Exhibit 10.1

 

  Michael L. Browne    Harleysville Insurance    Tel (215) 256-5013   Chief
Executive Officer    355 Maple Avenue    Fax (215) 256-5008     
Harleysville, PA 19438-2297    mbrowne@harleysvillegroup.com     
www.harleysvillegroup.com   

LOGO [g235997ex10_1pg001.jpg]

July 11, 2011

Arne Herenstein

Senior Vice President

Harleysville Insurance

355 Maple Ave

Harleysville, PA 19438

 

RE: CHANGE IN CONTROL AGREEMENT

Dear Arne:

Harleysville Group Inc. (“Employer”) considers the establishment and maintenance
of a sound and vital management team essential to protecting and enhancing the
best interests of it and its stockholders and those of its parent company,
Harleysville Mutual Insurance Company (“Parent”) and the Parent’s policyholders.
In this connection, the Employer recognizes that, as is the case with many
publicly held corporations, the possibility of a change in control of the
Employer exists and that such possibility and the uncertainty and questions
which it may raise among management personnel as to the effect of such change in
control on the Employer, may result in the departure or distraction of such
personnel to the detriment of the Employer, the Parent, the Employer’s
stockholders and the Parent’s policyholders. Accordingly, the Board of Directors
of the Employer (“Board”) has determined that appropriate steps should be taken
to reinforce and encourage the continued attention and dedication of the key
members of the Employer’s management, including yourself, to their assigned
duties without the distraction arising from the possibility of a change in
control.

In order to induce you to remain in the Employer’s employ, this letter agreement
(“Agreement”) supersedes and replaces any prior similar agreement, and sets
forth the severance benefits which the Employer agrees will be provided to you
in the event your employment is terminated subsequent to a “Change in Control”
(as defined in Section 2) and under the circumstances described below.

1. Term. This Agreement shall commence on July 11, 2011 and shall continue in
effect through December 31, 2012 (the “Initial Expiration Date”); provided,
however, that commencing on January 1, 2013, and each January 1 thereafter, the
term of this Agreement shall automatically be extended for one additional year
(each, an “Extended Expiration Date”) unless, not later than twelve (12) months
prior to the Initial Expiration Date or any Extended Expiration Date, as the
case may be, the Employer shall have given notice that it does not wish to
extend this Agreement; provided, further, if a Change in Control of the Employer
shall have occurred during the original or extended term of this Agreement, this
Agreement shall continue in effect for a period of twenty-four (24) months
beyond the month in which such Change in Control occurred.

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Change in Control Agreement

 

2. Change in Control.

For purposes of this Agreement, “Change in Control” of the Employer shall be
deemed to have occurred:

(a) if the “beneficial ownership” (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of securities representing more than twenty percent
(20%) of the combined voting power of the Employer Voting Securities (as herein
defined) is acquired by any individual, entity or group (a “Person”), other than
the Parent, the Employer, any trustee or other fiduciary holding securities
under any employee benefit plan of the Employer or an affiliate thereof, or any
corporation owned, directly or indirectly, by the stockholders of the Employer
in substantially the same proportions as their ownership of stock of the
Employer (for purposes of this Agreement, “Employer Voting Securities” shall
mean the then outstanding voting securities of the Employer entitled to vote
generally in the election of directors); provided, however, that the following
shall not constitute a Change in Control under this paragraph (a) : (i) any
acquisition pursuant to a transaction which complies with clauses (i), (ii) and
(iii) of paragraph (c) of this Section 2; (ii) any acquisition of the Employer
Voting Securities from the Parent pursuant to a Business Combination (as herein
defined) or otherwise, if (x) the acquiring or resulting entity is organized in
the mutual form, and (y) persons who were members of the Incumbent Board (as
herein defined) of the Parent immediately prior to such acquisition constitute
at least two-thirds of the members of the Board of Directors of the acquiring
entity immediately following such acquisition and (iii) any acquisition of
voting securities from the Employer or the Parent by a person engaged in
business as an underwriter of securities who acquires the shares through his
participation in good faith in a firm commitment underwriting registered under
the Securities Act of 1933; and (iv) any acquisition otherwise within the terms
of this paragraph (a) during any period in which Parent owns at least a majority
of the combined voting power of Employer Voting Securities (the “Parent Control
Period”), but if such an acquisition is made during a Parent Control Period by
any Person and such Person continues to hold more than 20% of the combined
voting power of all Employer Voting Securities on the first day following the
termination of a Parent Control Period, such acquisition will be deemed to have
been first made on such date; or

(b) if, during any period of twenty-four (24) consecutive months, individuals
who, as of the beginning of such period, constitute the Board of Directors of
the Employer or the Parent, as the case may be (the “Applicable Incumbent
Board”), cease for any reason to constitute at least a majority of the Board of
Directors of the Employer or the Parent, as the case may be; provided, however,
that (x) any individual becoming a director of the Employer or the Parent, as
the case may be, during such period whose election, or nomination for election,
was approved by a vote of at least a two-thirds of the directors then comprising
the Applicable Incumbent Board (other than in connection with the settlement of
a threatened proxy contest) shall be considered as though such individual were a
member of the Incumbent Board of Directors of the Employer or the Parent, as the
case may be, and (y) the provisions of this paragraph (b) shall not be
applicable to the composition of the Board of Directors of Parent if Parent
shall cease to own at least 20% of the combined voting power of all Employer
Voting Securities; or

(c) upon consummation by the Employer of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Employer or the acquisition of assets or stock of another entity
(a “Business Combination”), unless, in any such

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Change in Control Agreement

 

case, immediately following such Business Combination the following three
conditions are met: (i) more than 50% of the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors of (x) the corporation resulting from such Business Combination (the
“Surviving Corporation”), or (y) if applicable, a corporation which as a result
of such transaction owns the Employer or all or substantially all of the
Employer’s assets either directly or through one or more subsidiaries (the “New
Parent Corporation”), is represented, in either such case, directly or
indirectly, by Employer Voting Securities outstanding immediately prior to such
Business Combination (or, if applicable, is represented by shares into which
such Employer Voting Securities were converted pursuant to such Business
Combination), and such voting power is distributed among the holders thereof in
substantially the same proportions as their ownership, immediately prior to such
Business Combination, of the Employer Voting Securities, and (ii) no Person
(excluding any employee benefit plan (or related trust) of the Employer or such
corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 50% or more of the combined voting power of the then
outstanding voting securities eligible to elect directors of the New Parent
Corporation (or, if there is no New Parent Corporation, the Surviving
Corporation) except to the extent that such ownership of the Employer existed
prior to the Business Combination, and (iii) at least a majority of the members
of the board of directors of the New Parent Corporation (or, if there is no New
Parent Corporation, the Surviving Corporation) were members of the Board of
Directors of the Employer at the time of the execution of the initial agreement,
or the action of the Board, providing for such Business Combination; or

(d) Parent affiliates with, or acquires by merger, a third party and, as a
consequence thereof, persons who were members of the Incumbent Board of Parent
immediately prior to such transaction cease to constitute at least two-thirds of
the directors of Parent following such transaction provided, however, that this
paragraph (d) shall not apply if immediately prior to such affiliation or
merger, Parent does not own more than 20% of the combined voting power of
Employer Voting Securities; or

(e) upon approval by the stockholders of the Employer and all necessary
regulatory authorities of a complete liquidation or dissolution of the Employer;
or

(f) any other event shall occur that would be required to be reported by the
Employer in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated
under the Exchange Act (or any provision successor thereto); or

(g) the Employer or Parent has entered into a management agreement or similar
arrangement pursuant to which an entity other than the Employer or the Parent or
the Boards of Directors or the executive officers and management of the Employer
or the Parent has the power to direct or cause the direction of the management
and policies of the Employer or the Parent; provided, however, that this
paragraph (g) shall not apply to Parent if, immediately prior to entering into
any such management agreement or similar arrangement, Parent does not own more
than 20% of Employer Voting Securities.

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Change in Control Agreement

 

3. Termination Following Change in Control. If any of the events described in
Section 2 hereof constituting a Change in Control shall occur during the term
hereof, you shall be entitled to the benefits provided in Section 4 hereof upon
the subsequent termination of your employment within twenty-four months
following such Change in Control unless such termination is (a) because of your
death or Retirement, (b) by the Employer for Cause, or (c) by you other than for
Good Reason, in accordance with the following:

 

  (a) Disability; Retirement.

 

  (i) If, as a result of your incapacity due to physical or mental illness, you
shall have been absent from your duties with the Employer on a full time basis
for six (6) consecutive months and within 30 days after written notice of
termination is given you shall not have returned to the full time performance of
your duties, the Employer may terminate this Agreement for “Disability.”

 

  (ii) Termination of your employment based on “Retirement” shall mean
termination in accordance with the Employer’s retirement policy, including early
retirement, generally applicable to its salaried employees or in accordance with
any retirement arrangement established with your consent with respect to you.

 

  (b) Cause. The Employer may terminate your employment for Cause. Termination
by the Employer of your employment for “Cause” shall mean termination upon
(A) the willful and continued failure by you to substantially perform your
duties with the Employer (other than any such failure resulting from your
incapacity due to physical or mental illness), or any such actual or anticipated
failure after the issuance of a Notice of Termination by you for Good Reason, as
such terms are defined in Subsections 3(d) and 3(c), respectively, after a
written demand specifically identifies the manner in which the Board believes
that you have not substantially performed your duties, or (B) the willful
engaging by you in conduct which is demonstrably and materially injurious to the
Company, monetarily or otherwise. For purposes of this paragraph, no act or
failure to act on your part shall be considered “willful” unless done or omitted
to be done by you not in good faith and without reasonable belief that your
action or omission was in the best interest of the Employer. Notwithstanding the
foregoing, you shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to you a copy of a resolution duly adopted
by the affirmative vote of not less than three-quarters of the entire membership
of the Board of a meeting of the Board called and held for the purpose (after
reasonable notice to you and an opportunity for you, together with your counsel,
to be heard before the Board) finding that, in the good faith opinion of the
Board, you were guilty of conduct set forth above and specifying the particulars
thereof in detail.

 

  (c) Good Reason. You may terminate your employment for Good Reason. For
purposes of this Agreement, “Good Reason” shall mean, within twenty four
(24) months following any Change in Control and without your express written
consent:

 

  (i) the assignment to you of any duties inconsistent with your positions,
duties, responsibilities and status with the Employer immediately prior to a
Change in Control or a change in your reporting responsibilities, titles or
offices as in effect immediately prior to a Change in Control, or any removal of
you from or any failure to re-elect you to any of such positions, except in
connection with the termination of your employment for Cause, Disability,
Retirement or by you other than for Good Reason or as a result of your death;

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Change in Control Agreement

 

  (ii) a reduction in your base salary under the Employer’s Wage and Salary
Program in effect immediately prior to a Change in Control or as the same may be
increased from time to time thereafter;

 

  (iii) a failure by the Employer (A) to continue its executive incentive plans,
as the same may be amended or modified from time to time but substantially in
the form in effect immediately prior to a Change in Control (“Program”), or
failure by the Employer to continue you as a participant in the Program on at
least the basis in effect immediately preceding a Change in Control, provided
that the failure to continue any one or more plans constituting the Program, or
to continue you in any one or more plans shall not constitute Good Reason as
long as, after giving effect to any such changes, the aggregate of the
compensation which may be earned by you and the circumstances under which such
amounts may be earned are substantially comparable, taken as a whole, as the
Program, or (B) to pay you any installment of a previous award or of deferred
compensation, if any, under the Program or any deferred compensation program in
which you participated immediately prior to a Change in Control;

 

  (iv) the Employer requiring you to be based anywhere other than within fifty
(50) miles of the office in Harleysville, Pennsylvania, except for required
travel on business to an extent substantially consistent with the business
travel obligations you experienced immediately preceding a Change in Control;

 

  (v)

the failure by the Employer to continue in effect any benefit or compensation
plan or arrangement, in which you are participating immediately preceding Change
in Control, the taking of any action by the Employer not required by law which
would adversely affect your participation in or materially reduce your benefits
under any of such plans or deprive you of any material fringe benefit enjoyed by
you at the time of the Change in Control or the failure by the Employer to
provide you with the number of paid vacation days, holidays and personal days to
which you are then entitled in accordance with the Employer’s normal leave
policy in effect immediately preceding a Change in Control; provided, however,
that the failure to continue any plan or benefit or the taking of any

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  action which adversely affects your participation in, or materially reduces
your benefits under any plan or deprives you of any material fringe benefit
shall not be Good Reason under this Section 3(c)(v) if the failure to continue
or other action applies equally to all employees or executives covered by the
plan or benefit.

 

  (vi) the failure of the Employer to obtain the assumption of the agreement to
perform this Agreement by any successor as contemplated in Section 5 hereof; or

 

  (vii) any purported termination of your employment by the Employer which is
not effected pursuant to a Notice of Termination satisfying the requirements of
subparagraph (d) below (and, if applicable, subparagraph (b) above). Your
continued employment shall not constitute consent to, or a waiver of rights with
respect to, any circumstance constituting Good Reason hereunder.

 

  (d) Notice of Termination. Any termination by the Employer pursuant to
subparagraphs (a) or (b), above, or by you pursuant to subparagraph (c), above,
shall be communicated by a written Notice of Termination to the other party
hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth, in reasonable detail, the facts and
circumstances claimed to provide a basis for termination of your employment
under the provision so indicated.

 

  (e)

Date of Termination. “Date of Termination” shall mean (A) if this Agreement is
terminated for Disability, 30 days after Notice of Termination is given
(provided that you shall not have returned to the performance of your duties on
a full-time basis during such 30-day period), (B) if your employment is
terminated pursuant to subparagraph (c), above, the date specified in the Notice
of Termination and (C) if your employment is terminated for any other reason,
the date on which a Notice of Termination is given; provided that, if within 30
days after any Notice of Termination is given, the party receiving such Notice
of Termination gives notice to the other party, other than in Bad Faith, that a
dispute exists concerning the termination and the party giving such Notice shall
pursue his claim diligently and in other than Bad Faith, the Date of Termination
shall be the date on which the dispute is finally resolved, either by mutual
written agreement of the parties, by a binding and final arbitration award or by
a final judgment, order or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been perfected). As
used in this Agreement, “Bad Faith” shall mean that a dispute was asserted or
maintained by you (i) for an improper purpose, such as to harass or cause
unnecessary delay or needlessly increase the cost of resolution, or (ii) on a
basis not warranted by existing law or a non-frivolous argument for the
extension, modification, or reversal of existing law or the establishment of new
law, or (iii) in the absence of evidentiary support (unless evidentiary support
was reasonably likely to exist after

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  investigation or discovery). Bad Faith shall only be determined to exist for
purposes of this Agreement if the arbitrator selected pursuant to Section 10
hereof makes a specific finding thereof in his award.

4. Compensation Upon Termination Or During Disability Following A Change In
Control.

 

  (a) During any period following a Change in Control that you fail to perform
your duties hereunder as a result of incapacity due to physical or mental
illness, you shall continue to receive your full base salary at the rate then in
effect and any installments of deferred portions of awards under the Program
paid during such period until your employment is terminated pursuant to
paragraph 3(a) hereof. Thereafter, your benefits shall be determined in
accordance with the Employer’s Long-Term Disability Plan, or any substitute plan
then in effect.

 

  (b) If, following a Change in Control, you terminate your employment other
than for Good Reason or your employment shall be terminated for Cause, the
Employer shall pay you your full base salary through the Date of Termination at
the rate in effect at the time Notice of Termination is given plus all other
amounts to which you are entitled under any compensation plan, the annual
incentive plan, long-term incentive plan, or stock option plan of the Employer
at the time such payments are due and the Employer shall have no further
obligation to you.

 

  (c) If, following a Change in Control, the Employer shall terminate your
employment other than pursuant to paragraph (a) or (b) hereof or if you shall
terminate your employment for Good Reason, then the Employer shall pay to you as
severance pay in a lump sum at the time specified in Section 4(f), the following
amounts:

 

  (i) your full base salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given and an amount equal to the
amount, if any, of the deferred portion of any awards which have been awarded to
you pursuant to the Program but which have not yet been paid to you and the
amount of Deferred Compensation, if any, under the Program which has accrued to
your account; and

 

  (ii) in lieu of any further salary payments to you for periods subsequent to
the Date of Termination, an amount equal to the product of (a) the higher of
your annual base salary in effect as of (i) the date of the Change in Control,
and (ii) the Date of Termination, plus the average target awards under any
annual incentive plan for the last three years, multiplied by (b) the number
2.000; and

 

  (iii)

in lieu of payments of any type under any long-term incentive plan, and to the
extent not covered by any other subsection of this

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Change in Control Agreement

 

  Section 4(c), a cash amount equal to the sum of the target bonuses, pro-rated
on a month-completed basis, for all long-term incentive plan periods in which
you are currently participating plus any incentive compensation which has been
allocated or awarded to you for a fiscal year or other measuring period
preceding the Date of Termination but has not yet been paid. If all or part of a
target award is comprised of shares of Employer’s stock, the amount paid in cash
shall be equal to the fair market value of the stock at the beginning of the
plan period; and

 

  (iv)

in the event that any payments made to you under this Agreement or otherwise
(the “Payments”) for a termination event occurring under this Agreement that
arises on or prior to December 31, 2014 are subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code (the “Excise Tax”), then the Employer
shall pay you an additional amount (“Gross Up”) such that the net amount
retained by you after deduction of any Excise Tax on the Payments and any
Federal, State and local income taxes and Excise Tax upon the payments provided
for by this Section 4(c)(iv) shall be equal to the total value of the Payments
at the time such payments are to be made. For the avoidance of doubt, (1) this
Section 4(c)(iv) shall not provide you any additional amounts in respect of
Federal, State, and local income taxes payable by you on amounts payable to you
under any other section of this Agreement; and (2) this Section 4(c)(iv) shall
not apply to any Payments made for any termination event arising under this
Agreement with a Date of Termination after December 31, 2014. For purposes of
determining the amount of the Gross Up, you shall be deemed to pay Federal,
State and local income taxes at the highest marginal rate of taxation in the
calendar year in which the Payment is to be made. State and local income taxes
shall be determined based upon the state and locality of your domicile on the
Date of Termination. The determination of whether such Excise Tax is payable,
the amount thereof, and the Gross Up shall be based upon the opinion of tax
counsel selected by the Employer and acceptable to you. If such opinion is not
finally accepted by the IRS upon audit, then appropriate adjustments shall be
computed (without interest but with Gross Up, if applicable) by such tax counsel
based upon the final amount of the Excise Tax so determined. The amount shall be
paid by the appropriate party in one lump cash sum within 30 days of such
computation. Notwithstanding anything to the contrary in this Section 4(c)(iv),
if the Payments would be subject to excise tax pursuant to Section 4999 of the
Internal Revenue Code (the “Code”) (or any similar federal or state excise tax),
but would not be so subject if the total of such Payments would be reduced by
10% or less, then such Payments shall be reduced by the minimum amount necessary
so as not to cause the Employer to have paid an Excess Parachute Payment as

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Change in Control Agreement

 

  defined in Section 280G(b)(1) of the Code and so you will not be subject to
Excise Tax pursuant to Section 4999 of the Code. The calculation of any
potential reduction pursuant to this paragraph or any disputes related thereto
shall be made as described above with respect to the calculation of the Gross
Up. In the event that the amount of any Payments that would be payable to or for
your benefit under this Agreement must be modified or reduced to comply with
this provision, you shall direct which Payments are to be modified or reduced;
provided, however, that no change in the amount of any Payment or change in the
timing of the Payment shall be made without the consent of the Employer. In no
event shall the total Payments be reduced by more than 10% in order to avoid
treatment as an Excess Parachute Payment. In no event shall any Gross Up under
this provision be paid to you later than the end of the year following the year
in which you pay the Excise Tax; and

 

  (v) the Employer shall pay all legal fees and expenses incurred by you as a
result of such termination (including all such fees and expenses, if any,
incurred in contesting or disputing any such termination or in seeking to obtain
or enforce any right or benefit provided by this Agreement or in connection with
any tax audit or proceeding to the extent attributable to the application of
Section 4999 of the Code to any payment or benefit hereunder). Reimbursement of
such legal fees and expenses shall be made on a regular and periodic basis by
the Employer upon your presentation to the Employer of a statement of such fees
and expenses prepared by your counsel under standard and customary methods;
provided, however, that any such payments shall be made by the end of the year
following the year in which such fees and expenses incurred; and

 

  (vi) the Employer shall maintain in full force and effect, for your continued
benefit for twenty-four (24) months after the Date of Termination, all employee
health and welfare benefit plans, programs or arrangements in which you were
entitled to participate immediately prior to the Date of Termination, including,
without limitation, medical and dental, life, disability, accident and death
insurance plans, provided your continued participation is possible under the
general terms and provisions of such plans and programs. In the event that your
participation in any such plan or program is barred, the Employer shall arrange
to provide you with benefits substantially similar to those which you would have
been entitled to receive under such plans and programs. Except for any insurance
policy used by the Employer to fund any Rabbi Trust, at the end of the period of
coverage, you shall have the option to have assigned to you at no cost and with
no apportionment of prepaid premiums, any assignable insurance policy owned by
the Employer immediately preceding the Change in Control; and

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Change in Control Agreement

 

  (d) You shall not be required to mitigate the amount of any payment provided
for in this Section 4 by seeking other employment or otherwise, nor shall the
amount of any payment or benefit provided for in this Section 4 be reduced by
any compensation earned by you or benefits including retirement benefits
provided to you as the result of employment by another employer after the Date
of Termination or otherwise.

 

  (e) In addition to all other amounts payable to you under Section 4, and to
the extent not payable by reason of the other provisions hereof, you shall be
entitled to receive all benefits which have accrued through the Date of
Termination and are payable to you under the Harleysville Retirement Savings
Plus Plan, the Supplemental Retirement Plan, the Pension Plan, the Non-Qualified
Deferred Compensation Plan, and any other plan or agreement relating to
retirement benefits.

 

  (f) Any payments due under Sections 4(c)(i)-(iii) of this Agreement shall be
paid on the thirtieth day following the Date of Termination. Notwithstanding the
foregoing, no payments shall be made under Sections 4(c)(i)-(iii) until the
first business day of the seventh calendar month following the month in which
the Date of Termination occurs (except that any base salary accrued and unpaid
as of the Date of Termination shall be paid in accordance with the Employer’s
standard payroll practice).

5. Successors’ Binding Agreement.

 

  (a) The Employer will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Employer, by agreement in form and substance
reasonably satisfactory to you, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Employer would be
required to perform it if no such succession had taken place. The Employer will
also obtain agreement from such successor that it will not exercise its
non-renewal option at any time within one year from the date of the Change in
Control. Failure of the Employer to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle you to compensation from the Employer in the same amount and on
the same terms as you would be entitled hereunder if you terminated your
employment for Good Reason, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in the Agreement, “Employer” shall mean
the Employer as hereinbefore defined and any successor to its business and/or
assets as aforesaid which executes and delivers the agreement provided for in
this Section 5 or which otherwise becomes bound by all the terms and provisions
of this Agreement by operation of law.

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Change in Control Agreement

 

  (b) This Agreement shall inure to the benefit of and be enforceable by your
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If you should die while any amounts would
still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee, or other designee or, if there
be no such designee, to your estate.

6. Notice. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Employer shall be directed to the attention of the
Corporate Secretary or to such other address as either party may have furnished
to the other in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.

7. Miscellaneous. No provisions of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
and signed by you and such officer as may be authorized by the Board. No waiver
by either party hereto at any time of any breach by the other party hereto of or
compliance with any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provision or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in the Agreement. It is intended that the benefits payable hereunder
shall be considered paid to you for your past services to the Employer and
continuing services from the date hereof. Any payment provided for hereunder
shall be paid net of any applicable withholding required under Federal, State
and local law. No termination of this Agreement shall terminate the Employer’s
obligation to complete the payments of all amounts and benefits to which you
became entitled, by operation of the provisions hereof, prior to expiration
hereof. This is not an employment agreement; you remain an employee at will; in
the event your employment is terminated prior to a Change in Control for any
reason or no reason, no amounts are payable to you by reason of this Agreement.
The validity, interpretation, construction and performance of this Agreement
shall be governed by the substantive law of the Commonwealth of Pennsylvania.

8. Validity. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity of enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.

9. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.

10. Arbitration. Any dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively by arbitration before a single
arbitrator in the Commonwealth of Pennsylvania in accordance with the Commercial
Rules of the American Arbitration Association then in effect. Notwithstanding
the pendancy of any such dispute or controversy, the Employer will continue to
pay your full compensation in effect when the notice

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Change in Control Agreement

 

giving rise to the dispute was given (including, but not limited to, base salary
and installments under the Program) and, to the extent permitted by law,
continue you as a participant in all compensation, benefits and insurance plans
in which you were participating when the notice giving rise to the dispute was
given, until the dispute is finally resolved in accordance with paragraph 3(e)
hereof. Amounts paid under the previous sentence shall be offset against, and
shall reduce, any other amounts due under this Agreement. If the Employer is
successful in the arbitration and the arbitrator makes a specific finding that
the controversy was commenced or maintained in Bad Faith, then all amounts paid
to you pursuant to Section 4(c)(vi) and the second sentence of this Section 10
shall be repaid by you to the Employer within thirty (30) days of the award.
Judgment may be entered on the arbitrator’s award in any court having
jurisdiction; provided, however, that you shall be entitled to seek specific
performance of your right to be paid until the Date of Termination during
pendancy of any dispute or controversy arising under or in connection with this
Agreement.

 

Very truly yours, HARLEYSVILLE GROUP, INC. By  

/s/ Michael L. Browne

  Michael L. Browne   Chief Executive Officer

 

/s/ Arnold F. Herenstein

EMPLOYEE’S SIGNATURE

AGREED TO THIS 11th DAY

OF JULY, 2011