXECUTIVE INCENTIVE
COMPENSATION PLAN
EFFECTIVE JANUARY 1, 2009
ADOPTED BY STOCKHOLDERS: APRIL 22,
2009
HARLEYSVILLE GROUP INC.
SENIOR EXECUTIVE INCENTIVE
COMPENSATION PLAN
EFFECTIVE JANUARY 1, 2009
TABLE OF CONTENTS
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ARTICLE
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I.
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PURPOSE
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1
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ARTICLE
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II.
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DEFINITIONS
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1
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ARTICLE
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III.
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ADMINISTRATION
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2
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ARTICLE
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IV.
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EFFECTIVE
DATE
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3
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ARTICLE
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V.
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PARTICIPATION
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3
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ARTICLE
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VI.
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MINIMUM
INCENTIVE AWARD THRESHOLD
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3
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ARTICLE
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VII.
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MAXIMUM
AWARDS
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4
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ARTICLE
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VIII
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COMMITTEE
CERTIFICATION
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5
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ARTICLE
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IX.
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PAYMENT OF
INCENTIVE AWARDS
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5
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ARTICLE
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X.
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DEFERRED
PAYMENT ELECTION
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5
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ARTICLE
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XI.
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FORFEITURE
OF INCENTIVE AWARDS
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5
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ARTICLE
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XII.
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AMENDMENT,
SUSPENSION OR TERMINATION
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6
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ARTICLE
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XIII.
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GOVERNING
LAW
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6
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ARTICLE
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XIV.
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COSTS OF THE
PLAN
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6
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ARTICLE
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XV.
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NON-ASSIGNABLE
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6
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ARTICLE
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XVI
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NO
EMPLOYMENT CONTRACT
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7
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HARLEYSVILLE GROUP INC.
SENIOR EXECUTIVE INCENTIVE
COMPENSATION PLAN
EFFECTIVE JANUARY 1,
2009
ARTICLE
I. PURPOSE
This Senior Executive Incentive Compensation
Plan (hereinafter referred to as the "Plan") is intended to
increase the profitability of Harleysville Group Inc. ("HGI"),
Harleysville Mutual Insurance Company (“HMIC”) and
their respective subsidiaries by providing competitive incentive
award opportunities for senior management based on achievement of
business-related objectives. It is the purpose of this
Plan to motivate senior management to the attainment of demanding
goals by providing recognition and rewards in the form of incentive
payments which shall be paid in cash; provided that payment of an
incentive award may be deferred at the election of each Participant
as set forth in this Plan. The Plan has the further
objectives of attracting and retaining senior management personnel
of superior caliber and of affording them a means of participating
in the overall success of the business.
ARTICLE
II. DEFINITIONS
For the purposes of this Plan, the following
terms shall have the meanings set forth below:
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“ Base
Salary ” - A Participant’s base salary payable by
one of the Companies, as in effect at the beginning of an Incentive
Award Year; provided, that if, within the first 90 days of an
Incentive Award Year, the Committee, or, with respect to CEO base
salary, the independent members of the Board of Directors,
determines a Participant’s base salary for that year
retroactive to the beginning of such Incentive Award Year, that
different base salary shall be used.
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" Board of
Directors " - The Board of Directors of HGI.
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“
CEO ” - The chief executive officer of HGI.
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“
Code ” - The Internal Revenue Code of 1986, as
amended.
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"
Committee " - The Compensation and Personnel Development
Committee of the Board of Directors, which Committee members shall
meet the requirements of section 162(m) of the Code.
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“
Companies ” - HGI, HMIC and their respective
subsidiaries. Any of them may be individually referred
to as a “Company” in this Plan.
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“
EIP ” – The Harleysville Group Inc. Amended and
Restated Equity Incentive Plan or its successor.
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" Incentive
Award Year " - A calendar year for which incentive awards may
be paid.
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" Maximum
Award " - The maximum incentive award amount for each
Participant which may be paid only if the minimum incentive award
threshold, as described in Article VI of this Plan, for such
Incentive Award Year is satisfied.
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"
Participant " - An officer of one of the Companies who is
designated as a participant by the Committee.
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“
Return on Equity (ROE) ” - The operating return on the
average common stockholders equity of HGI. To determine
the average equity, the common equity at the beginning of the year
and end of the year will be averaged. Operating return
is based on net income (after taxes) but excluding realized
investment gains or losses, after taxes. ROE will be
calculated without the stockholders’ equity impact of SFAS
Nos. 115.
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ARTICLE
III. ADMINISTRATION
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The
responsibility for the implementation and administration of this
Plan is delegated to the Committee. In addition to its
duties as elsewhere set forth in this Plan, the Committee's
functions shall include the following:
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interpretation
of the Plan and establishment of the rules and regulations
governing Plan administration,
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determination
of who is a Participant,
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selection of
appropriate incentive award criteria (from among those criteria
specified in Article VI(B)) and thresholds, and
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determination
of the incentive awards under this Plan; provided that the
Committee shall only have authority to reduce Maximum Awards from
the maximums set forth in Article VII.
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In reaching its
decisions, the Committee shall consider recommendations made by the
CEO. The Committee may, in discharging its
responsibilities under the Plan, delegate such administrative
duties to officers or other employees of one of the Companies as it
deems appropriate, other than such duties as relate to compliance
with section 162(m) of the Code. The Committee may also
utilize the services of an independent compensation consultant or,
to the extent necessary, the services of the Company’s
independent auditing firm, to the extent necessary to provide
information to be used by the Committee in its administration of
this Plan and determination of incentive awards under this
Plan. No Committee Member shall be eligible for an
incentive award under this Plan.
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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.
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This Plan is
intended to satisfy the applicable requirements of section 162(m)
of the Code and the regulations thereunder so that the applicable
Company’s tax deduction for incentive awards granted to
“covered employees” (as defined in section 162(m)) is
not disallowed in whole or in part by the operation of section
162(m). The Committee shall interpret the terms of this
Plan and any incentive award granted hereunder so as not to
frustrate such intent.
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ARTICLE
IV. EFFECTIVE
DATE
This Plan shall be effective for all Incentive
Award Years beginning on or after January 1, 2009, subject to
receipt of approval from the HGI stockholders, and will be
submitted for such approval at the 2009 Annual Meeting of
Stockholders. Any incentive awards made for the
Incentive Award Years beginning on or after January 1, 2009 shall
be conditioned upon receipt of such stockholder
approval.
ARTICLE
V. PARTICIPATION
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No later than
ninety (90) days after the beginning of each Incentive Award Year,
the Committee shall designate the officers of Companies who shall
participate in the Plan, retroactive back to January 1 for such
Incentive Award Year. If an officer otherwise becomes a
Participant during an Incentive Award Year, he or she shall be
eligible to participate on the same basis as other similarly
situated officers; provided that he or she will be entitled to
receive no more than that portion of his or her Maximum Award that
he or she otherwise would have received under the Plan for the full
Incentive Award Year which the number of complete calendar months
of his or her participation in the Plan during such Incentive Award
Year bears to twelve (12). If prior to end of any
Incentive Award Year, a Participant’s employment shall have
been terminated for a reason other than retirement (as defined in
the EIP), change in control (as defined in EIP), death or
disability, such Participant shall not be entitled to any incentive
award for that Incentive Award Year. In addition, if
prior to the end of an Incentive Award Year, an officer’s
employment is not terminated, but such Participant’s
eligibility is terminated because of change of duties or position,
such officer shall not be entitled to any incentive award for that
Incentive Award Year.
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If, prior to
the end of an Incentive Award Year, a Participant's employment with
all Companies ceases because of disability (as defined in
HGI’s long-ter
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