EXHIBIT 4(A)
HARLEYSVILLE GROUP INC.
AGENCY STOCK PURCHASE PLAN
As Amended & Restated June 7, 2005
1.Purpose
The Harleysville Group Inc. Agency Stock Purchase Plan (the "Plan") is
established by the Harleysville Group Inc. (the "Company") for the benefit of
the independent insurance agencies of the Company's parent, Harleysville Mutual
Insurance Company ("Parent"), and the Company's affiliated and subsidiary
insurance companies, which shall be those insurance companies 50% or more of
whose stock is owned by the Company or Parent. This Plan provides an Eligible
Agency and its Key Employees, as defined below, an opportunity to acquire a
long-term proprietary interest in the Company through the purchase of the
Company stock at a discount from fair market value. In offering this Plan, the
Company seeks to foster the common interests of the Company and its independent
agencies and employees thereof in achieving long-term profitable growth for the
Company. Accordingly, the Company has created this Plan for the purpose of
facilitating the purchase of and long-term holding of shares of its stock by an
Eligible Agency and its Key Employees and not for such Agency's or Key
Employee's short-term gain. It is expected that an Eligible Agency or Key
Employee thereof that purchases shares of stock hereunder will hold such shares
on a long-term basis, as the Plan is not intended to benefit an agency or
employee which demonstrates a pattern of immediate resale of shares acquired
hereunder and, as discussed in Paragraph 2 below regarding eligibility, such a
pattern of conduct will cause an otherwise Eligible Agency to become ineligible
for continued participation in the Plan.
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2.Eligibility
(a)An agency designated as an Eligible Agency by the Company is
eligible to participate in this Plan. An Eligible Agency shall be an agency
which, as determined by the Company in its discretion, is an agency that
brings value to the Company, its Parent, affiliates and subsidiaries and
with which the Company seeks a long term relationship. The Company, in its
discretion, may base eligibility on agency segmentation class or any other
factor(s) which indicates value to the Company or Parent, directly or
indirectly. Continued eligibility will be subject to the Company's periodic
review.
(b)An Eligible Agency that participates in this Plan may direct that
shares purchased under this Plan from its contribution account, as defined
below, be registered as of the date of purchase in the name of certain
persons associated with the agency. Such persons shall only be (i) the
principal or principals of an Eligible Agency that is a proprietorship,
(ii) the general partner or general partners of an Eligible Agency that is
a partnership, (iii) the officers and stockholders of an Eligible Agency
that is a corporation, (iv) employee benefit plans of such entities
established for the benefit of any of the foregoing persons, and (v) key
employees designated by the principal or principals of an Eligible Agency
that is a proprietorship, the general partner or general partners of an
Eligible Agency that is a partnership, or the executive officers of an
Eligible Agency that is a corporation. The Company's determination of which
individuals are eligible for direct registration under this Plan will be
final, conclusive and binding. All persons enumerated in (i) through (v)
above who are designated by any such Eligible Agency to participate in the
Plan are referred to herein as "Key Employees".
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(c)A pattern of immediate resale of stock acquired under this plan by
an Eligible Agency or a Key Employee thereof shall be a factor in the
Company's determination of the Eligible Agency's continued eligibility for
the Plan because it shows that an Eligible Agency and its Key Employees are
not interested in sharing in the long term profitable growth of the
Company.
3.Methods of Payment and Amount of Contribution
There shall be three methods of payment to purchase stock. An Eligible
Agency may elect any of the payment methods individually or in combination. In
each Subscription Period an Eligible Agency may contribute an aggregate maximum
of $12,500 toward the purchase of stock under all payment methods combined.
(a)An Eligible Agency may elect to purchase stock through deductions
from its semi-monthly direct bill commission payments. Under this method,
an Eligible Agency shall designate no less than one percent (1%) and no
more than ten percent (10%) of the Eligible Agency's direct bill commission
payments, in whole number increments, to be withheld from the Eligible
Agency's direct bill commission payments; provided, however, that no more
than $12,500 per Subscription Period will be withheld by Company from
direct bill commission payments. Direct bill commission payments shall mean
the commissions earned and that are actually available for payment in a
semi-monthly period to an Eligible Agency for personal and commercial
direct bill policies after all offsetting debits and credits are applied as
determined solely from the Company's records.
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(b)An Eligible Agency may elect to purchase stock during each January
15th - July 14th Subscription Period through a deduction from the bonus, if
any, payable to the Eligible Agency under the applicable Agency Contingency
Plan or its equivalent. Under this method, an Eligible Agency shall
designate a percentage of the bonus, in whole number increments, to be
withheld by the Company subject to a maximum of $12,500.
(c)An Eligible Agency may elect to purchase stock through lump sum
payments to the Company. Under this method, the Eligible Agency shall pay
to the Company by June 1st or December 1st a dollar amount in a lump sum.
If an Eligible Agency is contributing under the direct bill commission
payment method under subparagraph (a), the total amount of any lump sum
payments shall not be less than $1,000 and not more than $12,500, or if an
Eligible Agency is not enrolled under subparagraph (a), the total amount of
any lump sum payments shall not be less than $1,000 and not more than
$6,000.
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At the end of each Subscription Period, each Eligible Agency's direct bill
commission payments, if any, shall be totaled and added to all lump sum and
bonus payments, if any, made by such agency. Any excess over $12,500 shall be
returned within a reasonable time to the Eligible Agency without interest. The
amount remaining shall be applied to purchase stock as specified below. If at
any time throughout a Subscription Period an Eligible Agency's total payments
exceeds the maximum permitted for such agency, then upon request by the Eligible
Agency such excess amount will be returned within a reasonable period to the
Eligible Agency without interest.
4.Duration of Offer and Subscription Periods
This Plan shall be in effect from July 15, 2005 through and including July
31, 2015. During the duration of the Plan there will be twenty (20)
"Subscription Periods". Each Subscription Period runs from January 15th through
July 14th or from July 15th through January 14th.
5.Enrollment and Enrollment Periods
Enrollment for participation based on withholding from direct bill
commissions will take place in the "Enrollment Period" which shall be from the
1st through 14th day of January and July of each year commencing with July of
2005. An Eligible Agency shall be sent a Subscription Agreement prior to the
beginning of the Enrollment Period. An Eligible Agency that desires to subscribe
for the purchase of stock through withholding from direct bill commissions for
the following Subscription Period must file a Subscription Agreement during the
applicable Enrollment Period. Once enrolled, an Eligible Agency will continue to
participate in the Plan for each succeeding Subscription Period until it ceases
to be an Eligible Agency or chooses to
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withdraw from the Plan pursuant to Paragraph 9. If an Eligible Agency
desires to change its rate of contribution it may do so effective for the next
Subscription Period by filing a new Subscription Agreement during the Enrollment
Period for that Subscription Period. An Eligible Agency that wishes to make lump
sum purchases during a Subscription Period shall remit a lump sum to the Company
along with a supplemental Subscription Agreement for that Subscription Period by
June 1st or December 1st of the Subscription Period. An Eligible Agency that
wishes to make a purchase during the January 15th - July 14th Subscription
Period through designation of a portion of its bonus under the Agency
Contingency Plan shall file a Subscription Agreement during the Enrollment
Period for that Subscription Period.
6.Number of Shares to be Offered
The aggregate number of shares of common stock that may be issued under the
Plan is 1,000 shares which were registered subsequent to the adoption and
approval of the Agency Stock Purchase Plan as restated on August 23, 1995. The
total number of shares to be made available under the Plan is 500,000 shares of
capital stock of the Company ("Stock"). In the event these registered shares of
Stock are subscribed prior to the expiration of the Plan, the Plan may be
terminated in accordance with Section 14 of the Plan.
7.Subscription Price
The "Subscription Price" for each share of Stock shall be ninety percent
(90%) of the fair market value of such share on the last day of the Subscription
Period provided, however, that the price shall never be less than $1.00 per
share which is the par value of a share of Company Stock. The fair market value
of a share shall be the closing price as of the last day of the Subscription
Period on which a trade occurs as reported on the NASDAQ National Market System.
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8.Purchase of Shares
The Company will maintain a contribution account in the name of each
enrolled Eligible Agency. As of the last day of each Subscription Period, the
total amount deducted from the Eligible Agency's direct bill commission, any
bonus withholding, and any lump sum payments, not to exceed $12,500 from all
three sources, will be credited to the Eligible Agency's contribution account.
At such time, the amount then so credited will be divided by the Subscription
Price for such Subscription Period. The full amount of shares, including
fractional shares, which results will then be allocated to the accounts
maintained on the books of the Company's stock transfer agent ("Plan Accounts")
for the Eligible Agency and its Key Employees in accordance with the allocations
specified in the most current form regarding stock registration filed with the
Company by the Eligible Agency.
The Company shall be entitled to rely on the most recent form regarding
stock registration executed in accordance with rules and procedures established
by the Committee, and the Company shall have no liability for allocation of
shares consistent with such form. Shares will be issued in book entry form with
the Company's stock transfer agent and titled in the name of the enrolled
Eligible Agency, or Key Employee, as the case may be. An enrolled Eligible
Agency and its Key Employees will receive a statement of account in a timely
fashion following the end of each Subscription Period in which shares are
acquired. In the event the number of shares subscribed for any Subscription
Period exceeds the number of shares available for sale under the Plan for such
period, the available shares shall be allocated among all the Eligible Agencies
in proportion to their Plan Account balances.
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9.Withdrawal from the Plan
An enrolled Eligible Agency may withdraw from the Plan at any time prior to
the end of a Subscription Period. At the time of withdrawal the amount of cash
credited to the Eligible Agency's Plan Account for that Subscription Period will
be refunded in cash without interest. If an Eligible Agency withdraws, such
Eligible Agency may not resubscribe until after the next full Subscription
Period has elapsed.
10.Special Rules for Section 16 Officers and 5% Owners
An agency which would otherwise be an Eligible Agency may not participate
in this Plan if the agency is subject to Section 16 of the Securities Exchange
Act of 1934 in connection with the Company or is a 5% owner of the Company as
defined under Section 13 of said Act. If an Eligible Agency is enrolled in the
Plan and becomes subject to Section 16 or a 5% owner, then such Eligible Agency
will be deemed to have withdrawn from the Plan and all amounts credited will be
refunded in cash.
11.Termination of Agency Status
Termination of agency status for any reason shall be treated as an
automatic withdrawal as set forth in Section 9.
12.Assignment and Issuance of Shares
No Eligible Agency may assign its subscription or rights to subscribe to
any other entity (including its shareholders or partners) and any attempted
assignment shall be void. All shares issued under this Plan shall be titled in
the name of the Eligible Agency. Notwithstanding the foregoing, an Eligible
Agency may permit direct registration of stock in the name of a Key Employee as
described in paragraph 8 hereof.
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13.Adjustment of and Changes in the Stock
In the event that the shares of Stock shall be changed into or exchanged
for a different number or kind of shares of stock or other securities of the
Company or of another corporation (whether by reason of merger, consolidation,
recapitalization, split up, combination of shares, or otherwise), or if the
number of shares of Stock shall be increased through a stock split or the
payment of a stock dividend, then there shall be substituted for or added to
each share of Stock theretofore reserved for sale under the Plan, the number and
kind of shares of stock or other securities into which each outstanding share of
Stock shall be so changed, or for which each such share shall be exchanged, or
to which each such share shall be entitled, as the case may be.
14.Amendment or Discontinuance of the Plan
The Board of Directors of the Company shall have the right to amend, modify
or terminate the Plan at any time without notice provided that no participant's
existing rights are adversely affected thereby.
15.Administration
The Plan shall be administered by a committee to be appointed by the Board
of Directors consisting of three employees of the Company. The committee may
from time to time adopt rules, regulations and procedures for carrying out the
Plan. Interpretation or construction of any provision of the Plan by the
committee shall be final and conclusive on all persons absent contrary action by
the Board of Directors.
16.Titles
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Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of this Agreement.
17.Applicable Law
The Plan shall be construed, administered and governed in all respects
under the laws of the Commonwealth of Pennsylvania.
EXHIBIT 4A