EXHIBIT (4)(C)
HARLEYSVILLE GROUP INC.
YEAR 2000 DIRECTORS' STOCK OPTION PROGRAM
APPROVED BY BOARD OF DIRECTORS
FEBRUARY 24, 1999
T A B L E O F C O N T E N T S
I. INTRODUCTION 1
A. Purpose of the Program 1
B. Definitions 1
II. PROGRAM ADMINISTRATION 2
A. Administration 2
B. Participation 3
C. Maximum Number of Shares Available 3
D. Adjustments 3
E. Registration Conditions 3
F. General Provisions 4
III. STOCK OPTIONS 4
A. Price 4
B. Amount and Timing of Grants 4
C. Exercisability of Options 5
D. Period 5
E. Exercise Procedures 5
F. Payment 5
G. Termination of Service 5
H. Retirement, Disability or Death 5
IV. MISCELLANEOUS PROVISIONS 6
A. Amendment, Suspension and Termination of Program 6
B. Government and Other Regulations 6
C. Other Compensation Plans and Programs 6
D. Transferability 6
E. Withholding Taxes 6
F. Construction of Program 6
G. Unfunded Program 6
H. Pronouns, Singular and Plural 6
I. Effective Dates 7
J. Limitation of Rights 7
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HARLEYSVILLE GROUP INC.
YEAR 2000 DIRECTORS' STOCK OPTION PROGRAM
I. INTRODUCTION
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A. PURPOSE OF THE PROGRAM: Harleysville Group Inc. (the
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"Company) has established the Program to further its
long-term financial success by offering stock options
to non-employee Directors of the Company and of its
parent, Harleysville Mutual Insurance Company, whereby
such Directors can share in achieving and sustaining
such success. The Program also provides a means to
attract and retain the Directors needed to achieve the
Company's and the Parent's long-term growth and
profitability objectives. No more option grants shall
be made after May 1999 under the 1995 Directors' Stock
Option Program.
B. DEFINITIONS: When used in the Program, the following
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terms shall have the meanings set forth below:
"Award(s)" shall mean Non-Qualified Stock Options
made under the Program.
"Board" shall mean the Board of Directors of the
Company and the Board of Directors of the Parent.
"Code" shall mean the Internal Revenue Code of
1986, as amended.
"Company" shall mean Harleysville Group Inc., a
Delaware corporation, and any successor in a
reorganization or similar transaction.
"Committee" shall mean the Compensation &
Personnel Development Committee of the Board of
Directors, which shall administer the Program. The
Committee shall be composed of at least two persons who
are from time to time appointed to serve by the Board
of the Company.
"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.
"Director" shall mean a member of the Board of
Directors of the Company or a member of the Board of
Directors of the Parent.
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"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 Termination of Service.
"Fair Market Value" shall mean with respect to a
given day, 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 the last
preceding day on which transactions took place. The
foregoing notwithstanding, the Committee may determine
the Fair Market Value in such other manner as it may
deem more appropriate for Program purposes or as is
required by applicable laws or regulations.
"1995 Program" shall mean the 1995 Directors'
Stock Option Program.
"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
422A of the Code, or such other sections of the Code as
may be in effect from time to time.
"Parent" shall mean Harleysville Mutua Insurance
Company.
"Participant" shall mean an active member of the
Board who is not an officer or full-time salaried
employee of the Company or of the Parent.
"Program" shall mean the Company's Year 2000
Directors' Stock Option Program.
"Termination of Service" shall mean a cessation of
the Participant's Board service for any reason.
II. PROGRAM ADMINISTRATION
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A. ADMINISTRATION: The Program shall be administered by
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the Committee. Subject to the express provisions of
the Program, the Committee shall have authority to
interpret the Program, to prescribe, amend and rescind
rules and regulations relating to the Program and to
make all other determinations deemed necessary or
advisable in the implementation and administration of
the Program; provided, however, that the Committee
shall have no discretion with respect to the
eligibility or selection of Directors to receive
options under the Program, the number of shares of
stock subject to any such options under the Program, or
the purchase price thereunder, and provided further
that the Committee shall not have the authority to take
any action or make any determination that would
materially increase the benefits accruing to
Participants under the Program. The determination of
the Committee in the administration of the Program, as
described herein, shall be final, conclusive and
binding upon all persons including, without limitation,
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the Company, its stockholders and the persons granted
options under the Program. The Secretary of the
Company shall be authorized to implement the Program in
accordance with its terms and to take such action of a
ministerial nature as shall be necessary to effectuate
the intent and purposes thereof.
B. PARTICIPATION: All current and future non-employee
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active Directors of the Company and the Parent who hold
office at any time between the May 2000 Board Meeting
and the May Board Meeting in 2004 shall be eligible to
participate in the Program. Non-employee Directors as
of the May 2000 Board of Directors Meeting shall
automatically participate in the Program. Future non-
employee Directors, including an employee Director who
becomes a non-employee Director, will automatically
participate in the Program as of the date of the first
May meeting of the Board of Directors following
election to the Board of Directors, or at the first May
Board of Directors meeting after becoming a non-
employee Director (whether or not newly elected to the
Board) at or prior to the May 2004 Board of Directors
meeting.
C. MAXIMUM NUMBER OF SHARES AVAILABLE: The maximum number
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of shares for which options may be granted under the
Program is 123,500, subject to adjustment as provided
under Article II, Paragraph D, of the Program. The
shares made available are comprised of all shares not
issued under the 1990 Directors' Stock Option Program
and 1995 Directors' Stock Option Program, with any
additional amount of shares concurrently necessary, up
to a maximum of 123,500, to be made available through a
reduction in the amount of total shares reserved for
the Company' s Equity Incentive Plan approved in 1997.
Stock options which expire or are terminated,
cancelled or forfeited in accordance with the Program
shall again be available for Award under the Program.
D. ADJUSTMENTS: In the event of stock dividends, stock
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splits, re-capitalizations, 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 Program shall be adjusted proportionately,
and 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 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
Program, such adjustment, if any, as may be deemed
equitable by the Committee, shall be made to give
proper effect to such event.
E. REGISTRATION CONDITIONS:
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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 Program 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 such other
documentation as may be
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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 or 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.
F. GENERAL PROVISIONS: Each Award under the Program shall
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be subject to the requirement that if at any time the
Committee shall determine that (i) the listings,
registrations or qualifications of the shares of Common
Stock subject or related thereto upon any securities
exchange or under any state or federal law, or (ii) the
consent or approval of any government regulatory body,
or (iii) an agreement by the recipient of an Award with
respect to the disposition of shares of Common Stock is
necessary or desirable as a condition of or in
connection with the granting of such Award or the issuance
or purchase of shares of Common Stock thereunder, such
Award shall not be consummated in whole or in part
unless such listing, registration, qualification,
consent, approval, or agreement shall have been
effected or obtained free of any conditions not
acceptable to the Committee.
III. STOCK OPTIONS
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All stock options granted to Participants under the Program
shall be Non-Qualified Stock Options and evidenced by a
Notice of Award which shall be subject to applicable
provisions of the Program, and such other provisions as the
Committee may adopt, including the following provisions:
A. PRICE: The option price per share shall be one hundred
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percent (100%) of the Fair Market Value of a share of
Common Stock at the close of business on the date of
grant.
B. AMOUNT AND TIMING OF GRANTS: An incumbent Director
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shall receive a grant of 2,500 Non-Qualified Stock
Options at the Year 2000 May Board Meeting and a grant
of 2,500 options at each May Board Meeting thereafter
for four successive years until and including the May
2004 Board Meeting, except that if an incumbent
Director has options under the 1995 Program that vest
in the same year as an award of options under this
Program then the amount of shares awarded in that year
shall be reduced by the number of shares that vest that
year under the 1995 Program. For Directors first
elected after May 2000, or for an employee Director
becoming a non-employee Director after May 2000, he or
she shall receive a grant of 2,500 options at the first
May Board Meeting following election or an employee
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Director becoming a non-employee Director and a grant
of 2,500 options at each May Board Meeting thereafter
occurring in or before May 2004. No options shall be
granted under this Program after May 2004.
In the event that at a May Board meeting there are
insufficient shares remaining in the Program on which
to grant 2,500 options to each Director otherwise
entitled to receive options, then the remaining shares
shall be divided by the number of Participants and
options shall be granted to the Participants in an
amount equal to the whole number so determined.
C. EXERCISABILITY OF OPTIONS: All options vest and are
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exercisable as of the day of grant.
D. PERIOD: Stock options shall have a term of ten years
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from the date of grant and shall expire at 5:00 p.m. on
the tenth anniversary of the grant, subject to earlier
expiration or termination as set forth herein.
E. EXERCISE PROCEDURES: A stock option, or portion
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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.
F. PAYMENT: The price of an exercised stock option, or
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portion thereof, may be paid:
1. in cash or by check, bank draft or money
order 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 on the date of exercise equal to the
option price, or
3. by a combination of both 1 and 2 above.
G. TERMINATION OF SERVICE: In the event of the Termination
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of Service on the Board by a Director, other than by
reason of retirement, Disability or death as set forth
in paragraph H hereof, the then outstanding options of
such Director may be exercised within one hundred
twenty days after such termination, or on their stated
expiration date, whichever occurs first. For purposes
of this Program, the term "by reason of retirement"
shall mean mandatory retirement at age 72 pursuant to
Board policy.
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H. RETIREMENT, DISABILITY OR DEATH: In the event of
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Termination of Service by reason of retirement (as
defined above) or death, or Disability of a Director,
the Director or his/her guardian or legal representative
may exercise all options within two years after such
retirement, death or Disability, or on their stated
expiration date, whichever occurs first.
IV. MISCELLANEOUS PROVISIONS
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A. AMENDMENT, SUSPENSION AND TERMINATION OF PROGRAM: The
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Board of Directors may suspend or terminate the Program
or revise or amend it in any respect whatsoever;
provided, however, that without approval of the
stockholders, no revision or amendment shall change the
selection or eligibility of Directors to receive
options under the Program, the number of shares of
stock subject to any such options of the Program, the
purchase price thereunder, or materially increase the
benefits accruing to Participants under the Program.
B. GOVERNMENT AND OTHER REGULATIONS: The obligation of the
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Company to issue Awards under the Program 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 Program
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shall not be deemed to preclude the implementation by
the Company or its Parent of other compensation plans
or programs which may be in effect from time to time.
D. TRANSFERABILITY: No right or interest of any
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Participant in any Award under the Program shall
be (a) assignable or transferable, except by will or
the laws of descent and distribution or a valid
beneficiary designation made in accordance with
procedures established by the Committee, and (b) liable
for, or subject to, any lien, obligation or liability.
E. WITHHOLDING TAXES: The Company shall have the right to
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require a payment from a Participant to cover
applicable withholding for any federal, state or local
taxes, if any. The Company reserves the right to
offset such tax payment from any other funds which may
be due the Participant by the Company.
F. CONSTRUCTION OF PROGRAM: The interpretation of the
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Program and the application of any rules implemented
hereunder shall be determined in accordance with the
laws of the Commonwealth of Pennsylvania.
G. UNFUNDED PROGRAM: The Program shall be unfunded, and
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the Company shall not be required to segregate any
assets which may at any time be represented by Awards.
Any liability of the Company to any person with respect
to an Award under this Program shall be based solely
upon any obligations which may be created by this
Program; no such obligation of the Company shall be
deemed to be secured by any pledge or other encumbrance
on any property of the Company.
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H. PRONOUNS, SINGULAR AND PLURAL: The masculine may be
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read as feminine, the singular as plural, and the
plural as singular as necessary to give effect to the
Program.
I. EFFECTIVE DATES: The Program will become effective on
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approval by stockholders. The Program and all
outstanding Awards shall remain in effect until all
outstanding Awards have been exercised or repurchased,
have expired or have been cancelled.
J. LIMITATION OF RIGHTS:
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1. No Right to Continue as a Director: Neither the
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Program, nor the granting of an option nor any
other action taken pursuant to the Program, shall
constitute or be evidence of any agreement or
understanding, express or implied, that the
Director has a right to continue as a Director for
any period of time, or at any particular rate of
compensation.
2. No Share Owners' Rights for Options: A Director
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who has been granted options shall have no rights
as a share owner with respect to the shares
covered by options granted hereunder until the
date of the issuance of a stock certificate
therefor, and no adjustment will be made for
dividends or other rights for which the record
date is prior to the date such certificate is
issued.