Effect of Abstentions and Broker Non-VotesAbsent specific instructions from <strong>the</strong> beneficial owner of sh<strong>are</strong>s, brokers may not vote <strong>the</strong> sh<strong>are</strong>sof <strong>the</strong> Company’s common s<strong>to</strong>ck with respect <strong>to</strong> <strong>the</strong> proposal <strong>to</strong> adopt <strong>the</strong> Merger Agreement. Forpurposes of determining adoption of <strong>the</strong> Merger Agreement, abstentions and broker non-votes willhave <strong>the</strong> same effect as a vote ‘‘AGAINST’’ <strong>the</strong> proposal <strong>to</strong> adopt <strong>the</strong> Merger Agreement. Brokernon-votes will not apply <strong>to</strong> <strong>the</strong> proposal <strong>to</strong> approve, on a non-binding advisory basis, <strong>the</strong> goldenparachute compensation. Abstentions will count as votes cast ‘‘AGAINST’’ <strong>the</strong> proposal <strong>to</strong> approve, ona non-binding advisory basis, <strong>the</strong> golden parachute compensation, since this vote is based on <strong>the</strong>number of sh<strong>are</strong>s represented at <strong>the</strong> Special Meeting.Accordingly, <strong>the</strong> Company’s board of direc<strong>to</strong>rs urges s<strong>to</strong>ckholders <strong>to</strong> complete, date, sign andreturn <strong>the</strong> accompanying proxy card, or <strong>to</strong> submit a proxy by telephone or through <strong>the</strong> Internet byfollowing <strong>the</strong> instructions included with your proxy card, or, in <strong>the</strong> event you hold your sh<strong>are</strong>s througha broker or o<strong>the</strong>r nominee, by following <strong>the</strong> separate voting instructions received from your broker ornominee.Sh<strong>are</strong>s Owned by Our Direc<strong>to</strong>rs and Executive OfficersAs of February 29, 2012, our direc<strong>to</strong>rs and executive officers owned 1,333,826 sh<strong>are</strong>s of ourcommon s<strong>to</strong>ck entitled <strong>to</strong> vote, which represents approximately 4.74% of our outstanding sh<strong>are</strong>s(including restricted s<strong>to</strong>ck plus any s<strong>to</strong>ck options that <strong>are</strong> currently exercisable or that will becomeexercisable within 60 days of February 29, 2012). In addition, our direc<strong>to</strong>rs and executive officers hold(1) s<strong>to</strong>ck options <strong>to</strong> purchase up <strong>to</strong> an additional 102,316 sh<strong>are</strong>s of our common s<strong>to</strong>ck, which willbecome vested and exercisable at <strong>the</strong> effective time of <strong>the</strong> Merger, and (2) outstanding restricted s<strong>to</strong>ckunit and deferred s<strong>to</strong>ck unit awards <strong>to</strong> acquire up <strong>to</strong> an additional 155,002 sh<strong>are</strong>s of our commons<strong>to</strong>ck, which will become vested at <strong>the</strong> effective time of <strong>the</strong> Merger. See <strong>the</strong> section entitled‘‘Sh<strong>are</strong>holdings of Direc<strong>to</strong>rs and Management’’ below.Solicitation of ProxiesThe expense of soliciting proxies will be borne by <strong>the</strong> Company. Proxies will be solicited by mailand may be solicited, for no additional compensation, by officers, direc<strong>to</strong>rs or employees of <strong>the</strong>Company or its subsidiaries, by telephone, facsimile, electronic mail or in person. Brokerage houses ando<strong>the</strong>r cus<strong>to</strong>dians, nominees and fiduciaries may be requested <strong>to</strong> forward soliciting material <strong>to</strong> <strong>the</strong>beneficial owners of sh<strong>are</strong>s of <strong>the</strong> Company’s common s<strong>to</strong>ck, and will be reimbursed for <strong>the</strong>ir relatedexpenses.Receipt of Proxy StatementsCertain s<strong>to</strong>ckholders who sh<strong>are</strong> <strong>the</strong> same address may receive only one copy of this proxystatement in accordance with a notice previously delivered in early 2012 from such s<strong>to</strong>ckholders’ bank,broker, or o<strong>the</strong>r holder of record, unless <strong>the</strong> applicable bank, broker, or o<strong>the</strong>r holder of recordreceived contrary instructions. This practice, known as ‘‘householding,’’ is designed <strong>to</strong> reduce printingand postage costs. If you own your sh<strong>are</strong>s through a bank, broker, or o<strong>the</strong>r holder of record and wish<strong>to</strong> ei<strong>the</strong>r s<strong>to</strong>p or begin householding, you may request or s<strong>to</strong>p householding, or you may request aseparate copy of this proxy statement or <strong>the</strong> annual report, ei<strong>the</strong>r by contacting your bank, broker, oro<strong>the</strong>r holder of record at <strong>the</strong> telephone number or address provided in <strong>the</strong> above referenced notice, orby contacting us by telephone at 215.256.5000 or in writing <strong>to</strong> Harleysville Group Inc., 355 MapleAvenue, Harleysville, PA 19438-2297, Attention: Secretary. If you request <strong>to</strong> begin or s<strong>to</strong>phouseholding, you should provide your name, <strong>the</strong> name of your broker, bank, or o<strong>the</strong>r record holder,and your account information.22
S<strong>to</strong>ckholder Voting AgreementIn connection with <strong>the</strong> Merger Agreement, Harleysville Mutual, <strong>the</strong> owner as of such date ofapproximately 53.5% of <strong>the</strong> issued and outstanding sh<strong>are</strong>s of common s<strong>to</strong>ck of <strong>the</strong> Company, enteredin<strong>to</strong> a S<strong>to</strong>ckholder Voting Agreement with Nationwide Mutual (<strong>the</strong> ‘‘Voting Agreement’’). Pursuant <strong>to</strong><strong>the</strong> Voting Agreement, Harleysville Mutual agreed <strong>to</strong> vote its sh<strong>are</strong>s of common s<strong>to</strong>ck of <strong>the</strong> Companyin favor of <strong>the</strong> proposal <strong>to</strong> adopt <strong>the</strong> Merger Agreement and in any o<strong>the</strong>r circumstances upon which avote, consent or o<strong>the</strong>r approval is sought with respect <strong>to</strong> <strong>the</strong> Merger Agreement, <strong>the</strong> Merger or o<strong>the</strong>rtransactions contemplated by <strong>the</strong> Merger Agreement. Solely for purposes of <strong>the</strong> Voting Agreement,Harleysville Mutual has agreed <strong>to</strong> designate Nationwide Mutual as Harleysville Mutual’s proxy andat<strong>to</strong>rney-in-fact. Accordingly, unless <strong>the</strong> Voting Agreement is terminated as a result of <strong>the</strong> terminationof <strong>the</strong> Merger Agreement, Harleysville Mutual will vote its sh<strong>are</strong>s of common s<strong>to</strong>ck of <strong>the</strong> Company infavor of <strong>the</strong> proposal <strong>to</strong> adopt <strong>the</strong> Merger Agreement and <strong>the</strong> vote of no s<strong>to</strong>ckholder o<strong>the</strong>r thanHarleysville Mutual is required <strong>to</strong> adopt <strong>the</strong> Merger Agreement, and <strong>the</strong> Merger Agreement will beadopted at <strong>the</strong> Special Meeting. In addition, Harleysville Mutual has agreed <strong>to</strong> vote against (i) anymerger (o<strong>the</strong>r than <strong>the</strong> Mergers with Nationwide Mutual) or o<strong>the</strong>r sale of substantial assets, (ii) anyAlternative Transaction or Alternative Transaction Proposal, and (iii) any o<strong>the</strong>r action, agreement ortransaction that would reasonably be expected <strong>to</strong> result in a breach of any covenant, representation orwarranty or any o<strong>the</strong>r obligation or agreement of Harleysville Mutual contained in <strong>the</strong> MergerAgreement. The Voting Agreement will terminate upon <strong>the</strong> earlier of (i) <strong>the</strong> effective time of <strong>the</strong>Mergers, and (ii) <strong>the</strong> termination of <strong>the</strong> Merger Agreement in accordance with its terms. Prior <strong>to</strong>entering in<strong>to</strong> <strong>the</strong> Voting Agreement, <strong>the</strong> Company’s board of direc<strong>to</strong>rs also approved <strong>the</strong> VotingAgreement, <strong>the</strong>reby making Section 203 (Business Combinations with Interested S<strong>to</strong>ckholders) of <strong>the</strong>Delaw<strong>are</strong> General Corporation Law inapplicable <strong>to</strong> <strong>the</strong> Merger.THE MERGERIntroductionWe <strong>are</strong> seeking adoption by our s<strong>to</strong>ckholders of <strong>the</strong> Merger Agreement by and among us,Nationwide Mutual, Harleysville Mutual, and Merger Sub. In connection with <strong>the</strong> Merger, ours<strong>to</strong>ckholders will receive $60.00 in cash, without interest and less any applicable withholding taxes, foreach sh<strong>are</strong> of our common s<strong>to</strong>ck (o<strong>the</strong>r than (1) sh<strong>are</strong>s owned by <strong>the</strong> Company and its subsidiaries,(2) sh<strong>are</strong>s owned by Harleysville Mutual and its subsidiaries, which will be owned by NationwideMutual (as <strong>the</strong> surviving corporation of <strong>the</strong> P<strong>are</strong>nt Merger), and (3) sh<strong>are</strong>s for which appraisal rightshave been properly exercised under Delaw<strong>are</strong> law) outstanding immediately prior <strong>to</strong> <strong>the</strong> effective timeof <strong>the</strong> Merger.The Parties <strong>to</strong> <strong>the</strong> Merger AgreementHarleysville GroupHarleysville Group Inc.355 Maple AvenueHarleysville, Pennsylvania 19438Telephone: (215) 256-5000We <strong>are</strong> an insurance holding company headquartered in Pennsylvania which, <strong>to</strong>ge<strong>the</strong>r with oursubsidiaries, engages in <strong>the</strong> property and casualty insurance business on a regional basis in <strong>the</strong> UnitedStates. We <strong>are</strong> a Delaw<strong>are</strong> corporation formed by Harleysville Mutual in 1979 as a wholly ownedsubsidiary. In May 1986, we completed an initial public offering of our common s<strong>to</strong>ck, reducing <strong>the</strong>percentage of outstanding sh<strong>are</strong>s owned by Harleysville Mutual <strong>to</strong> approximately 70%. In April 1992,Harleysville Mutual completed a secondary public offering of a portion of <strong>the</strong> Company’s commons<strong>to</strong>ck <strong>the</strong>n owned by it, fur<strong>the</strong>r reducing <strong>the</strong> percentage of outstanding sh<strong>are</strong>s owned by Harleysville23
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should be executed by or for all jo
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including a request that the court
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A. Andrew Tignanelli v. W. Thacher
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oard of directors from performing i
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Effect of the MergerAt the effectiv
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No consideration will be paid to st
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• accuracy of information contain
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• receipt by Nationwide Mutual’
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affecting investment assets of us o
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e made pursuant to existing contrac
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No Solicitations by the CompanyUnde
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defined in the Merger Agreement) to
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• between the date of the Merger
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Termination Fee if the Mergers Are
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MARKET PRICE OF THE SHARES OF THE C
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SHAREHOLDINGS OF DIRECTORS AND MANA
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If you have questions about the Spe
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TABLE OF CONTENTSARTICLE I DEFINITI
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Section 7.12 Retention of Executive
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membership interests, by contract,
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‘‘Delaware Certificate of Merge
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avoidance of doubt, Harleysville De
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‘‘IRCA’’ means the Immigrat
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‘‘Order’’ means an order, i
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corporation) of which is beneficial
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Nationwide Mutual and will have the
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Section 3.2 HGI Stock Options and R
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(e) Promptly following the date tha
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have been made available to Nationw
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execution and delivery of this Agre
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Person the right to enjoin or resci
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listing on any list maintained by a
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accordance with their terms. Harley
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facility or assigned risk pool. To
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Section 4.20 Intellectual Property.
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ARTICLE VREPRESENTATIONS AND WARRAN
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are set forth in Section 5.2(b) of
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development involving a prospective
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(b) Except as set forth in Section
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extent that it is a party thereto,
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Section 5.15 Cancellations. Except
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(d) Except as set forth in Section
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agreements, information on the basi
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Section 5.21 Rating Agencies. Excep
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Agreement, the Mergers, the Voting
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Agreement with and the approval of
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Producers wrote, sold or produced s
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(o) Brokers or Finders. No broker,
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ARTICLE VIICOVENANTSSection 7.1 Har
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(i) Except as set forth in Section
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(w) Neither of the Harleysville Par
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Notwithstanding anything to the con
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(c) the receipt by such Party of an
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of any nature whatsoever and, speci
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Section 8.2 Stockholder Meeting and
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Section 9.2 Conditions to Obligatio
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(c) by any of the Harleysville Part
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or related to the authorization, pr
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allow the other Parties a reasonabl
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IN WITNESS WHEREOF, Nationwide Mutu
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In connection with this opinion, we
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APPENDIX CGENERAL CORPORATION LAW O
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either notice that such notice has