Document:

HGI Equity Incentive Plan approved by shareholders 4/26/06

    

    HARLEYSVILLE
      GROUP INC.

    EQUITY
      INCENTIVE PLAN 

    APPROVED
      BY SHAREHOLDERS APRIL 26, 2006

     

    
 

    

    I.     INTRODUCTION

    

    A.     PURPOSE
      OF THE PLAN:
      Harleysville Group Inc. (the "Company') has established the Plan to further
      the
      growth, development and success of the Company by providing additional
      incentives to those officers and key employees who are responsible for the
      management of the Company's business affairs which enable them to participate
      directly in the growth of the capital stock of the Company. The Company intends
      that the Plan will facilitate securing, retaining, and motivating management
      employees of high caliber and potential. It is intended that the amended and
      restated Plan shall satisfy the requirements for transactions pursuant hereto
      to
      be exempt from Section 16(b) of the Securities Exchange Act of 1934 ("Exchange
      Act") and for compensation paid hereunder to be fully deductible to the Company
      to the extent permitted under Section 162(m) of the Internal Revenue Code of
      1986.

    

    B.     DEFINITIONS:
      When
      used in the Plan, the following terms shall have the meanings set forth
      below:

    

    
      	 	 	
              1.

            	
              "Award(s)"
                shall mean Incentive Stock Options, Non-Qualified Stock Options,
                stock
                appreciation rights and restricted stock made under the
                Plan.

            

    

    

    
      	 	 	
              2.
                

            	
              "Change
                in Control" 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 Company Voting Securities (as herein
                defined)
                is acquired by any individual, entity or group (a "Person"), other
                than
                the Parent, the Company, any trustee or other fiduciary holding securities
                under any employee benefit plan of the Company or an affiliate thereof,
                or
                any corporation owned, directly or indirectly, by the stockholders
                of the
                Company in substantially the same proportions as their ownership
                of stock
                of the Company (for purposes of this Plan, "Company Voting Securities"
                shall mean the then outstanding voting securities of the Company
                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 B2; (ii) any acquisition
                of the Company 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 Company 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 Company
                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
                Company 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 Company
      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
      Company or the Parent, as the case may be; provided,
      however, that (x) any individual becoming a director of the Company 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
      Company Voting Securities; or

    

    (c)
       upon
      consummation by the Company of a reorganization, merger or consolidation or
      sale
      or other disposition of all or substantially all of the assets of the Company
      or
      the acquisition of assets or stock of another entity (a "Business Combination"),
      unless, in any such 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 Company 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 Company Voting Securities outstanding immediately prior to such
      Business Combination (or, if applicable, is represented by shares into which
      such Company 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 Company Voting Securities, and (ii) no Person
      (excluding any employee benefit plan (or related trust) of the Company 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 Company 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 Company 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 Company Voting Securities; or

    

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

    

    (f)
       any
      other
      event shall occur that would be required to be reported by the Company 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
      Company or Parent has entered into a management agreement or similar arrangement
      pursuant to which an entity other than the Company or the Parent or the Boards
      of Directors or the executive officers and management of the Company or the
      Parent has the power to direct or cause the direction of the management and
      policies of the Company 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 Company Voting Securities.

    

     

    
      	 	 	
              3.

            	
              "Company"
                shall mean Harleysville Group Inc., a Delaware corporation, and any
                successor in a reorganization or similar
                transaction.

            

    

    

    
      	 	 	
              4.

            	
              "Board"
                or "Board of Directors" shall mean the Board of Directors of the
                Company.

            

    

    

    
      	 	 	
              5.

            	
              "Code"
                shall mean the Internal Revenue Code of 1986, as
                amended.

            

    

    

    
      	 	 	
              6.

            	
              "Committee"
                shall mean the Compensation & Personnel Development Committee of the
                Board of Directors of Harleysville Group Inc. The Committee shall
                consist
                of three or more directors selected by the Board of Directors each
                of
                which whom:

            

    

     

    
      	 	 	 	
              (i)

            	
              is
                not a current employee of the Company, the Parent or a subsidiary
                of the
                Company; 

            

    

    

    
      	 	 	 	
              (ii)

            	
              is
                not a former employee of the Company who receives compensation for
                prior
                services (other than benefits under a tax-qualified retirement plan)
                during the taxable year; 

            

    

    

    
      	 	 	 	
              (iii)

            	
              has
                not been an officer of the Company and is not currently an officer
                of the
                Company, the Parent or subsidiary of the Company;
                

            

    

    

    
      	 	 	 	
              (iv)

            	
              does
                not receive remuneration from the Company, the Parent or a subsidiary
                of
                the Company either directly or indirectly for services rendered in
                any
                capacity other than as a director, except for an amount that is de
                minimis
                remuneration within the meaning of Treasury Regulation §1.162.27(e)(iii)
                and does not exceed the dollar amount for which disclosure would
                be
                required pursuant to Item 404 (a) of Regulation S-K;
                

            

    

    

    
      	 	 	 	
              (v)

            	
              does
                not possess an interest in any other transaction for which disclosure
                would be required pursuant to Item 404(a) of Regulation S-K; and
                

            

    

    

    
      	 	 	 	
              (vi)

            	
              ise
                not engaged in a business relationship for which disclosure would
                be
                required pursuant to Item 404(b) of Regulation
                S-K.

            

    

    

    
      	 	 	
              7.

            	
              "Common
                Stock" shall mean the common stock of the Company, par value of $1.00
                per
                share, and may be either stock previously authorized but unissued,
                or
                stock reacquired by the Company.

            

    

    

    
      	 	 	
              8.

            	
              "Director"
                shall mean a member of the Board of Directors of the
                Company.

            

    

    

    
      	 	 	
              9.

            	
              "Disability"
                shall mean the inability of a Participant to perform the services
                normally
                rendered due to any physical or mental impairment that can be expected
                to
                be of either permanent or indefinite duration, as determined by the
                Committee on the basis of appropriate medical evidence, and that
                results
                in the Participant's cessation of active employment with the
                Company.

            

    

    

    
      	 	 	
              10.

            	
              “Early
                Retirement shall mean cessation of employment with the Company after
                attaining the age of 55 and completing at least ten years of continuous
                service with the Company or attaining the age of 62 and completing
                at
                least five years of continuous service with the
                Company.

            

    

    

    
      	 	 	
              11.

            	
              "Exchange
                Act" shall mean the Securities Exchange Act of 1934, as
                amended.

            

    

    

    
      	 	 	
              12.

            	
              "Fair
                Market Value" shall mean the closing price of Common Stock, as reported
                by
                such responsible reporting service as the Committee may select, or
                if
                there were no transactions in the Common Stock on such day, then
                on the
                last preceding day on which a transaction in the Common Stock took
                place.
                The foregoing notwithstanding, the Committee may determine the Fair
                Market
                Value in such other manner as it may deem more appropriate for Plan
                purposes or as is required by applicable laws or
                regulations.

            

    

    

    
      	 	 	
              13.

            	
              "Incentive
                Stock Option" or "ISO" shall mean a right to purchase the Company's
                Common
                Stock which is intended to comply with the terms and conditions for
                an
                incentive stock option, set forth in Section 422 of the Code, or
                such
                other sections of the Code as may be in effect from time to
                time.

            

    

    

    
      	 	 	
              14.

            	
              "Non-Qualified
                Stock Option" or "NQSO" shall mean a right to purchase the Company's
                Common Stock which is not intended to comply with the terms and conditions
                for an incentive stock option, as set forth in Section 422 of the
                Code, or
                such other sections of the Code as may be in effect from time to
                time.

            

    

    

    
      	 	 	
              15.

            	
              “Normal
                Retirement” shall mean cessation of employment with the Company after
                attaining the age of 65 and achieving at least five years of continuous
                service with the Company.

            

    

    

    
      	 	 	
              16.

            	
              "Parent"
                shall mean Harleysville Mutual Insurance
                Company.

            

    

    

    
      	 	 	
              17.

            	
              "Participant"
                shall mean those eligible officers and other key employees of the
                Company
                who receive Awards under the Plan. 

            

    

    

    
      	 	 	
              18.

            	
              "Plan"
                shall mean the Company's Equity Incentive Plan amended and restated
                on
                February 22, 2006

            

    

     

    
      	 	 	
              19.
                

            	
              “1997
                Plan” shall mean the Equity Incentive Plan as amended and restated in
                1997.

            

    

    

    
      	 	 	
              20.

            	
              "Retirement"
                shall mean Normal Retirement or Early
                Retirement.

            

    

    

     

    
      	 	 	 	
              21.

            	
              "Stock
                Option" shall a mean Non-Qualified Stock Option and a Incentive Stock
                Option.

            

    

    

      
      22.     "Termination
      of Employment" shall mean a cessation of the Participant's employment with
      the
      Company for any reason  other than Retirement, death or
      Disability.

    

    
      	
              II.

            	
              PLAN
                ADMINISTRATION

            

    

    

    A. ADMINISTRATION:
      The
      Plan shall be administered by the Committee. Subject to the express provisions
      of the Plan, the Committee shall have full and exclusive authority:

     

    
      	 	 	
              (i)

            	
              to
                interpret the Plan; 

            

    

    

    
      	 	 	
              (ii)

            	
              to
                determine the employees to whom awards should be made under the Plan;
                

            

    

    

    
      	 	 	
              (iii)

            	
              to
                determine the type of awards to be made and the amount, size and
                terms of
                each such award;

            

    

    

    
      	 	 	
              (iv)

            	
              to
                determine the time when the awards are granted and the duration of
                any
                applicable exercise or restriction period, including the criteria
                for
                exercisability and the acceleration thereof;

            

    

    

    
      	 	 	
              (v)

            	
              to
                prescribe, amend and rescind rules and regulations relating to the
                Plan;
                and 

            

    

    

    
      	 	 	
              (vi)

            	
              to
                make all other determinations deemed necessary or advisable in the
                implementation and administration of the Plan as permitted by federal
                and
                state laws and regulations, including those laws and regulations
                regarding
                deductibility from income under the Code and exemption from §16 of the
                Exchange Act, or by rules and regulations of a national securities
                exchange or the NASDAQ NMS.

            

    

    

     The
      determination of the Committee in the administration of the Plan, as described
      herein, shall be final and conclusive and binding upon all persons including,
      without limitation, the Company, its stockholders, Participants, and any persons
      having any interest under the Plan. The Secretary of the Company shall be
      authorized to implement the Plan in accordance with its terms and to take such
      action of a ministerial nature, including the preparation of award documents
      provided to participants, as shall be necessary to effectuate the intent and
      purposes hereof.

    

    Notwithstanding
      the foregoing, no Incentive Stock Options may be granted after the expiration
      of
      ten years from the Plan's adoption by the Board of Directors.

    

    B.     ELIGIBILITY:
      Persons
      eligible to receive Awards under the Plan shall be those officers and other
      key
      employees of the Company, its Parent and its subsidiaries (as defined in Section
      424 of the Code, or any amendment or substitute thereto) who are in positions
      in
      which their decisions, actions and counsel significantly impact upon the
      profitability and success of the Company. Directors of the Company who are
      not
      otherwise officers or employees of the Company, its Parent or its subsidiaries
      shall not be eligible to participate in the Plan.

     

    C.     MAXIMUM
      NUMBER OF SHARES AVAILABLE:
      Subject
      to adjustment as specified in Section II.E. below, the aggregate number of
      shares of common stock that may be issued or transferred under the Plan is
      1,000,000a shares, which shall be newly registered subsequent to the adoption
      and approval of this Plan, plus such previously registered shares under the
      1997
      Plan that have not previously been granted or, if granted, have again become
      available for reissuance. If any previously registered shares again become
      available for issuance and are reissued, they shall be fully subject to the
      terms and conditions of this Plan. Such shares may be authorized and unissued
      shares or treasury shares. Except as provided herein, any shares subject to
      an
      option or right which for any reason expires or is forfeited or terminated
      in
      accordance with the Plan shall again be available under the Plan. 

    

    D.     MAXIMUM
      SHARES AWARDED:
      No one
      Participant shall receive stock options, restricted stock or stock appreciation
      rights for more than 100,000 shares of Common Stock during any one calendar
      year
      under the Plan.

    

    E.     ADJUSTMENTS:
      In the
      event of stock dividends, stock splits, recapitalizations, mergers,
      consolidations, combinations, exchan-ges of shares, spin-offs, liquidations,
      reclassifications or other similar changes in the capitalization of the Company,
      the number of shares of Common Stock available for grant under this Plan in
      the
      aggregate or to any one individual shall be adjusted proportionately or
      otherwise by the Board, and where deemed appropriate, the number of shares,
      and
      the option price of outstanding Stock Options shall be similarly adjusted.
      Also,
      in instances where another business entity is acquired by the Company or its
      Parent, and the Company or its Parent has assumed outstanding employee option
      grants under a prior existing plan of the acquired entity, similar adjustments
      are permitted at the discretion of the Board of the Company. In the event of
      any
      other change affecting the Common Stock reserved under the Plan, such
      adjustment, if any, as may be deemed equitable by the Committee, shall be made
      to give proper effect to such event.

    

    F. REGISTRATION
      CONDITIONS:

    

    
      	 	 	
              1.

            	
              Unless
                issued pursuant to a registration statement under the Securities
                Act of
                1933, as amended, no shares shall be issued to a Participant under
                the
                Plan unless the Participant represents and agrees with the Company
                that
                such shares are being acquired for investment and not with a view
                to the
                resale or distribution thereof, or agrees to such other documentation
                as
                may be required by the Company, unless in the opinion of counsel
                to the
                Company such representation, agreement or documentation is not necessary
                to comply with such Act.

            

    

    

    
      	 	 	
              2.

            	
              Any
                restriction on the resale of shares shall be evidenced by an appropriate
                legend on the stock certificate.

            

    

    

    
      	 	 	
              3.

            	
              The
                Company shall not be obligated to deliver any Common Stock until
                it has
                been listed on each securities exchange on which the Common Stock
                may then
                be listed and until there has been qualification under or compliance
                with
                such federal or state laws, rules or regulations as the Company may
                deem
                applicable. The Company shall use reasonable efforts to obtain such
                listing, qualification and
                compliance.

            

    

    

    G.      RIGHTS
      UPON A CHANGE IN CONTROL:
      In the
      event of a Change in Control, notwithstanding any other restrictive provisions
      herein, all previously granted Stock Options and stock appreciation rights
      shall
      become exercisable immediately and all previously issued shares of restricted
      stock shall be issued free of restrictive legend, except that no Incentive
      Stock
      Option may be exercised prior to six months following the date of grant
      thereof.

    

    
      	
              III.

            	
              STOCK
                OPTIONS

            

    

    

    
      	 	
              All
                Stock Options granted to Participants under the Plan shall be subject
                to
                the following terms and conditions which shall be set forth in an
                appropriate written document ("Option Document") and which may provide
                such other terms, conditions and provisions, not inconsistent with
                this
                Plan, as the Committee may direct:

            

    

    

    A.     TYPE
      OF OPTION:
      Each
      Option Document shall identify the option presented thereby as Incentive Stock
      Options or Non-Qualified Stock Options, as the case may be.

    

    B.     PRICE:
      The
      option price per share shall not be less than one hundred percent (100%) of
      the
      Fair Market Value of a share of Common Stock on the date of grant, and in no
      event less than the par value of the stock.

    

    C.     EXERCISE
      TERM AND VESTING:
      Except
      as provided in Paragraph F below, 33 1/3% of a Stock Option award shall be
      exercisable after the first anniversary of the award, 33 1/3% of a Stock Option
      Award shall be exercisable after the second anniversary, and the remaining
      33
      1/3 percent of the Award shall be exercisable after the third anniversary of
      the
      Award. Each Stock Option document shall state the period or periods of time
      within which the Stock Option may be exercised, in whole or in part. The
      Committee shall have the power to permit an acceleration of previously
      established exercise terms, subject to the requirements set forth herein, upon
      such circumstances and subject to such terms and conditions as the Committee
      deems appropriate. All options shall expire as of 5:00 p.m. on the tenth
      anniversary of the grant unless the Committee provides otherwise.

    

    D.     EXERCISE
      PROCEDURES:
      A Stock
      Option, or portion thereof, shall be exercised by delivery of a written notice
      of exercise to the Secretary of the Company, and payment of the full price
      of
      the shares being purchased, as well as payment of all withholding taxes due
      thereon, if any.

    

    E.     PAYMENT:
      The
      price of an exercised Stock Option, or portion thereof, may be
      paid:

    

    
      	 	 	
              1.

            	
              by
                check, bank draft, money order, or electronic funds transfer payable
                to
                the order of the Company, or

            

    

     

    
      	 	 	
              2.

            	
              through
                the delivery of shares of the Company's Common Stock owned by the
                Participant, having an aggregate Fair Market Value as determined
                as of the
                date prior to exercise equal to the option price,
                or

            

    

    

    
      	 	 	
              3.

            	
              by
                such other method as the Committee may approve, including payment
                through
                a broker in accordance with procedures permitted by Regulation T
                of the
                Federal Reserve Board, or

            

    

    

    
      	 	 	
              4.

            	
              by
                a combination of 1, 2 and 3 above.

            

    

    

     In
      the event a Participant delivers already owned shares of the Company's Common
      Stock, at the Participant's option, the Participant may provide an executed
      attestation of ownership in lieu of actual delivery of shares.

    

     Subject
      to the approval of the Committee as set forth in the Option Document or
      otherwise in accordance with Rule 16b-3 of the Exchange Act, a Participant
      may
      surrender already owned shares of the Company's Common Stock or forego delivery
      of shares due as a result of the exercise in order to pay any withholding tax
      required to be collected upon exercise of a Non-Qualified Stock Option. Such
      shares shall be valued at their Fair Market Value pursuant to subparagraph
      2
      above.

    

     If
      payment is made under Section III.E.3. of the Plan, the written exercise notice
      may instruct the Company to deliver shares due upon the exercise of the Stock
      Option to a registered broker or dealer designated by the Company, if any,
      ("Designated Broker") in lieu of delivery to the optionee. Such instructions
      must designate the account into which the shares are to be
      deposited.

    

    F.     RIGHTS
      UPON TERMINATION OF EMPLOYMENT:
      In the
      event of an optionee's Termination of Employment, all Stock Options awarded
      to
      such optionee shall expire, on the thirtieth day following the effective date
      of
      the Termination of Employment unless the Committee in the Option Document or
      otherwise grants an additional period in which to exercise the Stock Options.
      In
      the event that an optionee ceases employment due to Retirement, death or
      Disability prior to the expiration of his or her Stock Options and without
      having fully exercised his or her Stock Options, all Non-Qualified Stock Options
      and Incentive Stock Options that have been held for at least six months shall
      immediately become exercisable and the optionee or his successor shall have
      the
      right to exercise the Stock Option during its term within a period of one year
      after cessation of employment due to death or Disability and within a period
      of
      two years after cessation of employment due to Retirement, or one year from
      Optionee's date of death, whichever occurs first, or within such other period,
      and subject to such terms and conditions, as may be specified by the Committee;
      provided, however, an Optionee who ceases employment due to Retirement after
      attaining age 62 with at least 5 years of continuous service may exercise
      Non-Qualified Stock Options, if otherwise exercisable, during their term within
      five years after Retirement; and provided further that ISO tax treatment shall
      be available only as permitted under the Internal Revenue Code.

    

    G.     RESTRICTIONS
      UPON TRANSFER:
      Unless
      otherwise directed by the Committee, each Option Document for Non-Qualified
      Stock Options shall further provide that no option nor any interest or right
      therein or part thereof shall be liable for the debts, contracts or engagements
      of the optionee or his successors in interest or shall be subject to disposition
      by transfer, alienation, anticipation, pledge, encumbrance, assignment or any
      other means whether such disposition be voluntary or involuntary or by operation
      of law by judgment, levy, attachment, garnishment or any other legal or
      equitable proceedings (including bankruptcy) and any attempted disposition
      thereof shall be null and void and of no effect; provided, however, that this
      Paragraph III.G. shall not prevent (with Committee approval) transfers to the
      Participant's spouse, children, grandchildren, parents or a trust established
      for any of them or the Participant, or by will or the laws of descent and
      distribution. If such a transfer is made, the employee may not receive any
      consideration therefor, and the Option will continue to be subject to the same
      terms and conditions as were applicable to the Option immediately before
      transfer.

    

    H.     INCENTIVE
      STOCK OPTIONS:
      An
      Incentive Stock Option shall be subject to the following terms and conditions,
      which shall be set forth in the Option Document and which may provide such
      other
      terms, conditions and provisions as the Committee determines necessary or
      desirable in order to qualify such option as an incentive stock option (within
      the meaning of Section 422 of the Code, or any amendment or substitute thereto
      or regulation thereunder):

    

    
      	 	 	
              (1)

            	
              The
                period or periods of time within which the option may be exercised,
                in
                whole or in part, which shall be such period or periods of time as
                may be
                determined by the Committee, provided that no option shall be exercisable
                prior to six months nor after ten years from the date of grant thereof.
                The Committee shall have the power to permit an acceleration of previously
                established exercise terms, subject to the requirements set forth
                herein,
                upon such circumstances and subject to such terms and conditions
                as the
                Committee deems appropriate;

            

    

    

    
      	 	 	
              (2)

            	
              The
                aggregate Fair Market Value (determined as of the date the option
                is
                granted) of the stock with respect to which Incentive Stock Options
                are
                exercisable for the first time by such individual during a calendar
                year
                (under all plans of the Company) shall not exceed
                $100,000;

            

    

    

    
      	 	 	
              (3)

            	
              No
                Incentive Stock Option shall be granted to any employee if at the
                time the
                option is granted the individual owns stock possessing more than
                ten
                percent (10%) of the total combined voting power of all classes of
                stock
                of the Company or its Parent or its subsidiaries unless at the time
                such
                option is granted the option price is at least 110 percent (110%)
                of the
                fair market value of the stock subject to the option and such option
                by
                its terms is not exercisable after the expiration of five years from
                the
                date of grant; and

            

    

    

    
      	 	 	
              (4)

            	
              No
                Incentive Stock Option nor any interest or right therein or part
                thereof
                shall be liable for the debts, contracts or engagements of the optionee
                or
                his successors in interest or shall be subject to disposition by
                transfer,
                alienation, anticipation, pledge, encumbrance, assignment or any
                other
                means whether such disposition be voluntary or involuntary or by
                operation
                of law by judgment, levy, attachment, garnishment or any other legal
                or
                equitable proceedings (including bankruptcy) and any attempted disposition
                thereof shall be null and void and of no effect; provided, however,
                that
                this Subparagraph III. H(4) shall not prevent transfers by will or
                by the
                laws of descent and distribution. During the lifetime of the optionee,
                the
                option is exercisable only by the
                optionee.

            

    

    

    IV.     STOCK
      APPRECIATION RIGHTS

    

    Stock
      appreciation rights may be granted in connection with a contemporaneously
      granted stock option and shall be subject to the following terms and conditions
      which shall be set forth in the Option Document which may provide such other
      terms, conditions and provisions not inconsistent with this Plan as the
      Committee may direct. 

    

    A.     GRANT
      OF RIGHTS:
      Stock
      appreciation rights shall entitle the grantee, subject to such terms and
      conditions determined by the Committee, to receive upon exercise thereof all
      or
      a portion of the excess of (i) the Fair Market Value of a specified number
      of
      shares of the Common Stock at the time of exercise, as determined by the
      Committee, over (ii) a specified price which shall not be less than 100 percent
      (100%) of the Fair Market Value of the stock on the day the right is
      granted.

    

    B.     TERM:
      The
      period or periods of time within which the stock appreciation rights may be
      exercised, in whole or in part, is co-extensive with the contemporaneously
      granted Stock Option. 33 1/3 percent of an Award of stock appreciation rights
      shall be exercisable after the first anniversary of the Award, 33 1/3 percent
      of
      an Award of stock appreciation rights shall be exercisable after the second
      anniversary of the award, and the remaining 33 1/3 percent of the award shall
      be
      exercisable after the third anniversary of the Award. The Committee shall have
      the power to permit an acceleration of previously established exercise terms,
      subject to the requirements set forth herein, upon such circumstances and
      subject to such terms and conditions as the Committee deems
      appropriate.

    

    C.     LIMITS
      ON STOCK APPRECIATION RIGHTS:

    

    
      	 	 	
              (1)

            	
              Stock
                appreciation rights shall be paid only upon exercise of the Stock
                Option
                and then only in respect to the number of shares then being
                purchased.

            

    

    

    
      	 	 	
              (2)

            	
              Stock
                appreciation rights shall be payable only to the extent the Stock
                Option
                may become exercisable and shall expire or terminate with the Stock
                Option.

            

    

    

    
      	 	 	
              (3)

            	
              No
                stock appreciation rights nor any interest or right therein or part
                thereof shall be liable for the debts, contracts or engagements of
                the
                Participant or his successors in interest or shall be subject to
                disposition by transfer, alienation, anticipation, pledge, encumbrance,
                assignment or any other means whether such disposition be voluntary
                or
                involuntary or by operation of law by judgment, levy, attachment,
                garnishment or any other legal or equitable proceedings (including
                bankruptcy) and any attempted disposition thereof shall be null and
                void
                and of no effect; provided, however, that this Subparagraph IV.C.(3)
                shall
                not prevent transfers to the Participant's spouse, children,
                grandchildren, parents or trust established for any of them or the
                Participant, or by will or the laws of descent and distribution;
                provided,
                however, that stock appreciation rights granted in connection with
                an
                Incentive Stock Option shall be subject to the same transferability
                restrictions as Incentive Stock Options as provided in Subparagraph
                III.H(4).

            

    

    

    D.     PAYMENT:
      Payments upon exercise of stock appreciation rights shall be paid in cash,
      less
      any withholding tax required to be withheld, and may be applied to the
      contemporaneous Stock Option exercise.

    

    E.     OTHER
      TERMS:
      Stock
      appreciation rights shall be granted in such manner and such form, and subject
      to such additional terms and conditions as the Committee in its sole discretion
      deems necessary or desirable, including without limitation: (i) if in connection
      with an Incentive Stock Option, in order to satisfy any requirements set forth
      under Section 422 of the Code, or any amendment or substitute thereto, or
      regulation thereunder; or, (ii) in order to avoid any insider trading liability
      in connection with stock appreciation rights under Section 16(b) of the Exchange
      Act.

    

    V.     RESTRICTED
      STOCK AWARDS

    

    Restricted
      Stock Awards shall be subject to the following terms and conditions, which
      shall
      be set forth in an appropriate written agreement between the Company and the
      Participant (“Award Document”) and which may provide such other terms,
      conditions and provisions not inconsistent with this Plan, as the Committee
      may
      direct.

    

    A.     PRICE:
      Restricted stock may be made available to a Participant free of any purchase
      price or for such purchase price as established by the Committee.

    

    B.     RESTRICTION
      PERIOD:
      Shares
      awarded pursuant to this Plan shall be subject to such terms, conditions and
      restrictions, including without limitation, prohibitions against transfer,
      substantial risks of forfeiture and attainment of performance objectives for
      such period or periods as shall be determined by the Committee and set forth
      in
      the Award Document. The Committee shall have the power to permit, in its
      discretion, an acceleration of the expiration of the applicable restriction
      period with respect to any part or all of the shares awarded to a
      Participant.

    

    C.     RESTRICTION
      UPON TRANSFER:
      During
      the restriction period determined by the Committee that is applicable to any
      shares of restricted stock under the Plan, no right or interest of any
      Participant in such restricted stock nor any interest or right therein
      (including the right to vote such shares and receive dividends thereon) or
      part
      thereof shall be liable for the debts, contracts or engagements of the
      Participant or his successors in interest or shall be subject to disposition
      by
      transfer, alienation, anticipation, pledge, encumbrance, assignment or any
      other
      means whether such disposition be voluntary or involuntary or by operation
      of
      law by judgment, levy, attachment, garnishment or any other legal or equitable
      proceedings (including bankruptcy) and any attempted disposition thereof shall
      be null and void and of no effect. Notwithstanding the foregoing and except
      as
      otherwise provided in the Plan, the Participant shall have all the other rights
      of a stockholder including, but not limited to, the right to receive dividends
      and the right to vote such shares.

     

    D.     CERTIFICATES:
      Each
      certificate issued in respect of shares awarded to a Participant shall be
      deposited with the Company or its designee and shall bear the following
      legend:

    

    
      	 	 	 	
              This
                certificate and the shares of stock represented hereby are subject
                to the
                terms and conditions (inclu-ding forfei-ture provisions and restrictions
                against transfer) contained in the Harleysville Group Inc. Amended
                and
                Restated Equity Incentive Plan and an agreement entered into between
                the
                Participant and the Company. Release from such terms and conditions
                shall
                be obtained only in accordance with the provisions of the Plan and
                agreement, a copy of each of which is on file in the office of the
                Secretary of Harleysville Group
                Inc.

            

    

    

    E.     LAPSE
      OF RESTRICTIONS:
      The
      Award Document shall specify the terms and conditions upon which any
      restrictions upon shares awarded under the Plan shall lapse, as determined
      by
      the Committee. Upon the lapse of such restrictions, shares of Common Stock
      free
      of the restrictive legend shall be issued to the Participant or his or her
      other
      legal representative.

    

     In
      accordance with Rule 16b-3 of the Exchange Act, a Participant may surrender
      already owned shares of the Company's Common Stock or forego delivery of shares
      due as a result of the lapse of restrictions in order to pay any withholding
      tax
      required to be collected upon lapse of restrictions. Such shares shall be valued
      at their Fair Market Value as of the date of the lapse of restrictions.

    

     In
      the event of a Participant’s cessation of employment due to death or Disability,
      all restrictions upon shares awarded under the Plan shall lapse and shares
      of
      Common Stock free of the restrictive legend shall be issued to the Participant
      or his or her legal representative. 

    

     In
      the event of a Participant’s cessation of employment due to Normal Retirement,
      all restrictions upon shares awarded under the Plan shall lapse and shares
      of
      Common Stock free of the restrictive legend shall be issued to the Participant
      or his or her legal representative, unless the Committee provides otherwise.
      

    

     In
      the event of a Participant’s cessation of employment due to Early Retirement,
      restrictions upon shares awarded under the Plan shall lapse for that proportion
      of shares that represents the number of days from the Date of Grant until the
      date of retirement divided by the number of days in the restriction period
      and
      that number of shares of Common Stock free of the restrictive legend shall
      be
      issued to the Participant or his or her legal representative, unless the
      Committee provides otherwise 

    

     The
      Committee shall have the power to permit an acceleration of previously
      established lapse of restriction terms, upon such circumstances and subject
      to
      such terms and conditions as the Committee deems appropriate.  

    

    F.     TERMINATION
      PRIOR
      TO LAPSE OF RESTRICTIONS:
      In the
      event of a Participant's Termination of Employment prior to the lapse of
      restrictions as determined pursuant to the provisions of preceding subparagraph
      V.E, all shares as to which there still remains unlapsed restrictions shall
      be
      forfeited by such Participant to the Company without payment of any
      consideration by the Company, and neither the Participant nor any successors,
      heirs, assigns, or personal representatives of such Participant shall thereafter
      have any further rights or interest in such shares or certificates.

    

    VI.     MISCELLANEOUS
      PROVISIONS

    

    A.     AMENDMENT,
      SUSPENSION AND TERMINATION OF PLAN:
      The
      Board of Directors may suspend or terminate the Plan or revise or amend it
      in
      any respect whatsoever except where stockholder approval is required by federal
      or state laws or regulations or by rules and regulations of a national
      securities exchange or the NASDAQ.

    

    B.     GOVERNMENT
      AND OTHER REGULATIONS:
      The
      obligation of the Company to issue Awards under the Plan shall be subject to
      all
      applicable laws, rules and regulations, and to such approvals by any government
      agencies as may be required.

    

    C.     OTHER
      COMPENSATION PLANS AND PROGRAMS:
      The
      Plan shall not be deemed to preclude the implementation by the Company, Parent
      or its subsidiaries of other compensation plans or programs which may be in
      effect from time to time. Participation in this Plan shall not affect an
      employee's eligibility to participate in any other benefit or incentive plan
      of
      the Company, its Parent or its subsidiaries. Any Awards made pursuant to this
      Plan shall not be used in determining the benefits provided under any other
      plan
      of the Company, Parent or its subsidiaries unless specifically
      provided.

    

    D.     WITHHOLDING
      TAXES:
      The
      Company shall have the right to require a payment from a Participant to cover
      applicable withholding for any federal, state or local taxes. The Company
      reserves the right to offset such tax payment from any other funds which may
      be
      due the Participant by the Company.

    

    E.     SINGLE
      OR
      MULTIPLE DOCUMENTS:
      Multiple forms of Awards or combinations thereof may be evidenced by a single
      document or multiple documents, as determined by the Committee.

    

    F.     NON-UNIFORM
      DETERMINATIONS:
      The
      Committee's determinations under the Plan (including without limitation
      determinations of the persons to receive Awards, the form, amount and timing
      of
      such Awards, the terms and provisions of such Awards, and the documents
      evidencing same) need not be uniform and may be made selectively among persons
      who receive, or are eligible to receive, Awards under the Plan whether or not
      such persons are similarly situated.

    

    G.     Whenever
      the Plan provides for issuance of stock certificates to reflect the issuance
      of
      shares, the issuance may be affected on a non-certificate basis, to the extent
      not prohibited by applicable law or the applicable rules of any stock
      exchange.

    

    H.     CONSTRUCTION
      OF PLAN:
      The
      interpretation of the Plan and the application of any rules implemented
      hereunder shall be determined in accordance with the laws of the Commonwealth
      of
      Pennsylvania.

    

    I.     PRONOUNS,
      SINGULAR AND PLURAL:
      The
      masculine may be read as feminine, the singular as plural, and the plural as
      singular as necessary to give effect to the Plan.

    

    J.     LIMITATION
      OF RIGHTS:

    

    
      	 	 	
              1.

            	
              No
                Right to Continue as an Employee:
                Neither the Plan, nor the granting of an Award nor any other action
                taken
                pursuant to the Plan, shall constitute or be evidence of any agreement
                or
                understanding, express or implied, that the Participant has a right
                to
                continue as an employee of the Company for any period of time, or
                at any
                particular rate of compensation.

            

    

    

    
      	 	 	
              2.

            	
              No
                Stockholder's Rights for Options:
                An optionee shall have no rights as a stockholder with respect to
                the
                shares covered by options granted hereunder until the date of the
                issuance
                of stock in book entry or certificate form and no adjustment will
                be made
                for dividends or other rights for which the record date is prior
                to the
                date such shares are issued.

            

    

    

    K.     DURATION
      OF THE PLAN:
      The
      Plan shall remain in effect until all Awards under the Plan have been satisfied
      by the issuance of shares or the payment of cash, expire by their terms, or
      are
      otherwise forfeited, provided, however, that t no Incentive Stock Option Award
      shall be granted more than ten years after the Plan is adopted by the Company's
      Board of Directors. 

    

    L.     STOCKHOLDER
      APPROVAL:
      The
      Plan shall be subject to stockholder approval.Notice of Award of Non-Qualified Stock Options dated 4/26/06

    EQUITY
      INCENTIVE PLAN

    NOTICE
      OF AWARD OF

    NON-QUALIFIED
      STOCK OPTIONS

    DATED
      APRIL 26, 2006 ("DATE OF GRANT")

     

    

    Harleysville
      Group Inc. ("Company"), acting by and through the Compensation & Personnel
      Development Committee of the Board of Directors ("Committee"), makes an award
      of
      ______ Non-Qualified Stock Options ("Option”) to ____________ (“Employee”) to
      purchase Common Stock of the Company ($1.00 par value) at the price of $_____per
      share (without commission or other charge) pursuant to the terms and conditions
      of the Harleysville Group Inc. Equity Incentive Plan ("Plan"), in order to
      effectuate the purposes of the Plan as stated therein, the terms of which are
      incorporated by reference and made a part of this Notice. All capitalized terms
      shall have the meaning set forth in the Plan.

     

    I.     PERIOD
      OF EXERCISABILITY

     

    
      	 	
              1.1
                - Commencement of
                Exercisability

            

    

    
      	 	
              (A)

            	
              Except
                as provided in Section 1.1(B) below, the Option shall become exer-cisable
                in three (3) cumulative installments as
                follows:

            

    

    
      	 	 	
              (1)

            	
              The
                first installment shall consist of thirty-three and one-third percent
                (33
                1/3%) of the shares covered by the Option and shall become exercisable
                on
                the first anniversary of the date the Option is
                granted.

            

    

    
      	 	 	
              (2)

            	
              The
                second installment shall consist of thirty-three and one-third percent
                (33
                1/3%) of the shares covered by the Option and shall become exercisable
                on
                the second an-niversary of the date the Option is
                granted.

            

    

    
      	 	 	
              (3)

            	
              The
                third installment shall consist of thirty-three and one-third percent
                (33
                1/3%) of the shares covered by the Option and shall become exercisable
                on
                the third anniversary of the date the Option is
                granted.

            

    

    
      	 	
              (B)

            	
              The
                Option shall immediately become exercisable without regard to Sections
                1.1(A)(1), 1.1(A)(2) and 1.1(A)(3) above in the case of Retirement,
                death
                or Disability, provided that no Option shall be exercisable prior
                to six
                months after the Date of Grant, unless Section 1.4 is
                applicable.

            

    

    
      	 	
              (C)

            	
              No
                portion of the Option which is unexercisable at Termination of Employment
                shall thereafter become exercisable.

               

            

    

    1.2
      -
      Duration of Exercisability

    
      	 	 	
              The
                installments provided for in Section 1.1 are cumulative. Each such
                installment which becomes exercisable pursuant to Section 1.1 shall
                remain
                exercisable until it becomes unexercisable under Section 1.3.

               

            

    

    1.3
      -
      Expiration of Option

    
      	 	 	
              The
                Option may not be exercised to any extent by anyone after the first
                to
                occur of the following events:

            

    

    
      	 	 	
              (A)

            	
              As
                of 5:00 p.m. on the tenth anniversary of the Date of Grant of the
                Option;
                or

            

    

    
      	 	 	
              (B)

            	
              As
                of 5:00 p.m. on the thirtieth day after the Employee's Termination
                of
                Employment except on account of Retirement, death or Disability;
                or

            

    

    
      	 	 	
              (C)

            	
              As
                of 5:00 p.m. on the first anniversary of the date of the Employee's
                death
                or Disability, as defined in the Plan;
                or

            

    

    
      	 	 	
              (D)
                

            	
              As
                of 5:00 p.m. on the second anniversary of the date of the Employee’s
                Retirement; provided, however, that if the date of the Employee’s
                Retirement occurs after the Employee has attained the age of 62,
                the
                period for exercise of the option shall expire at 5:00 p.m. on the
                fifth
                anniversary of the date of Retirement.

            

    

    
      	 	 	
              For
                purposes of this section, an employee is eligible for Retirement
                if the
                Employee has attained the age of 55 and has at least 10 years of
                continuous service or has attained the age of 62 and has at least
                5 years
                of continuous service.

               

            

    

    1.4
      -
      Rights Upon a Change in Control

    
      	 	 	
              In
                the event of a Change in Control as defined in the Plan, notwithstanding
                any other restrictive provisions herein, an Option shall become
                exercisable immediately.

            

    

    II.     EXERCISE
      OF OPTIONS

     

    2.1
      -
      Non-Qualified Stock Options

    
      	 	 	
              No
                Option nor any interest or right therein or part thereof shall be
                liable
                for the debts, contracts or engagements of the optionee or his or
                her
                successors in interest or shall be subject to disposition by transfer,
                alienation, anticipation, pledge, encumbrance, assignment or any
                other
                means whether such disposition be voluntary or involuntary or by
                operation
                of law by judgment, levy, attachment, garnishment or any other legal
                or
                equitable proceedings (including bankruptcy) and any attempted disposition
                thereof shall be null and void and of no effect; provided, however,
                that
                this Section 2.1 shall not prevent transfers by will or the laws
                of
                descent and distribution. 

            

    

    2.2
      -
      Partial Exercise

    
      	 	 	
              Any
                exercisable portion of the Option or the entire Option, if then wholly
                exercisable, may be exercised in whole or in part at any time prior
                to the
                time when the Option or portion thereof becomes unexercisable under
                Section 1.3; provided, however, that each partial exercise shall
                be for
                whole shares only.

            

    

    2.3
      -
      Manner of Exercise

    
      	 	 	
              The
                Option, or any exercisable portion thereof, may be exercised solely
                by
                delivery to the Secretary of the Company of all of the following
                prior to
                the time when the Option or such portion becomes unexercisable under
                Section 1.3:

            

    

    
      	 	 	
              (A)

            	
              Notice
                in writing signed by the Employee or transferee stating that the
                Option or
                portion is thereby exercised, such notice complying with all applicable
                rules established by the Committee;

            

    

    
      	 	 	
              (B)

            	
              Full
                payment for the shares with respect to which such Option or portion
                is
                exercised, made as follows:

            

    

    
      	 	 	 	
              (1)

            	
              payment
                in check or electronic funds transfer;
                or

            

    

    
      	 	 	 	
              (2)

            	
              shares
                of the Company's Common Stock owned by the Employee duly endorsed
                for
                transfer to the Company with a fair market value on the date of delivery
                equal to the aggregate purchase price of the shares with respect
                to which
                such Option or portion is exercised or attestation of ownership;
                or

            

    

    
      	 	 	 	
              (3)

            	
              by
                such other method as the Committee may approve, including payment
                through
                a broker in accordance with procedures permitted by Regulation T
                of the
                Federal Reserve Board, or

            

    

    
      	 	 	 	
              (4)

            	
              any
                combination of the consideration provided in the foregoing subparagraphs
                (1), (2) and (3);

            

    

    
      	 	 	 	
              If
                payment is made under Section 2.3(B)(3), such notice may instruct
                the
                Company to deliver shares due upon the exercise of the Option to
                a
                registered broker or dealer, if any, designated by the Employee
                ("Designated Broker") in lieu of delivery to the optionee. Such
                instructions must designate the account into which the shares are
                to be
                deposited.

            

    

    
      	 	 	
              (C)

            	
              A
                written representation in the notice of exercise that the
                Employee:

            

    

    
      	 	 	 	
              (1)

            	
              acknowledges
                that issuance of certificates may be governed by the restrictions
                set
                forth in the Plan and this Notice;

            

    

    
      	 	 	 	
              (2)

            	
              is
                aware that the Securities Act of 1933, as amended, and the regulations
                and
                requirements of the Securities and Exchange Commission thereunder,
                may
                impose limitations on the resale of said shares and that any resale
                of
                said shares will be made in compliance with said Act and said regulations
                and requirements; and

            

    

    
      	 	 	 	
              (3)

            	
              further
                affirms that he or she accepts the terms and conditions of the option
                as
                described in the Notice of Award of Stock
                Options.

            

    

    
      	 	 	
              (D)

            	
              Full
                payment to the Company of all amounts, which, under federal, state
                or
                local law, it is required to withhold upon exercise of the Options.
                An
                Employee may surrender shares already owned or forego delivery of
                shares
                due as a result of an option exercise in order to pay for taxes to
                be
                withheld to the extent there is no adverse accounting impact to the
                Company.

               

            

    

    2.4
      -
      Conditions to Issuance of Stock Certificates

    
      	 	 	
              The
                shares of stock deliverable upon the exercise of the Option, or any
                portion thereof, may be either previously authorized but unissued
                shares
                or issued shares which have then been reacquired by the Company.
                Such
                shares shall be fully paid and nonassessable.
                Nevertheless:

            

    

    
      	 	 	
              (A)

            	
              unless
                issued pursuant to a registration statement under the Securities
                Act of
                1933, as amended, no shares shall be issued to a Employee under the
                Plan
                unless the Employee represents and agrees with the Company that such
                shares are being acquired for investment and not with a view to the
                resale
                or distribution thereof, or such other documentation as may be required
                by
                the Company, unless in the opinion of counsel to the Company such
                representation, agreement or documentation is not necessary to comply
                with
                such Act;

            

    

    
      	 	 	
              (B)

            	
              any
                restriction on the resale of shares shall be evidenced by an appropriate
                legend on the stock certificate;
                and

            

    

    
      	 	 	
              (C)

            	
              the
                Company shall not be obligated to deliver any Common Stock until
                it has
                been listed on each securities exchange on which the Common Stock
                may then
                be listed and until there has been qualification under or compliance
                with
                such federal or state laws, rules or regulations as the Company may
                deem
                applicable. The Company shall use reasonable efforts to obtain such
                listing, qualification and compliance.

               

            

    

    2.5
      -
      Rights of Shareholder

    
      	 	 	
              The
                holder of the Option shall not be, nor have any of the rights or
                privileges of, a shareholder of the Company in respect of any shares
                purchasable upon the exercise of any part of the Option unless and
                until
                certificates representing such shares shall have been issued by the
                Company to such holder.

               

            

    

    III.     ADJUSTMENTS

    
      	 	 	
              In
                the event of stock dividends, stock splits, recapitalizations, mergers,
                consolidations, combinations, exchanges of shares, spin-offs,
                liquidations, reclassifications or other similar changes in the
                capitalization of the Company, the number of shares of Common Stock
                available for grant under this Plan shall be adjusted proportionately
                (or
                otherwise by the Board of the Company), and unless inappropriate,
                the
                number of shares and option price of outstanding stock options shall
                be
                similarly adjusted. Also, in instances where another business entity
                is
                acquired by the Company or its Parent, and the Company or its Parent
                has
                assumed outstanding employee options grants under a prior existing
                plan of
                the acquired entity, similar adjustments are permitted at the discretion
                of the Board of the Company. In the event of any other change affecting
                the Common Stock reserved under the Plan, such adjustment, if any,
                as may
                be deemed equitable by the Committee, shall be made to give proper
                effect
                to such event.

               

            

    

    IV.     MISCELLANEOUS

     

    4.1
      -
      Administration

    
      	 	 	
              The
                Plan shall be administered by the Committee. Subject to the express
                provisions of the Plan, the Committee shall have full and exclusive
                authority:

            

    

    
      	 	 	 	
              (A)

            	
              to
                interpret the Plan; 

            

    

    
      	 	 	 	
              (B)

            	
              to
                determine the employees to whom awards should be made under the Plan;
                

            

    

    
      	 	 	 	
              (C)

            	
              to
                determine the type of awards to be made and the amount, size and
                terms of
                each such award;

            

    

    
      	 	 	 	
              (D)

            	
              to
                determine the time when the awards are granted and the duration of
                any
                applicable exercise or restriction period, including the criteria
                for
                exercisability and the acceleration thereof;

            

    

    
      	 	 	 	
              (E)

            	
              to
                prescribe, amend and rescind rules and regulations relating to the
                Plan;
                and

            

    

    
      	 	 	 	
              (F)

            	
              to
                make all other determinations deemed necessary or advisable in the
                implementation and administration of the Plan as permitted by federal
                and
                state laws and regulations including those laws and regulations regarding
                deductibility from income under the Code and exemption under §16 of the
                Exchange Act, or by the rules and regulations of a national securities
                exchange or the NASDAQ NMS.

            

    

    
      	 	 	
              The
                determination of the Committee in the administration of the Plan,
                as
                described herein, shall be final and conclusive and binding upon
                all
                persons including, without limitation, the Company, its stockholders
                and
                the persons granted options under the Plan. The Secretary of the
                Company
                shall be authorized to implement the Plan in accordance with its
                terms and
                to take such action of a ministerial nature, including the preparation
                of
                award documents to Employees, as shall be necessary to effectuate
                the
                intent and purposes thereof.

               

            

    

    4.2
      -
      No Right of Continued Employment

    
      	 	 	
              Nothing
                in this Notice or in the Plan shall confer upon the Employee any
                right to
                continue in the employ of the Company, its Parent or any Subsidiary
                or
                shall interfere with or restrict in any way the rights of the Company,
                its
                Parent, or its Subsidiaries, which are hereby expressly reserved,
                to
                discharge the Employee at any time for any reason whatsoever, with
                or
                without cause.

               

            

    

    4.3
      -
      Shares To Be Reserved

    
      	 	 	
              The
                Company shall at all times during the term of the Option reserve
                and keep
                available such number of shares of stock as will be sufficient to
                satisfy
                the requirements of this Notice.

               

            

    

    4.4
      -
      Notices

    
      	 	 	
              Any
                notice to be given under the terms of this Notice to the Company
                shall be
                addressed to the Company in care of its Secretary, and any notice
                to be
                given to the Employee shall be addressed to him or her at the most
                recent
                address on file with the Company. Any notice which is required to
                be given
                to the Employee shall, if the Employee is then deceased, be given
                to the
                Employee's personal representative if such representative has previously
                informed the Company of his or her status and address by written
                notice
                under this Section 4.4. Any notice shall have been deemed duly given
                when
                enclosed in a properly sealed envelope or wrapper addressed as aforesaid,
                deposited (with postage prepaid) in a post office or branch post
                office
                regularly maintained by the United States Postal Service.

               

            

    

    4.5
      -
      Titles

    
      	 	 	
              Titles
                are provided herein for convenience only and are not to serve as
                a basis
                for interpretation or construction of this
                Notice.

            

    

    

    I
      hereby
      certify that the foregoing Award on the foregoing terms and conditions has
      been
      authorized by the Compensation & Personnel Development Committee of the
      Board of Directors of Harleysville Group Inc.

     

     

    HARLEYSVILLE
      GROUP INC.  

     

    

    

                                                

    Robert
      A.
      Kauffman

     

    

    I
      acknowledge receipt of a copy of this Notice of Award and have read, understand
      and accept its term and conditions.

    

                  

    
      	 	 	 
	 	 
	 
 	 
 	 
 
	Date: 	  	 
	
              

            	
              
                

                Employee

            
	 	
               

               

              
                
 Social
                Security Number

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