Document:

EXHIBIT 4.16

                               GUARANTEE AGREEMENT

                                     Between

                             Harleysville Group Inc.
                                 (as Guarantor)

                                       And

                            Wilmington Trust Company
                             (as Guarantee Trustee)

                          dated as of ________________

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                                Table of Contents
                                                                                                               Page

                                    ARTICLE 1

                                   DEFINITIONS

   SECTION 1.1             Definitions............................................................................2

                                    ARTICLE 2

                               TRUST INDENTURE ACT

   SECTION 2.1             Trust Indenture Act; Application.......................................................4
   SECTION 2.2             List of Holders........................................................................5
   SECTION 2.3             Reports by the Guarantee Trustee.......................................................5
   SECTION 2.4             Periodic Reports to Guarantee Trustee..................................................5
   SECTION 2.5             Evidence of Compliance with Conditions Precedent.......................................5
   SECTION 2.6             Events of Default; Waiver..............................................................5
   SECTION 2.7             Event of Default; Notice...............................................................6
   SECTION 2.8             Conflicting Interests..................................................................6

                                    ARTICLE 3

               POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE

   SECTION 3.1             Powers and Duties of the Guarantee Trustee.............................................6
   SECTION 3.2             Certain Rights of Guarantee Trustee....................................................7
   SECTION 3.3             Not Responsible for Recitals or Issuance of Guarantee..................................9

                                    ARTICLE 4

                                GUARANTEE TRUSTEE

   SECTION 4.1             Guarantee Trustee; Eligibility.........................................................9
   SECTION 4.2             Appointment, Removal and Resignation of the Guarantee Trustee.........................10
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                                    ARTICLE 5

                                    GUARANTEE

   SECTION 5.1             Guarantee.............................................................................11
   SECTION 5.2             Waiver of Notice and Demand...........................................................11
   SECTION 5.3             Obligations Not Affected..............................................................11
   SECTION 5.4             Rights of Holders.....................................................................12
   SECTION 5.5             Guarantee of Payment..................................................................12
   SECTION 5.6             Subrogation...........................................................................13
   SECTION 5.7             Independent Obligations...............................................................13

                                    ARTICLE 6

                     LIMITATIONS OF TRANSACTIONS AND RANKING

   SECTION 6.1             Limitations of Tranactions............................................................13
   SECTION 6.2             Ranking...............................................................................14

                                    ARTICLE 7

                                   TERMINATION

   SECTION 7.1             Termination...........................................................................14

                                    ARTICLE 8

                                 INDEMNIFICATION

   SECTION 8.1             Exculpation...........................................................................14
   SECTION 8.2             Indemnification.......................................................................15

                                    ARTICLE 9

                                  MISCELLANEOUS

   SECTION 9.1             Successors and Assigns................................................................15
   SECTION 9.2             Amendments............................................................................16
   SECTION 9.3             Notices...............................................................................16
   SECTION 9.4             Benefit...............................................................................17
   SECTION 9.5             Interpretation........................................................................17
   SECTION 9.6             Governing Law.........................................................................17
   SECTION 9.7             Counterparts..........................................................................17

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                               GUARANTEE AGREEMENT

         This GUARANTEE AGREEMENT ("Guarantee Agreement"), dated as of
___________, is executed and delivered by Harleysville Group Inc., a Delaware
corporation (the "Guarantor"), and Wilmington Trust Company, as trustee (the
"Guarantee Trustee"), for the benefit of the Holders (as defined herein) from
time to time of the Preferred Securities (as defined herein) of Harleysville
Group Capital Trust __, a Delaware statutory trust (the "Issuer").

         WHEREAS, pursuant to an Amended and Restated Trust Agreement (the
"Trust Agreement"), dated as of _____________ among the Trustees named therein,
the Guarantor, as Depositor, and the Holders from time to time of undivided
beneficial interests in the assets of the Issuer, the Issuer is issuing ____ of
its ____% Preferred Securities, (liquidation preference $___ per preferred
security) (the "Preferred Securities") representing preferred undivided
beneficial interests in the assets of the Issuer and having the terms set forth
in the Trust Agreement;

         [WHEREAS, pursuant to the Trust Agreement, the Trust and the Guarantor,
as Depositor, have granted an Over-Allotment Option (as defined in the Trust
Agreement) to certain underwriters or initial purchasers, as the case may be,
and such Over-Allotment Option may be exercised on or within [30] days after the
initial Closing Date (as defined in the Trust Agreement) such that an additional
$_____ aggregate liquidation amount of Preferred Securities (the "Option
Preferred Securities") and an additional $_____ aggregate liquidation amount of
common securities (together with the Common Securities, the Preferred Securities
and the Option Preferred Securities, the "Securities") may be issued and sold
pursuant to the Trust Agreement on such initial or second Closing Date, as the
case may be; PROVIDED that if the Over-Allotment Option is not exercised by the
underwriters or the initial purchasers, as the case may be, then the defined
term the "Securities" shall mean only the Common Securities and the Preferred
Securities;]

         WHEREAS, the Preferred Securities will be issued by the Issuer and the
proceeds thereof, together with the proceeds from the issuance of the Issuer's
Common Securities (as defined below), will be used to purchase the Debentures
(as defined in the Trust Agreement) of the Guarantor which will be deposited
with Wilmington Trust Company, as Property Trustee under the Trust Agreement, as
trust assets;

         WHEREAS, as incentive for the Holders to purchase Preferred Securities,
the Guarantor desires irrevocably and unconditionally to agree, to the extent
set forth herein, to pay to the Holders of the Preferred Securities the
Guarantee Payments (as defined herein) and to make certain other payments on the
terms and conditions set forth herein; and

         NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for
the benefit of the Holders from time to time of the Preferred Securities.

<PAGE>

                                    ARTICLE 1

                                   DEFINITIONS

         SECTION 1.1  Definitions.

         As used in this Guarantee Agreement, the terms set forth below shall,
unless the context otherwise requires, have the following meanings. Capitalized
or otherwise defined terms used but not otherwise defined herein shall have the
meanings assigned to such terms in the Trust Agreement as in effect on the date
hereof.

         "Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person, provided, however, that an Affiliate of the
Guarantor shall not be deemed to include the Issuer. For the purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.

         "Business Day" means any day other than a Saturday or Sunday or a day
on which banking institutions in New York, New York or Wilmington, Delaware are
authorized by law, regulation or executive order to remain closed.

         "Common Securities" means the securities representing common beneficial
interests in the assets of the Issuer.

         "Debt" means, with respect to any Person, whether recourse is to all or
a portion of the assets of such Person and whether or not contingent, (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such Person; and (vi) every
obligation of the type referred to in clauses (i) through (v) of another Person
and all dividends of another Person the payment of which, in either case, such
Person has guaranteed or is responsible or liable, directly or indirectly, as
obligor or otherwise.

         "Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Guarantee Agreement; provided, however,
that, except with respect to a default in payment of any Guarantee Payments, the
Guarantor shall have received notice of default and shall not have cured such
default within 60 days after receipt of such notice.

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         "Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Preferred Securities, to the extent not
paid or made by or on behalf of the Issuer: (i) any accrued and unpaid
Distributions (as defined in the Trust Agreement) required to be paid on the
Preferred Securities, to the extent the Issuer shall have funds on hand
available therefor, (ii) the redemption price, including all accrued and unpaid
Distributions to the date of redemption (the "Redemption Price"), with respect
to the Preferred Securities called for redemption by the Issuer to the extent
the Issuer shall have funds on hand available therefor, and (iii) upon a
voluntary or involuntary termination, winding-up or liquidation of the Issuer,
unless the Preferred Securities are redeemed or Debentures are distributed to
the Holders, the lesser of (a) the aggregate of the liquidation preference of $[
] per Preferred Security plus all accrued and unpaid Distributions on the
Preferred Securities to the date of payment to the extent the Issuer shall have
funds on hand legally and immediately available to make such payment and (b) the
amount of assets of the Issuer remaining available for distribution to Holders
in liquidation of the Issuer (in either case, the "Liquidation Distribution").

         "Guarantee Trustee" means Wilmington Trust Company until a Successor
Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this Guarantee Agreement and thereafter means each such
Successor Guarantee Trustee.

         "Holder" means any holder, as registered on the books and records of
the Issuer, of any Preferred Securities; provided, however, that in determining
whether the holders of the requisite percentage of Preferred Securities have
given any request, notice, consent or waiver hereunder, "Holder" shall not
include the Guarantor, the Guarantee Trustee or any Affiliate of the Guarantor
or the Guarantee Trustee.

         "Indemnified Person" means the Guarantee Trustee, or any Affiliate,
officer, director, shareholder, member, partner, employee, representative,
nominee, custodian or agent thereof.

         "Indenture" means the Subordinated Indenture dated as of ____________,
between the Guarantor and J.P. Morgan Trust Company, National Association, as
Trustee, as supplemented or amended from time to time.

         "List of Holders" has the meaning specified in Section 2.2(a).

         "Majority in liquidation preference of the Preferred Securities" means,
except as provided by the Trust Indenture Act, a vote by the Holder(s), voting
separately as a class, of more than 50% of the liquidation preference of all
then outstanding Preferred Securities issued by the Issuer.

         "Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chairman and Chief Executive Officer, President or a
Vice President, and by the Treasurer, an Associate Treasurer, an Assistant
Treasurer, the Controller, the Secretary or an Assistant Secretary of such
Person, and delivered to the Guarantee Trustee. Any Officers' Certificate
delivered with respect to compliance with a condition or covenant provided for
in this Guarantee Agreement shall include:

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             (a) a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definitions relating thereto;

             (b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers' Certificate;

             (c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed  opinion as to whether or not such  covenant or condition
has been complied with; and

             (d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.

         "Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.

         "Responsible Officer" means, with respect to the Guarantee Trustee, any
Senior Vice President, any Vice President, any Assistant Vice President, the
Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, any
Senior Trust Officer, Trust Officer or Assistant Trust Officer or any other
officer of the Corporate Trust Trustee Administration of the Guarantee Trustee
customarily performing functions similar to those performed by any of the above
designated officers, and also means, with respect to a particular corporate
trust matter, any other officer to whom such matter is referred because of that
officer's knowledge of and familiarity with the particular subject.

         "Senior Debt" has the same meaning given to that term in the Indenture.

         "Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.1.

         "Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.

                                    ARTICLE 2

                               TRUST INDENTURE ACT

         SECTION 2.1  Trust Indenture Act; Application.

             (a) This  Guarantee  Agreement is subject to the  provisions of the
Trust Indenture Act that are required to be part of this Guarantee Agreement and
shall, to the extent applicable, be governed by such provisions.

             (b) If and to the  extent  that  any  provision  of this  Guarantee
Agreement limits, qualifies or conflicts with the duties imposed by Sections 310
to 317,  inclusive,  of the Trust  Indenture  Act,  such  imposed  duties  shall
control.

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         SECTION 2.2  List of Holders.

             (a) The Guarantee Trustee shall preserve in as current a form as is
reasonably  practicable  the most recent list  available  to it of the names and
addresses of all Holders  ("List of Holders")  and shall  otherwise  comply with
Section 312(a) of the Trust  Indenture Act. If the Guarantee  Trustee is not the
registrar,  the Guarantor shall furnish to the Guarantee  Trustee at least seven
Business Days before each Interest  Payment Date (as such term is defined in the
Indenture)  and at such other  times as the  Guarantee  Trustee  may  request in
writing  a List  of  Holders  as of  such  date  as the  Guarantee  Trustee  may
reasonably require, in each case to the extent such information is not identical
to a previously  supplied List of Holders or has not otherwise  been received by
the Guarantee Trustee in its capacity as such. The Guarantee Trustee may destroy
any  List of  Holders  previously  given  to it upon  receipt  of a new  List of
Holders.

             (b) The Guarantee  Trustee shall comply with its obligations  under
Sections 311(a), 311(b) and 312(b) of the Trust Indenture Act.

         SECTION 2.3  Reports by the Guarantee Trustee.

         On or before ___ of each year, commencing ___________ the Guarantee
Trustee shall provide to the Holders such reports as are required by Section 313
of the Trust Indenture Act, if any, in the form and in the manner provided by
Section 313 of the Trust Indenture Act. The Guarantee Trustee shall also comply
with the other requirements of Section 313 of the Trust Indenture Act.

         SECTION 2.4  Periodic Reports to Guarantee Trustee.

         The Guarantor shall provide to the Guarantee Trustee, the Securities
and Exchange Commission and the Holders such documents, reports and information,
if any, as required by Section 314 of the Trust Indenture Act and the compliance
certificate required by Section 314(a)(4) of the Trust Indenture Act in the
form, in the manner and at the times required by Section 314 of the Trust
Indenture Act.

         SECTION 2.5 Evidence of Compliance with Conditions Precedent.

         The Guarantor shall provide to the Guarantee Trustee such evidence of
compliance with such conditions precedent, if any, provided for in this
Guarantee Agreement that relate to any of the matters set forth in Section
314(c) of the Trust Indenture Act. Any certificate or opinion required to be
given by an officer pursuant to Section 314(c)(1) of the Trust Indenture Act may
be given in the form of an Officers' Certificate.

         SECTION 2.6  Events of Default; Waiver.

         The Holders of a Majority in liquidation preference of the Preferred
Securities may, by vote, on behalf of all of the Holders, waive any past Event
of Default and its consequences. Upon such waiver, any such Event of Default
shall cease to exist, and any Event of Default arising therefrom shall be deemed
to have been cured, for every purpose of this Guarantee Agreement, but no such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent therefrom.

<PAGE>

         SECTION 2.7  Event of Default; Notice.

(e) The Guarantee Trustee shall, within 90 days after the occurrence of an Event
of Default, transmit to the Holders, notices of all Events of Default actually
known to the Guarantee Trustee, unless such defaults have been cured before the
giving of such notice, provided, that, except in the case of a default in the
payment of a Guarantee Payment, the Guarantee Trustee shall be protected in
withholding such notice if and so long as the Board of Directors, the executive
committee or a trust committee of directors and/or Responsible Officers of the
Guarantee Trustee in good faith determines that the withholding of such notice
is in the interests of the Holders.

(f) The Guarantee Trustee shall only be deemed to have knowledge of any Event of
Default if the Guarantee Trustee shall have received written notice, or a
Responsible Officer charged with the administration of the Trust Agreement shall
have obtained actual notice, of such Event of Default.

         SECTION 2.8  Conflicting Interests.

         The Trust Agreement shall be deemed to be specifically described in
this Guarantee Agreement for the purposes of clause (i) of the first proviso
contained in Section 310(b) of the Trust Indenture Act.

                                    ARTICLE 3
               POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE

         SECTION 3.1 Powers and Duties of the Guarantee Trustee.

             (a) This Guarantee Agreement shall be held by the Guarantee Trustee
for the benefit of the Holders,  and the  Guarantee  Trustee  shall not transfer
this  Guarantee  Agreement to any Person except a Holder  exercising  his or her
rights  pursuant  to  Section  5.4(v) or to a  Successor  Guarantee  Trustee  on
acceptance by such  Successor  Guarantee  Trustee of its  appointment  to act as
Successor  Guarantee  Trustee.  The right,  title and interest of the  Guarantee
Trustee  shall  automatically  vest in any  Successor  Guarantee  Trustee,  upon
acceptance by such Successor Guarantee Trustee of its appointment hereunder, and
such  vesting  and  cessation  of  title  shall  be  effective  whether  or  not
conveyancing  documents  have  been  executed  and  delivered  pursuant  to  the
appointment of such Successor Guarantee Trustee.

             (b) If an Event of  Default  of which  the  Guarantee  Trustee  has
knowledge  as provided in Section  2.7(b) has occurred  and is  continuing,  the
Guarantee Trustee shall enforce this Guarantee  Agreement for the benefit of the
Holders.

             (c) The Guarantee  Trustee,  before the  occurrence of any Event of
Default  and after the curing or waiving of all Events of Default  that may have
occurred,  shall undertake to perform only such duties as are  specifically  set
forth in this Guarantee  Agreement,  and no implied covenants shall be read into
this  Guarantee  Agreement  against the Guarantee  Trustee.  In case an Event of
Default has occurred (that has not been cured or waived pursuant to Section 2.6)
of which the Guarantee Trustee has knowledge as provided in Section 2.7(b),  the
Guarantee  Trustee shall  exercise such of the rights and powers vested in it by
this  Guarantee  Agreement,  and use the same  degree  of care and  skill in its
exercise  thereof,  as  a  prudent  person  would  exercise  or  use  under  the
circumstances in the conduct of his or her own affairs.

             (d) No provision of this Guarantee  Agreement shall be construed to
relieve the Guarantee Trustee from liability for its own negligent  action,  its
own negligent failure to act or its own willful misconduct, except that:

                (i) prior to the  occurrence  of any Event of Default  and after
the curing or waiving of all such Events of Default that may have occurred:

                    (A) the  duties and  obligations  of the  Guarantee  Trustee
shall  be  determined  solely  by  the  express  provisions  of  this  Guarantee
Agreement,  and  the  Guarantee  Trustee  shall  not be  liable  except  for the
performance of such duties and obligations as are specifically set forth in this
Guarantee Agreement; and

                    (B) in the absence of bad faith on the part of the Guarantee
Trustee,  the Guarantee  Trustee may  conclusively  rely, as to the truth of the
statements  and the  correctness  of the opinions  expressed  therein,  upon any
certificates  or opinions  furnished to the Guarantee  Trustee and conforming to
the  requirements  of this  Guarantee  Agreement;  but in the  case of any  such
certificates or opinions that by any provision  hereof or of the Trust Indenture
Act are  specifically  required to be furnished to the  Guarantee  Trustee,  the
Guarantee Trustee shall be under a duty to examine the same to determine whether
or not they conform to the requirements of this Guarantee Agreement;

                (ii) the Guarantee  Trustee shall not be liable for any error of
judgment made in good faith by a Responsible  Officer of the Guarantee  Trustee,
unless  it  shall  be  proved  that  the  Guarantee  Trustee  was  negligent  in
ascertaining the pertinent facts upon which such judgment was made;

                (iii) the Guarantee  Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in  accordance  with
the  direction  of the  Holders  of not  less  than a  Majority  in  liquidation
preference of the Preferred Securities relating to the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee,  or
exercising any trust or power  conferred  upon the Guarantee  Trustee under this
Guarantee Agreement; and

                (iv) no provision of this Guarantee  Agreement shall require the
Guarantee  Trustee to expend or risk its own funds or otherwise  incur  personal
financial  liability in the  performance of any of its duties or in the exercise
of any of its rights or powers,  if the Guarantee  Trustee shall have reasonable
grounds for  believing  that the  repayment  of such funds or  liability  is not
reasonably assured to it under the terms of this Guarantee Agreement or adequate
indemnity against such risk or liability is not reasonably assured to it.

<PAGE>

         SECTION 3.2  Certain Rights of Guarantee Trustee.

             (a) Subject to the provisions of Section 3.1:

                (i) the Guarantee  Trustee  conclusively  may rely, and shall be
fully  protected  in acting or  refraining  from acting  upon,  any  resolution,
certificate, statement, instrument, opinion, report, notice, request, direction,
consent,  order, bond, debenture,  note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed,  sent or
presented by the proper party or parties;

                (ii) any direction or act of the Guarantor  contemplated by this
Guarantee Agreement shall be sufficiently  evidenced by an Officers' Certificate
unless otherwise prescribed herein;

                (iii)  whenever,   in  the   administration  of  this  Guarantee
Agreement, the Guarantee Trustee shall deem it desirable that a matter be proved
or  established  before  taking,  suffering  or  omitting  to  take  any  action
hereunder,  the Guarantee Trustee (unless other evidence is herein  specifically
prescribed) may, in the absence of bad faith on its part,  request and rely upon
an Officers'  Certificate which, upon receipt of such request from the Guarantee
Trustee, shall be promptly delivered by the Guarantor;

                (iv)  the  Guarantee  Trustee  shall  have no duty to see to any
recording,  filing  or  registration  of any  instrument  (or  any  rerecording,
refiling or registration thereof);

                (v) the Guarantee  Trustee may consult with legal  counsel,  and
the  written  advice or  opinion  of such legal  counsel  with  respect to legal
matters shall be full and complete  authorization  and  protection in respect of
any action taken,  suffered or omitted to be taken by it hereunder in good faith
and in accordance  with such advice or opinion;  such legal counsel may be legal
counsel  to  the  Guarantor  or  any of  its  Affiliates  and  may be one of its
employees;  the  Guarantee  Trustee  shall  have  the  right at any time to seek
instructions  concerning the administration of this Guarantee Agreement from any
court of competent jurisdiction;

                (vi) the  Guarantee  Trustee  shall be  under no  obligation  to
exercise any of the rights or powers vested in it by this Guarantee Agreement at
the request or direction of any Holder,  unless such Holder shall have  provided
to the Guarantee Trustee such adequate security and indemnity as would satisfy a
reasonable person in the position of the Guarantee  Trustee,  against the costs,
expenses  (including  attorneys'  fees  and  expenses  and the  expenses  of the
Guarantee Trust's agents,  nominees or custodians) and liabilities that might be
incurred by it in  complying  with such  request or  direction,  including  such
reasonable advances as may be requested by the Guarantee Trustee; provided, that
nothing  contained  in this  Section  3.2(a)(vi)  shall be taken to relieve  the
Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation
to exercise the rights and powers vested in it by this Guarantee Agreement;

                (vii)  the  Guarantee  Trustee  shall  not be  bound to make any
investigation  into the facts or matters stated in any resolution,  certificate,
statement,  instrument,  opinion, report, notice, request,  direction,  consent,
order, bond,  debenture,  note, other evidence of indebtedness or other paper or
document,  but the Guarantee Trustee,  in its discretion,  may make such further
inquiry or investigation into such facts or matters as it may see fit;

<PAGE>

                (viii) the  Guarantee  Trustee  may execute any of the trusts or
powers  hereunder  or perform  any duties  hereunder  either  directly  or by or
through its agents, nominees, custodians or attorneys, and the Guarantee Trustee
shall not be  responsible  for any  misconduct  or negligence on the part of any
such agent or attorney appointed with due care by it hereunder; and

                (ix) any action by the Guarantee Trustee or its agents hereunder
shall bind the Holders of the  Preferred  Securities,  and the  signature of the
Guarantee  Trustee or its agents  alone shall be  sufficient  and  effective  to
perform any such  action.  No third party shall be required to inquire as to the
authority of the Guarantee Trustee to so act or as to its compliance with any of
the terms and  provisions of this  Guarantee  Agreement,  both of which shall be
conclusively evidenced by the Guarantee Trustee or its agent taking such action.

                (x) whenever in the  administration of this Guarantee  Agreement
the  Guarantee  Trustee  shall deem it  desirable to receive  instructions  with
respect to enforcing  any remedy or right or taking any other action  hereunder,
the  Guarantee  Trustee  (A) may  request  instructions  from the  Holders  of a
Majority in liquidation preference of the Preferred Securities,  (B) may refrain
from  enforcing  such  remedy or right or taking  such other  action  until such
instructions are received, and (C) shall be protected in conclusively relying on
or acting in accordance with such instructions.

             (b) No provision  of this  Guarantee  Agreement  shall be deemed to
impose any duty or  obligation  on the  Guarantee  Trustee to perform any act or
acts or exercise any right, power, duty or obligation conferred or imposed on it
in any  jurisdiction  in which it shall be  illegal,  or in which the  Guarantee
Trustee shall be unqualified or incompetent in accordance  with  applicable law,
to perform any such act or acts or to exercise  any such right,  power,  duty or
obligation.  No permissive power or authority available to the Guarantee Trustee
shall  be  construed  to be a duty  to act in  accordance  with  such  power  or
authority.

         SECTION 3.3 Not Responsible for Recitals or Issuance of Guarantee.

         The recitals contained in this Guarantee Agreement shall be taken as
the statements of the Guarantor, and the Guarantee Trustee does not assume any
responsibility for their correctness. The Guarantee Trustee makes no
representation as to the validity or sufficiency of this Guarantee Agreement.

                                    ARTICLE 4
                                GUARANTEE TRUSTEE

         SECTION 4.1  Guarantee Trustee; Eligibility.

             (a) There shall at all times be a Guarantee Trustee which shall:

                (i) not be an Affiliate of the Guarantor; and

<PAGE>

                (ii) be a  corporation  organized and doing  business  under the
laws of the United States of America or any State or Territory thereof or of the
District of Columbia, or a corporation or Person permitted by the Securities and
Exchange Commission to act as an institutional trustee under the Trust Indenture
Act,  authorized  under such laws to exercise  corporate trust powers,  having a
combined capital and surplus of at least 50 million U.S. dollars  ($50,000,000),
and subject to  supervision  or  examination  by Federal,  State,  Territory  or
District  of  Columbia  authority.  If such  corporation  publishes  reports  of
condition  at least  annually,  pursuant  to law or to the  requirements  of the
supervising or examining  authority referred to above, then, for the purposes of
this Section  4.1(a)(ii) and to the extent permitted by the Trust Indenture Act,
the combined capital and surplus of such  corporation  shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published.

             (b) If at any time the Guarantee Trustee shall cease to be eligible
to so act under Section 4.1(a),  the Guarantee Trustee shall immediately  resign
in the manner and with the effect set out in Section 4.2(c).

             (c) If the Guarantee  Trustee has or shall acquire any "conflicting
interest"  within the meaning of Section 310(b) of the Trust  Indenture Act, the
Guarantee Trustee and Guarantor shall in all respects comply with the provisions
of Section 310(b) of the Trust Indenture Act.

         SECTION 4.2 Appointment, Removal and Resignation of the Guarantee
Trustee.

             (a)  Subject  to  Section  4.2(b),  the  Guarantee  Trustee  may be
appointed or removed  without cause at any time by the Guarantor  (except during
an Event of Default,  in which case the Guarantee Trustee may only be removed by
a Majority in liquidation preference of the Preferred Securities).

             (b) The  Guarantee  Trustee  shall not be removed until a Successor
Guarantee  Trustee has been  appointed  and has  accepted  such  appointment  by
written instrument executed by such Successor Guarantee Trustee and delivered to
the Guarantor.

             (c) The Guarantee  Trustee  appointed  hereunder  shall hold office
until a  Successor  Guarantee  Trustee  shall have been  appointed  or until its
removal or  resignation.  The Guarantee  Trustee may resign from office (without
need for prior or subsequent accounting) by an instrument in writing executed by
the Guarantee  Trustee and delivered to the Guarantor,  which  resignation shall
not take effect until a Successor  Guarantee  Trustee has been appointed and has
accepted such  appointment  by instrument in writing  executed by such Successor
Guarantee  Trustee and delivered to the  Guarantor  and the resigning  Guarantee
Trustee,  whereupon  the  resigning  Guarantee  Trustee  shall be  released  and
discharged of the trusts and other duties  imposed on such trustee in connection
herewith.

             (d) If no Successor Guarantee Trustee shall have been appointed and
accepted  appointment  as  provided  in this  Section  4.2  within 60 days after
delivery of an instrument of  resignation  or removal,  the resigning or removed
Guarantee  Trustee may petition,  at the expense of the Guarantor,  any court of
competent  jurisdiction for appointment of a Successor  Guarantee Trustee.  Such
court may  thereupon,  after  prescribing  such  notice,  if any, as it may deem
proper, appoint a Successor Guarantee Trustee.

             (e) No Guarantee  Trustee shall be liable for the acts or omissions
to act of any Successor Guarantee Trustee.

<PAGE>

             (f) Upon  termination  of this  Guarantee  Agreement  or removal or
resignation of the Guarantee Trustee pursuant to this Section 4.2, the Guarantor
shall  pay to the  Guarantee  Trustee  all  amounts  accrued  and  owing to such
Guarantee Trustee to the date of such termination, removal or resignation.

                                    ARTICLE 5
                                    GUARANTEE

         SECTION 5.1  Guarantee.

         The Guarantor irrevocably and unconditionally agrees to pay in full to
the Holders the Guarantee Payments (without duplication of amounts theretofore
paid by or on behalf of the Issuer or upon distribution of Debentures to Holders
in exchange for all of the Preferred Securities as provided in the Trust
Agreement), as and when due, regardless of any defense, right of set-off or
counterclaim that the Issuer may have or assert. The Guarantor's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Guarantor to the Holders or by causing the Issuer to pay such
amounts to the Holders.

         SECTION 5.2  Waiver of Notice and Demand.

         The Guarantor hereby waives notice of acceptance of the Guarantee
Agreement and of any liability to which it applies or may apply, presentment,
demand for payment, any right to require a proceeding first against the
Guarantee Trustee, Issuer or any other Person before proceeding against the
Guarantor, protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.

         SECTION 5.3  Obligations Not Affected.

         The obligations, covenants, agreements and duties of the Guarantor
under this Guarantee Agreement shall in no way be affected or impaired by reason
of the happening from time to time of any of the following:

             (a) the release or waiver, by operation of law or otherwise, of the
performance  or  observance  by the Issuer of any express or implied  agreement,
covenant, term or condition relating to the Preferred Securities to be performed
or observed by the Issuer;

             (b) the  extension  of time for the payment by the Issuer of all or
any portion of the Distributions,  Redemption Price, Liquidation Distribution or
any  other  sums  payable  under the terms of the  Preferred  Securities  or the
extension of time for the performance of any other obligation under, arising out
of, or in connection with, the Preferred  Securities (other than an extension of
time for payment of Distributions, Redemption Price, Liquidation Distribution or
other sum payable that results from the extension of any interest payment period
on the Debentures as so provided in the Indenture);

             (c) any failure,  omission,  delay or lack of diligence on the part
of the Holders to enforce,  assert or exercise  any right,  privilege,  power or
remedy  conferred  on the  Holders  pursuant  to  the  terms  of  the  Preferred
Securities,  or any  action on the part of the  Issuer  granting  indulgence  or
extension of any kind;

<PAGE>

             (d) the voluntary or involuntary liquidation,  dissolution, sale of
any collateral, receivership, insolvency, bankruptcy, assignment for the benefit
of creditors,  reorganization,  arrangement, composition or readjustment of debt
of, or other similar proceedings  affecting,  the Issuer or any of the assets of
the Issuer;

             (e) any  invalidity  of, or defect or deficiency  in, the Preferred
Securities;

             (f) the  settlement  or compromise  of any  obligation  guaranteed
hereby or hereby incurred; or

             (g)  to the  extent  permitted  by  law,  any  other  circumstance
whatsoever  that might  otherwise  constitute a legal or equitable  discharge or
defense  of a  guarantor,  it being  the  intent  of this  Section  5.3 that the
obligations of the Guarantor hereunder shall be absolute and unconditional under
any and all circumstances.

                  There shall be no obligation of the Holders to give notice to,
or obtain the consent of, the Guarantor with respect to the happening of any of
the foregoing.

         SECTION 5.4  Rights of Holders.

         The Guarantor expressly acknowledges that: (i) this Guarantee Agreement
will be deposited with the Guarantee Trustee to be held for the benefit of the
Holders; (ii) the Guarantee Trustee has the right to enforce this Guarantee
Agreement on behalf of the Holders; (iii) the Holders of a Majority in
liquidation preference of the Preferred Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Guarantee Trustee in respect of this Guarantee Agreement or to direct the
exercise of any trust or power conferred upon the Guarantee Trustee under this
Guarantee Agreement; (iv) any Holder may institute a legal proceeding directly
against the Guarantor to enforce the Holder's rights under this Guarantee
Agreement, without first instituting a legal proceeding against, or requesting
or directing that action be taken by, the Guarantee Trustee, the Issuer or any
other Person; (v) if the Guarantee Trustee fails to enforce its rights under
this Guarantee Agreement, any Holder may directly institute a legal proceeding
against the Guarantor to enforce the Guarantee Trustee's rights under this
Guarantee Agreement, without first instituting a legal proceeding against the
Issuer, the Guarantee Trustee or any other person or entity; and (vi) the
Holders have those rights set forth in Section 316(b) of the Trust Indenture
Act.

         SECTION 5.5  Guarantee of Payment.

         This Guarantee Agreement creates a guarantee of payment and not of
collection. This Guarantee Agreement will not be discharged except by payment of
the Guarantee Payments in full (without duplication of amounts theretofore paid
by the Issuer or upon distribution of Debentures to Holders in exchange for all
of the Preferred Securities as provided in the Trust Agreement).

<PAGE>

         SECTION 5.6  Subrogation.

         The Guarantor shall be subrogated to all (if any) rights of the Holders
against the Issuer in respect of any amounts paid to the Holders by the
Guarantor under this Guarantee Agreement; provided, however, that the Guarantor
shall not (except to the extent required by mandatory provisions of law) be
entitled to enforce or exercise any right that it may acquire by way of
subrogation or any indemnity, reimbursement or other agreement, in all cases as
a result of payment under this Guarantee Agreement, if, at the time of any such
payment, any amounts are due and unpaid under this Guarantee Agreement. If any
amount shall be paid to the Guarantor in violation of the preceding sentence,
the Guarantor agrees to hold such amount in trust for the Holders and to pay
over such amount to the Holders.

         SECTION 5.7  Independent Obligations.

         The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Preferred
Securities and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Guarantee
Agreement notwithstanding the occurrence of any event referred to in subsections
(a) through (g), inclusive, of Section 5.3 hereof.

                                    ARTICLE 6
                     LIMITATION OF TRANSACTIONS AND RANKING

         SECTION 6.1  Limitation of Transactions.

         So long as any Preferred Securities remain outstanding, if (a) there
shall have occurred an Event of Default hereunder, (b) there shall have occurred
an Event of Default (as defined under the Indenture) or (c) the Guarantor has
exercised its option to defer interest payments on the Debentures by extending
the interest payment period as provided in the Indenture or any supplemental
indenture to the Indenture, and such period or extension thereof shall be
continuing, then (i) the Guarantor shall not declare or pay any dividend on,
make any distribution with respect to, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of its capital stock, other than (A)
dividends or distributions in shares of, or options, warrants or rights to
subscribe for or purchase shares of, the Guarantor's common stock; (B) any
declaration of a dividend in connection with any stockholders' rights plan that
we may adopt, or the issuance of stock under any such plan in the future, or the
redemption or repurchase of any such rights pursuant thereto; (C) as a result of
a reclassification of the Guarantor's capital stock or the exchange or
conversion of one class or series of the Guarantor's capital stock for another
class or series of the Guarantor's capital stock or (D) the purchase of
fractional interests in shares of the Guarantor's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged, and (E) purchases or acquisitions of shares of
Guarantor's common stock in connection with the satisfaction by the Guarantor of
its obligations under any benefit plans for the Guarantor's directors, officers
or employees or any other contractual obligation of the Guarantor (other than a
contractual obligation ranking equally with or junior to the Debentures), (ii)
the Guarantor shall not make any payment of interests, principal or premium, if
any, on or repay, repurchase or redeem any debt securities issued by the
Guarantor that rank equally with or junior to the Debentures and (iii) the
Guarantor shall not make any guarantee payments with respect to any guarantee by
the Guarantor of any securities of any of its subsidiaries if such guarantee
ranks junior to the Debentures in right of payment.

<PAGE>

         SECTION 6.2  Ranking.

         This Guarantee Agreement will constitute an unsecured obligation of the
Guarantor and will rank (i) subordinate and junior in right of payment to all
other liabilities of the Guarantor, including the Debentures, except those
obligations or liabilities made equal or subordinate by their terms, (ii)
equally with the most senior preferred or preference stock now or hereafter
issued by the Guarantor and with any guarantee now or hereafter entered into by
the Guarantor in respect of any preferred or preference stock of any Affiliate
of the Guarantor, and (iii) senior to the Guarantor's common stock.

                                    ARTICLE 7
                                   TERMINATION

         SECTION 7.1  Termination.

         This Guarantee Agreement shall terminate and be of no further force and
effect upon (i) full payment of the Redemption Price of all Preferred
Securities, (ii) the distribution of Debentures to the Holders in exchange for
all of the Preferred Securities or (iii) full payment of the amounts payable in
accordance with the Trust Agreement upon liquidation of the Issuer.
Notwithstanding the foregoing, this Guarantee Agreement will continue to be
effective or will be reinstated, as the case may be, if at any time any Holder
must restore payment of any sums paid with respect to Preferred Securities or
this Guarantee Agreement.

                                    ARTICLE 8
                                 INDEMNIFICATION

         SECTION 8.1 Exculpation.

                  (a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any Holder or beneficial
owner of Preferred Securities for any loss, damage or claim incurred by reason
of any act or omission performed or omitted by such Indemnified Person in good
faith in accordance with this Guarantee Agreement and in a manner that such
Indemnified Person reasonably believed to be within the scope of the authority
conferred on such Indemnified Person by this Guarantee Agreement or by law,
except that an Indemnified Person shall be liable for any such loss, damage or
claim incurred by reason of such Indemnified Person's negligence or willful
misconduct with respect to such acts or omissions.

                  (b) An Indemnified Person shall be fully protected in relying
in good faith upon the records of the Guarantor and upon such information,
opinions, reports or statements presented to the Guarantor by any Person as to
matters the Indemnified Person reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Guarantor, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits, losses, or any other facts pertinent to the existence and
amount of assets from which distributions to Holders might properly be paid.

<PAGE>

SECTION 8.2 Indemnification.

                  (a) To the fullest extent permitted by applicable law, the
Guarantor shall indemnify and hold harmless each Indemnified Person from and
against any loss, damage or claim incurred by such Indemnified Person by reason
of any act or omission performed or omitted by such Indemnified Person in good
faith in accordance with this Guarantee Agreement and in a manner such
Indemnified Person reasonably believed to be within the scope of authority
conferred on such Indemnified Person by this Guarantee Agreement, except that no
Indemnified Person shall be entitled to be indemnified in respect of any loss,
damage or claim incurred by such Indemnified Person by reason of such
Indemnified Person's negligence or willful misconduct with respect to such acts
or omissions.

                  (b) To the fullest extent permitted by applicable law,
reasonable expenses (including legal fees) incurred by an Indemnified Person in
defending any claim, demand, action, suit or proceeding shall, from time to
time, be advanced by the Guarantor prior to the final disposition of such claim,
demand, action, suit or proceeding upon receipt by the Guarantor of an
undertaking by or on behalf of the Indemnified Person to repay such amount if it
shall be determined that the Indemnified Person is not entitled to be
indemnified as authorized in Section 8.2(a).

                  (c) The  obligation  to indemnify as set forth in this Section
8.2 shall survive the termination of the this Guarantee Agreement.

                  (d) The Guarantor agrees to pay to the Guarantee Trustee
compensation for its services as shall be mutually agreed upon by the Guarantor
and the Guarantee Trustee. The Guarantor shall reimburse the Guarantee Trustee
upon request for all reasonable out-of-pocket expenses incurred by it, including
the reasonable compensation and expenses of the Guarantee Trustee's agents and
counsel, except any expense as may be attributable to the negligence of the
Guarantee Trustee.

                                    ARTICLE 9
                                  MISCELLANEOUS

         SECTION 9.1  Successors and Assigns.

         All guarantees and agreements contained in this Guarantee Agreement
shall bind the successors, assigns, receivers, trustees and representatives of
the Guarantor and shall inure to the benefit of the Holders of the Preferred
Securities then outstanding. Except in connection with a consolidation, merger,
conveyance, transfer or sale or lease involving the Guarantor that is permitted
under the Indenture and pursuant to which the assignee agrees in writing to
perform the Guarantor's obligations hereunder, the Guarantor shall not assign
its obligations hereunder.

<PAGE>

         SECTION 9.2  Amendments.

         Except with respect to any changes that do not adversely affect the
rights of the Holders in any material respect (in which case no consent of the
Holders will be required), this Guarantee Agreement may only be amended with the
prior approval of the Holders of not less than a Majority in liquidation
preference of the Preferred Securities. The provisions of Article 6 of the Trust
Agreement concerning meetings of the Holders shall apply to the giving of such
approval. No amendment hereof that affects materially and adversely the
Guarantee Trustee's rights, duties or immunities hereunder shall be effective
unless such amendment is executed by the Guarantee Trustee in its reasonable
discretion.

         SECTION 9.3  Notices.

         Any notice, request or other communication required or permitted to be
given to the Guarantor, Issuer or Guarantee Trustee hereunder shall be in
writing, duly signed by the party giving such notice, and delivered in person,
telecopied, mailed by first class mail (registered or certified, return receipt
requested) or overnight air courier guaranteeing next day delivery as follows:

                  (a) if given to the Guarantor, to the address set forth below
or such  other  address as the  Guarantor  may give  notice of to the  Guarantee
Trustee and Holders:

                           Harleysville Group Inc.
                           355 Maple Avenue
                           Harleysville, PA  19438-2297
                           Facsimile No.: (215) 256-5601
                           Attention:  General Counsel

                  (b) if given to the Issuer, in care of the Guarantee Trustee,
to the Issuer's  (and the Guarantee  Trustee's)  address set forth below or such
other address as the  Guarantee  Trustee on behalf of the Issuer may give notice
of to the Holders:

                           Harleysville Group Capital Trust __
                           c/o Harleysville Group Inc.
                           355 Maple Avenue
                           Harleysville, PA  19438-2297
                           Facsimile No.: (215) 256-5601
                           Attention:  General Counsel

                  (c) if  given  to the  Guarantee  Trustee,  to the  Guarantee
Trustee's address set forth below or such other address as the Guarantee Trustee
may give notice of to the Guarantor and the Holders:

                           Wilmington Trust Company
                           1100 North Market Street
                           Wilmington, DE   19890

<PAGE>

         All notices and communications (other than those sent to Holders) shall
be deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when receipt is acknowledged or confirmed, if telecopied;
and the next Business Day after timely delivery to the courier, if sent by
overnight courier guaranteeing next day delivery.

         Any notice or communication to a Holder shall be mailed by first class
mail or by overnight carrier guaranteeing next day delivery to the address set
forth on the books and records of the Issuer and shall be deemed to have been
duly given: five Business Days after being deposited in the mail, postage
prepaid, if mailed; and the next Business Day after timely delivery to the
courier, if sent by overnight courier guaranteeing next day delivery.

         If a notice or communication is sent in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.

         SECTION 9.4  Benefit.

         This Guarantee Agreement is solely for the benefit of the Holders and,
subject to Section 3.1(a), is not separately transferable from the Preferred
Securities.

         SECTION 9.5  Interpretation.

         In this Guarantee Agreement, unless the context otherwise requires:

                  (a)  capitalized  terms used in this Guarantee  Agreement but
not defined in the preamble hereto have the respective meanings assigned to them
in Section 1.1;

                  (b) a term defined  anywhere in this Guarantee  Agreement has
the same meaning throughout;

                  (c) all  references  to "the  Guarantee  Agreement"  or "this
Guarantee  Agreement" are to this Guarantee Agreement as modified,  supplemented
or amended from time to time;

                  (d) all  references in this  Guarantee  Agreement to Articles
and Sections are to Articles and  Sections of this  Guarantee  Agreement  unless
otherwise specified;

                  (e) a term  defined in the Trust  Indenture  Act has the same
meaning when used in this Guarantee  Agreement unless otherwise  defined in this
Guarantee Agreement or unless the context otherwise requires;

                  (f) a reference to the singular  includes the plural and vice
versa; and

                  (g) the  masculine,  feminine or neuter  genders  used herein
shall include the masculine, feminine and neuter genders.

<PAGE>

         SECTION 9.6  GOVERNING LAW.
                      -------------

         THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA
WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF.

         SECTION 9.7  Counterparts.

         This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.

<PAGE>

         THIS GUARANTEE AGREEMENT is executed as of the day and year first above
written.

                            Harleysville Group Inc.,
                            as Guarantor

                            By:
                               ---------------------------------------------
                               Name:
                               Title:

                            Wilmington Trust Company, as Guarantee
                            Trustee

                            By:
                               ---------------------------------------------
                               Name:
                               Title:

<PAGE>

CROSS-REFERENCE TABLE*

         Section of                                                   Section of
         Trust Indenture Act                                           Guarantee
         of 1939, as amended                                           Agreement
         -------------------                                           ---------
         310(a).........................................      4.1(a)
         310(b).........................................      2.8, 4.1(c)
         310(c).........................................      Inapplicable
         311(a).........................................       2.2(b)
         311(b).........................................      2.2(b)
         311(c).........................................      Inapplicable
         312(a).........................................      2.2(a)
         312(b).........................................      2.2(b)
         313............................................      2.3
         314(a).........................................      2.4
         314(b).........................................      Inapplicable
         314(c).........................................      2.5
         314(d).........................................      Inapplicable
         314(e).........................................      1.1, 2.5, 3.2
         314(f).........................................      2.1, 3.2
         315(a).........................................      3.1(d)
         315(b).........................................      2.7
         315(c).........................................      3.1
         315(d).........................................      3.1(d)
         315(e).........................................      Inapplicable
         316(a).........................................      1.1, 2.6, 5.4(iii)
         316(b).........................................      5.4
         316(c).........................................      Inapplicable
         317(a).........................................      5.4
         317(b).........................................      Inapplicable
         318(a).........................................      2.1(b)
         318(b).........................................      2.1
         318(c).........................................      2.1(a)

--------
* This Cross-Reference Table does not constitute part of the Guarantee Agreement
  and shall not affect the interpretation of any of its terms or provisions.<PAGE>

EX 4.0

SECURED PROMISSORY NOTE

U.S. ($1,120,000)               Beverly Hills, California
                                July 16, 2002

FOR VALUE RECEIVED, NUWAY ENERGY INC, a Delaware corporation (hereinafter
referred to as "Obligor"), promises to pay to {Summitt Ventures Inc}
(hereinafter referred to as "Holder"), the principal sum of One Million One
Hundred and Twenty Thousand Dollars ($1,120,000)}, together with interest, which
shall accrue at a rate of 10% per annum from the date hereof, on the principal
sum of this Note from time to time outstanding. This Note shall be payable on or
before the expiration of one year from the date of execution of this note. The
note shall pay interest monthly with the principle all due at the end of one
year, June 15, 2003 (the "Maturity Date"), on which date all accrued and unpaid
interest and the entire balance of the principal then outstanding shall be due
and payable. It is soley within the discretion of Holder to receive all or
partial payments during the course of the note period. Any payments received
will be credited against the outstanding balance which is due.

         All payments on this Note shall be made in lawful money of the United
States of America, and all notices by Obligor to the Holder shall be sent by
first class mail and if so sent shall be deemed received by Holder seventy-two
(72) hours after being deposited in the U.S. mails provided that it is mailed by
certified mail, return receipt requested, and postage prepaid and properly
addressed to Holder, or at such other place, in the United States, as the Holder
shall designate in writing to the Obligor from time to time hereafter.
Furthermore, It is agreed by the parties to this note, that in the event that
Holder wishes to offset any or all of the obligations which are attached to this
note to other third parties, entities which are owned or controlled by Holder,
or any law firm for collection, that this note in whole or in part is fully
assignable without the consent of the Obligor. In addition, in the event that
sums are not available to fully pay the interest, or note in full partial
payments will be accepted. Any partial payments will be offset against the
balance due on the note.

         This Note is secured by all of the assets of the obligor (the "Security
Agreement"), representing a first priority security interest (the "Security
Interest") in the assets of the obligor between Obligor and Holder dated as of
the date hereof (collectively, the Security Agreement are referred to herein as
the "SECURITY DOCUMENTS").

PARI PASSU STATUS. The payment of principal of and interest on this Note shall
rank pari passu with the other Secured Notes. All payment on this Note and the
other Secured Notes shall be made on a pro rata basis as applied to the
principal and interest under this Note and the other Secured Notes and no such
note shall be paid in full at any time prior to the payment in full of this Note
or any of the other Secured Notes.

 NATURE OF NOTE; USURY. The Obligor acknowledges that this Note evidences
purchase money indebtedness arising out of a business transaction. In no event
and upon no contingency shall Obligor be required to pay interest on this Note
in excess of the maximum rate allowed by law. It is the intention of the parties
hereto to conform strictly to the usury laws now in force that would apply to
this Note. Accordingly, notwithstanding anything to the contrary in this Note or
any other agreement entered into in connection herewith, it is agreed that all
charges that constitute interest that are contracted for, chargeable or
receivable under this Note or otherwise in connection with this transaction
shall, under no circumstances, exceed the maximum amount of interest permitted
by law, and any excess shall be deemed a mistake in calculation and canceled
automatically and, if theretofore paid, shall be, at the Holder's election,
either refunded to Obligor or credited on the unpaid principal of this Note.

PREPAYMENTS AND APPLICATION OF PAYMENTS. This Note July be prepaid in whole or
in part without notice, premium or penalty. Partial prepayments shall be applied
to the installment payments of principal and interest hereunder in the
chronological order in which they come due until this Note is paid in full. All
monthly installments of principal and interest paid hereunder, and any
prepayments made hereunder, shall be credited first to accrued and unpaid
interest payable on the principal balance of this Note from time to time
outstanding and then to the reduction of principal.

<PAGE>

EVENTS OF DEFAULT. Upon the occurrence and during the continuance of an Event of
Default (as hereinafter defined), the Holders of this Note shall be entitled, by
written notice to the Obligor, to declare this Note to be, and upon such
declaration this Note shall be and become immediately due and payable, in
addition to any other rights or remedies they July have under the laws of the
State of Nevada. The occurrence of any of the following events shall constitute
an "Event of Default":

                  (a) PAYMENT OF NOTE. Obligor shall fail to pay any principal
of or interest owing on this Note within ten (10) days after the due date of
such payment.

                  (b) BREACH OF COVENANTS. Obligor shall fail or neglect to
perform, keep or observe any covenant or obligation of Obligor contained in this
Note (other than failure to pay principal of or interest on this Note which is
dealt with specifically in Paragraph 5(a) above), the Security Documents, the
Stock Purchase Agreement or the Loan Agreement and the breach of any such
covenant or obligation is not cured within forty-five (45) days after Obligor's
receipt of notice of such breach from Holder.

                  (c) INSOLVENCY, ETC. Obligor shall suffer the appointment of a
receiver, trustee, custodian or similar fiduciary for all or substantially all
of its assets, or any petition for an order for relief shall be filed by or
against Obligor under any applicable bankruptcy law, and such appointment or
proceeding, as the case July be, is not controverted within thirty (30) days, or
is not dismissed within sixty (60) days, after such appointment or the
commencement of such proceeding (as the case July be).

COSTS AND EXPENSES OF COLLECTION. If this Note is collected by or through an
attorney at law, Obligor shall pay all of the Holder's reasonably incurred costs
of collection, including, without limitation, Holder's reasonable attorneys'
fees.

WAIVERS BY OBLIGOR. Except as otherwise provided elsewhere in this Note, Obligor
waives presentment for payment, protest, notice of dishonor and protest and
consents to any extensions of time with respect to any payment due under this
Note, and to the addition or release of any party. No waiver of any payment
under this Note shall operate as a waiver of any other payment.

EFFECT OF DELAY OR WAIVER BY HOLDER. No delay or failure of the Holder of this
Note in the exercise of any rights or remedy provided for hereunder shall be
deemed a waiver of any other right or remedy which the Holder July have.

NOTICES TO OBLIGOR. Any notice or demand to the Obligor shall be by First Class
Mail, addressed to Obligor, Med Wireless Inc Attention: President, or such other
address as July be designated in writing by Obligor to the Holder and shall be
deemed to have been received seventy-two (72) hours after its deposit,
postage-prepaid, with the United States Postal Service.

     GOVERNING LAW/HEADINGS. Obligor and Holder have agreed that,
notwithstanding any laws to the contrary of any jurisdiction in which this Note
is sought to be construed or enforced, this Note shall be governed by, construed
according to and enforced under the internal laws of the state of Nevada,
without regard to its choice of laws, to the same extent as if this Note had
been made, the obligations of the Obligor hereunder were to be performed, and
Holder received the payments due it hereunder, entirely in the state of Nevada.
The Paragraph headings in this Note are for convenience of reference only and
shall not be considered in, nor shall they affect, the interpretation or
application of any of the provisions of this Note.

<PAGE>

OBLIGOR:

NUWAY ENERGY, INC.
a Delaware Corporation

/s/ Dennis Calvert
-------------------------
By:

Accepted and Agreed

<PAGE>

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