



                                 EXHIBIT 4





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                               DONEGAL GROUP INC.

                        1996 EMPLOYEE STOCK PURCHASE PLAN

                        As Adopted as of January 1, 1996


Section 1.  Purpose.

         The Donegal Group Inc. 1996 Employee Stock Purchase Plan has been
established by Donegal Group Inc. (the "Company") for the benefit of the
eligible employees of the Company, its parent, Donegal Mutual Insurance Company
(the "Mutual Company"), and participating subsidiaries of the Company and the
Mutual Company. The purpose of this Plan is to provide each eligible employee
with an opportunity to acquire or increase his proprietary interest in the
Company through the purchase of shares of the Company's Common Stock at a
discount from current market prices. This Plan is intended to meet the
requirements of Section 423 of the Internal Revenue Code of 1986, as amended
(the "Code").

         The Company has heretofore maintained The Donegal Group Inc. Employee
Stock Purchase Plan (the "Prior Plan"), pursuant to which Eligible Employees (as
hereinafter defined) with respect to this Plan are currently enrolled as
participants. The Company anticipates that all of the shares of the Company's
Common Stock received for issuance under the Prior Plan will be subscribed for
during the current subscription period under the Prior Plan. The first
Subscription Period (as hereinafter defined) under this Plan shall run
concurrently with the current subscription period under the Prior Plan so that,
after the shares reserved for issuance under the Prior Plan shall be fully
subscribed, shares of the Company's Common Stock reserved for issuance under
this Plan shall be issued to the extent necessary to fill such subscriptions,
and, in such event, shares issued under this Plan and under the Prior Plan shall
be allocated among participants on a pro rata basis or on such other reasonable
basis as management of the Company shall determine.

Section 2.  Eligible Employees.

         (a) Employees eligible to participate in this Plan ("Eligible
Employees") shall consist of all individuals: (i) who are full-time employees
(as defined in Section 2(b) of this Plan) of the Company, the Mutual Company or
any subsidiary (as defined in Section 425 of the Code) of the Company or the
Mutual Company (a "Participating Subsidiary"), and (ii) who have completed one
month of employment on or prior to the date on which an Enrollment Period (as
hereinafter defined) begins.

         (b) A "full-time employee" is an employee of the Company, the Mutual
Company or any Participating Subsidiary who works or is scheduled to work at
least 1,000 hours during any calendar year. An employee who is not scheduled to
work at least 1,000 hours during a calendar year, but who in fact works at least
1,000 hours during a calendar year, shall be considered a "full-time employee"
once the employee works for 1,000 hours during such year.



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         (c) A person who is otherwise an Eligible Employee shall not be granted
any right to purchase shares of the Company's Common Stock under this Plan to
the extent that: (i) based on such person's ownership of the Company's Common
Stock at the time the right is granted, such right, if exercised, would cause
the person to own shares of the Company's Common Stock (including shares that
would be owned if all outstanding options to purchase Common Stock held by such
person were exercised) that possess 5% or more of the total combined voting
power or value of all classes of stock of the Company, or any subsidiary of the
Company or the Mutual Company, or (ii) such right would cause such person to
have purchase rights under this Plan and all other stock purchase plans of the
Company, or any subsidiary of the Company or the Mutual Company that meet the
requirements of Section 423 of the Code that accrue at a rate that exceeds
$25,000 of fair market value of the Common Stock of the Company, or any
subsidiary of the Company or the Mutual Company (determined at the time the
right to purchase Common Stock under this Plan is granted) for each calendar
year in which such right is outstanding. For this purpose, a right to purchase
Common Stock accrues when such right first becomes exercisable during the
calendar year (but the rate of accrual for any calendar year may in no event
exceed $25,000 of the fair market value of the Common Stock subject to the
right), and the number of shares of Common Stock under one right may not be
carried over to any other right.

         (d) Notwithstanding anything to the contrary set forth in this Plan,
officers of the Company, the Mutual Company or any Participating Subsidiary who
are subject to Section 16 of the Securities Exchange Act of 1934 (the "Exchange
Act") with respect to their ownership of shares of the Company's Common Stock
("Section 16 Officers") shall be subject to the restrictions and conditions set
forth in Sections 7(b) and 9 of this Plan.

Section 3.  Duration of Plan and Subscription Periods.

         This Plan shall be in effect from January 1, 1996 through and including
December 31, 2005. During the term of this Plan, there shall be 20 semi-annual
"Subscription Periods." Each Subscription Period shall extend from January 1
through June 30 or from July 1 through December 31, respectively, with the first
Subscription Period beginning on January 1, 1996 and the last Subscription
Period ending on December 31, 2005.

Section 4.  Enrollment and Enrollment Period.

         Eligible Employees who are enrolled in the Prior Plan as of December
31, 1995 shall be deemed to be enrolled automatically in this Plan effective as
of the first Subscription Period. Thereafter, enrollment for participation in
this Plan shall take place during the "Enrollment Period" preceding each
Subscription Period, which shall be either the period from the 1st through the
31st day of December or the period from the 1st through the 30th day of June of
each year. Except as provided above regarding enrollment in this Plan as of the
first Subscription Period, any person who is an Eligible Employee and who
desires to subscribe for the purchase of Common Stock must file a subscription
agreement during an Enrollment Period, and such employee's participation in this
Plan shall commence at the outset of the next Subscription Period. Once
enrolled, an Eligible Employee shall continue to participate in this Plan for
each succeeding Subscription Period until such Eligible Employee terminates his
participation or ceases to be an Eligible

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Employee. An Eligible Employee who desires to change his rate of contribution
may do so effective as of the beginning of the next Subscription Period during
the Enrollment Period for the next Subscription Period. An Eligible Employee who
is not a Section 16 Officer may also change his rate of contribution during a
Subscription Period only pursuant to Section 7(b) of this Plan.

Section 5.  Number of Shares To Be Offered.

         The total number of shares to be made available under this Plan is
100,000 shares of the Company's Common Stock. Such Common Stock may be
authorized and unissued shares or shares issued and thereafter acquired by the
Company. In the event the total number of shares available for purchase under
this Plan are purchased prior to the expiration of this Plan, this Plan may be
terminated in accordance with Section 13 of this Plan.

Section 6.  Subscription Price.

         The "Subscription Price" for each share of Common Stock subscribed for
under this Plan during each Subscription Period shall be the lesser of 85% of
the fair market value of such share on the last trading day before the first day
of the Enrollment Period with respect to such Subscription Period or 85% of the
fair market value of such share on the last trading day of such Subscription
Period. The fair market value of a share shall be the closing price reported by
the Nasdaq Stock Market on the applicable date; provided, however, that the
Subscription Price shall never be less than $1.00 per share.

Section 7.  Amount of Contribution and Method of Payment.

         (a) The Subscription Price shall be payable by the Eligible Employee by
means of payroll deduction. The maximum payroll deduction shall be no more than
10% of an Eligible Employee's Base Pay (as hereinafter defined). The minimum
payroll deduction an Eligible Employee must authorize is a payroll deduction,
based on such employee's rate of Base Pay at the time of such authorization,
that will enable such employee to accumulate by the end of the Subscription
Period an amount sufficient to purchase at least ten shares of Common Stock. An
Eligible Employee may not make separate cash deposits toward the payment of the
Subscription Price.

         (b) An Eligible Employee who is not a Section 16 Officer may at any
time during a Subscription Period reduce the amount previously authorized to be
deducted from his Base Pay, provided the reduction conforms with the minimum
payroll deduction set forth in Section 7(a) of this Plan, by forwarding to the
Company a written notice setting forth the reduction in his payroll deduction.
The change shall become effective on a prospective basis as soon as practicable
after receipt by the Company of the change notice. A payroll deduction may be
changed under this Section 7(b) of this Plan, by forwarding to the Company a
written notice setting forth the reduction in his payroll deduction only once
during any Subscription Period and shall remain in effect for subsequent
Subscription Periods, subject to compliance with Section 7(a) of this Plan,

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until such Eligible Employee terminates his participation or ceases to be an
Eligible Employee. A Section 16 Officer may not change his rate of contribution
during a Subscription Period.

         (c) "Base Pay" means the straight-time earnings or regular salary paid
to an Eligible Employee. Base Pay shall not include overtime, bonuses or other
items that are not considered to be regular compensation by the committee
administering this Plan pursuant to Section 14 of this Plan. Payroll deductions
shall commence with the first paycheck issued during the Subscription Period and
shall continue with each paycheck throughout the entire Subscription Period,
except for pay periods for which the Eligible Employee receives no compensation
(i.e., uncompensated personal leave, leave of absence, etc.).

Section 8.  Purchase of Shares.

         The Company shall maintain on its books a "Plan Account" in the name of
each Eligible Employee who authorized a payroll deduction (a "participant"). At
the close of each pay period, the amount deducted from the participant's Base
Pay shall be credited to the participant's Plan Account. No interest shall be
paid by the Company on any Plan Account balance. As of the last day of each
Subscription Period, the amount then in the participant's Plan Account shall be
divided by the Subscription Price for such Subscription Period and the
participant's Plan Account shall be credited with the number of whole shares
that results. Share certificates shall be issued and delivered to each
participant within a reasonable time thereafter. Any amount remaining in a
participant's Plan Account shall be carried forward to the next Subscription
Period, but shall not otherwise reduce the amount a participant may contribute
pursuant to Section 7 of this Plan during the next Subscription Period. If a
participant does not accumulate sufficient funds in his Plan Account to purchase
at least ten shares of Common Stock during a Subscription Period, such
participant shall be deemed to have withdrawn from this Plan pursuant to Section
9 of this Plan.

         If the number of shares subscribed for during any Subscription Period
exceeds the number of shares available for purchase under this Plan, the
remaining shares available for purchase shall be allocated among all
participants in proportion to their Plan Account balances, exclusive of any
amounts carried forward pursuant to the preceding paragraph. If the number of
shares that would be credited to any participant's Plan Account in either or
both of the Subscription Periods occurring during any calendar year exceeds the
limit specified in Section 2(c) of this Plan, the participant's Plan Account
shall be credited with the maximum number of shares permissible, and the
remaining amounts shall be refunded in cash without interest thereon.

Section 9.  Withdrawal from this Plan.

         A participant other than a Section 16 Officer (unless the withdrawal
occurs pursuant to Section 10 of this Plan) may withdraw from this Plan at any
time by giving written notice of withdrawal to the Company. As soon as
practicable following receipt of a notice of withdrawal, the amount credited to
the participant's Plan Account shall be refunded in cash without interest
thereon. No further payroll deductions shall be made with respect to such
participant except in accordance with an authorization for a new payroll
deduction filed during a subsequent Enrollment Period in accordance with Section
4 of this Plan. A participant's withdrawal shall not affect his

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eligibility to participate during any succeeding Subscription Period. A
withdrawal by a Section 16 Officer, other than a withdrawal under Section 10 of
this Plan, shall not become effective until the Subscription Period that
commences after the date written notice of such withdrawal is received by the
Company.

Section 10.  Separation from Employment.

         Separation from employment for any reason, including death, disability
or retirement (as hereinafter defined) shall be treated as an automatic
withdrawal pursuant to Section 9 of this Plan. However, at the election of a
participant who retires, or in the event of a participant's death at the
election of his beneficiary, any cash balance in such participant's Plan Account
may be used to purchase the appropriate number of whole shares of Common Stock
at a Subscription Price determined in accordance with Section 6 of this Plan
using the date of his retirement or death as though it was the last day of the
Subscription Period. Any cash balance in the Plan Account after such purchase
shall be refunded in cash to the participant, or in the event of his death to
his beneficiary without interest thereon. A transfer of employment among the
Company, the Mutual Company or any Participating Subsidiary shall not be treated
as a separation from employment. As used in this Section 10, "retirement" means
a termination of employment by reason of a participant's retirement at or after
his earliest permissible retirement date pursuant to and in accordance with his
employer's regular retirement plan or practice.

Section 11.  Assignment and Transfer Prohibited.

         No participant may assign, pledge, hypothecate or otherwise dispose of
his subscription or rights to subscribe under this Plan to any other person, and
any attempted assignment, pledge, hypothecation or disposition shall be void,
provided that a participant may acquire the shares of Common Stock subscribed to
under this Plan in the name of the participant and another person jointly with
the right of survivorship upon appropriate written notice to the Company. No
subscription or right to subscribe granted to a participant under this Plan
shall be transferable by him otherwise than by will or by the laws of descent
and distribution, and such subscription rights shall be exercisable, during his
lifetime, only by the participant.

Section 12.  Adjustment of and Changes in the Common Stock.

         In the event that the outstanding shares of Common Stock of the Company
are hereafter increased or decreased or changed into or exchanged for a
different number or kind of shares or other securities of the Company, or of
another corporation, by reason of reorganization, merger, consolidation,
recapitalization, reclassification, stock split-up, stock dividend (either in
shares of the Company's Common Stock or of another class of the Company's
stock), spin-off or combination of shares, appropriate adjustments shall be made
by the Committee appointed pursuant to Section 14 of this Plan in the aggregate
number and kind of shares that are reserved for sale under this Plan.


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Section 13.  Amendment or Discontinuance of this Plan.

         The Board of Directors of the Company (the "Board") shall have the
right to amend, modify or terminate this Plan at any time without notice,
provided that no participant's existing rights are adversely affected thereby
and provided further that, without the approval of the holders of a majority of
the shares of the Company's Common Stock present or represented and entitled to
vote at a duly convened meeting of stockholders, no such amendment shall
increase the benefits accruing to participants under this Plan, increase the
total number of shares subject to this Plan, change the formula by which the
price at which the shares shall be sold is determined, or change the class of
employees eligible to participate in this Plan.

Section 14.  Administration.

         This Plan shall be administered by a committee to be appointed by the
Board consisting of three employees of the Company. The committee may from time
to time adopt rules and regulations for carrying out this Plan. Any
interpretation or construction of any provision of this Plan by the Board shall
be final and conclusive on all persons. Any interpretation or construction of
any provision of this Plan by the committee shall be final and conclusive on all
persons absent contrary action by the Board.

Section 15.  Designation of Beneficiary.

         A participant may file a written designation of a beneficiary who is to
receive any cash credited to the participant under this Plan in the event of
such participant's death prior to the delivery to him of such cash. Such
designation of a beneficiary may be changed by the participant at any time upon
written notice. Upon the death of a participant and upon receipt by the
committee of proof of the participant's death and of the identity and existence
of a beneficiary validly designated by him under this Plan, the Company shall
deliver such cash to such beneficiary. In the event of the death of a
participant and in the absence of a beneficiary validly designated under this
Plan who is living at the time of such participant's death, the Company shall
deliver such cash to the executor or administrator of the estate of the
participant, or if no such executor or administrator has been appointed (to the
knowledge of the Company), the Company, in its sole discretion, may deliver such
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent, or relative is known to the Company,
then to such other person as the Company may designate. No designated
beneficiary shall, prior to the death of the participant by whom he has been
designated, acquire any interest in the shares or cash credited to the
participant under this Plan.

Section 16.  Employees' Rights.

         Nothing contained in this Plan shall prevent the Company, the Mutual
Company or any Participating Subsidiary from terminating any employee's
employment. No employee shall have any rights as a stockholder of the Company by
reason of participation in this Plan unless and until certificates representing
the shares of Common Stock for which he has subscribed shall have been issued
and delivered by the Company.

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Section 17.  Use of Funds.

         All payroll deductions received or held by the Company under this Plan
may be used by the Company for any corporate purpose, and the Company shall not
be obligated to segregate such payroll deductions.

Section 18.  Government Regulations.

         The Company's obligation to sell and deliver Common Stock under this
Plan is subject to any prior approval or compliance that may be required to be
obtained or made from or with any governmental or regulatory authority in
connection with the authorization, issuance or sale of such Common Stock.

Section 19.  Titles.

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

Section 20.  Applicable Law.

         This Plan shall be construed, administered and governed in all respects
under the laws of the Commonwealth of Pennsylvania and the United States of
America.

Section 21.  Compliance with Rule 16b-3.

         To the extent that Rule 16b-3 under the Exchange Act applies to
purchases made under this Plan, it is the intent of the Company that this Plan
comply in all respects with the requirements of Rule 16b-3, that any ambiguities
or inconsistencies in the construction of this Plan be interpreted to give
effect to such intention and that if this Plan shall not so comply, whether on
the date of adoption or by reason of any later amendment to or interpretation of
Rule 16b-3, the provisions of this Plan shall be deemed to be automatically
amended so as to bring them into full compliance with such rule.

Section 22.  Approval of Stockholders.

         Prior to January 1, 1997, this Plan shall be submitted for approval by
the affirmative vote of the holders of a majority of the shares of the Company's
Common Stock present or represented and entitled to vote at a duly convened
meeting of stockholders. Subscriptions for the purchase of shares under this
Plan shall be subject to the condition that this Plan shall be approved by the
stockholders of the Company prior to such date in the manner contemplated by
Section 423(b)(2) of the Code. If not so approved prior to such date, this Plan
shall terminate, all subscriptions hereunder shall be cancelled and be of no
further force or effect and all participants shall be entitled to the prompt
refund in cash, without interest, of all sums previously deducted from their
compensation pursuant to this Plan.


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