Exhibit
3.2
AMENDED AND RESTATED
BY-LAWS
of
DONEGAL GROUP INC.
Adopted April 19, 2007
Article 1
CORPORATION OFFICE
Section 1.1
.
Registered Office
. The registered office of the Corporation
shall be Capitol Corporate Services, Inc., 32 Loockerman Square, Suite 109, Dover, Delaware 19904.
Section 1.2
.
Principal Office
. The principal office of the Corporation shall
be in Marietta, Pennsylvania.
Section 1.3
.
Other Offices
. The Corporation may also have offices at such
other places as the Board of Directors may from time to time designate or the business of the
Corporation may from time to time require.
Article 2
STOCKHOLDERS
Section 2.1
.
Place and Time of Meetings
. All meetings of the stockholders
shall be held at such time and place as may be fixed from time to time by the Board of Directors
and stated in the notice of meeting.
Section 2.2
.
Annual Meeting
.
(a) The annual meeting of the stockholders shall be held on the third Thursday in April in
each year, if not a legal holiday, and, if a legal holiday, then on the next succeeding business
day, at the Corporation’s principal office or at such other place, date and time as shall be
designated from time to time by the Board of Directors and stated in the notice of meeting.
(b) At each annual meeting, the stockholders shall elect successors to the directors whose
terms shall expire that year to serve for the following three years and until their
successors shall have been duly elected or until their earlier death, resignation or removal.
The stockholders also shall transact such other business as may properly be brought before the
annual meeting and is in compliance with the provisions of these By-laws.
Section 2.3
.
Stockholder Proposals
.
(a) Nominations of persons for election to the Board of Directors (“Stockholder Nominations”)
and proposals of business to be transacted by the stockholders (“Stockholder Proposals”) may be
made at an annual meeting of stockholders (i) pursuant to the Corporation’s notice to stockholders
with respect to such annual meeting, (ii) by or at the direction of the Board of Directors of the
Corporation or (iii) by any stockholder of record of the Corporation who (A) was a stockholder of
record at the time of the giving of the notice provided in paragraph (b) of this Section 2.3, (B)
who is entitled to vote at the meeting and (C) who has complied with the prior notice procedures in
paragraph (b) of this Section 2.3.
(b) For Stockholder Nominations or Stockholder Proposals to be brought properly before an
annual meeting by a stockholder pursuant to clause (a)(iii) of this Section 2.3, (i) the
stockholder must have given timely notice (a “Proposing Stockholder’s Notice”) in writing of the
nomination or item of proposed business to the Secretary of the Corporation and (ii) such business
must be a proper matter for stockholder action under the General Corporation Law of the State of
Delaware (the “DGCL”). To be timely, a Proposing Stockholder’s Notice must be received by the
Secretary of the Corporation at the principal executive offices of the Corporation not less than 90
calendar days nor more than 120 calendar days prior to the first anniversary of the date on which
the Corporation first mailed its proxy statement to stockholders for its annual meeting of
stockholders in the immediately preceding year; provided, however, that in the case of an annual
meeting of stockholders that is called for a date that is not within 30 calendar days before or 30
calendar days after the first anniversary of the annual meeting of stockholders in the immediately
preceding year, the Proposing Stockholder’s Notice, to be timely, must be received by the Secretary
of the Corporation not later than the close of business on the later of (x) the 90
th
day
prior to such annual meeting or (y) the 10
th
day following the day on which a Public
Announcement, as defined in Section 2.3(e) of these By-laws, of the date of such annual meeting is
first made.
(c) The Proposing Stockholder’s Notice shall set forth (i) as to each person whom the
Proposing Stockholder nominates for election or reelection as a director all information relating
to such person as would be required to be disclosed in a solicitation of proxies for the election
of such nominees as directors pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), and the written consent of each such person to serve as a director
if elected; (ii) as to any other business that the Proposing Stockholder intends to bring before
the annual meeting, a brief description of such business, the Proposing Stockholder’s reasons for
presenting such business at the annual meeting and any material interest of the Proposing
Stockholder in such business; (iii) as to the Proposing Stockholder (A) the name and address of the
Proposing Stockholder, as the same appears on
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the Corporation’s books, (B) the number of shares of the Corporation’s Class A Common Stock
and Class B Common Stock that are owned beneficially within the meaning of Securities and Exchange
Commission (“SEC”) Rule 13d-3 and of record by the Proposing Stockholder; (C) the principal
occupation or employment of each person whose nomination is so proposed during the five-year period
preceding the date of the Proposing Stockholder’s Notice and (D) a description of any arrangement
or understanding between each person whose nomination is proposed and the Proposing Stockholder
with respect to such person’s nomination and election as a director and actions to be proposed or
taken by such person if elected as a director.
(d) Only persons nominated in accordance with the procedures set forth in this Section 2.3
shall be eligible for election as directors of the Corporation and only such business shall be
conducted at an annual meeting of stockholders as shall have been brought before such annual
meeting in accordance with the procedures set forth in this Section 2.3. The chairman of the
annual meeting shall determine in his discretion whether a nomination or an item of business has
been proposed in accordance with the procedures set forth in this Section 2.3. If any Stockholder
Nomination or Stockholder Proposal has not been made in compliance with these By-laws, the chairman
of the meeting shall declare that the improperly proposed Stockholder Nomination or improperly
proposed Stockholder Proposal has not been properly presented for stockholder action at the annual
meeting and such Stockholder Nomination or Stockholder Proposal shall not be considered or acted
upon at the annual meeting.
(e) For purposes of these By-laws, “Public Announcement” shall mean disclosure by the
Corporation in a press release reported by the Dow Jones News Service, the Associated Press or a
comparable national news service or in a document filed by the Corporation with the SEC pursuant to
the Exchange Act.
(f) Notwithstanding the foregoing provisions of this Section 2.3, a stockholder shall also
comply with all applicable requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth in this Section 2.3. Nothing in this Section 2.3
shall affect any rights of stockholders to request inclusion of proposals in a proxy statement of
the Corporation pursuant to Rule 14a-8 under the Exchange Act.
Section 2.4
.
Special Meetings
.
(a) Special meetings of the stockholders may be called at any time by the President of the
Corporation and shall be called by the Secretary of the Corporation at the request in writing of
the Board of Directors acting pursuant to a resolution adopted by a majority of the Whole Board or
by stockholders owning at least one-fifth of the voting power of the entire outstanding capital
stock of the Corporation entitled to vote thereat. For purposes of these By-laws, the term “Whole
Board” shall mean the number of directors then in office notwithstanding that the number of
directors then in office is less than the number of
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directors determined by the Board of Directors pursuant to Section 3.2 of these By-laws. The
Board of Directors may, in its discretion, postpone or reschedule any previously scheduled special
meeting of the stockholders.
(b) Only such business shall be conducted at a special meeting of stockholders as shall have
been brought before the meeting pursuant to the Corporation’s notice of meeting. If the
Corporation’s notice of the special meeting provides for the election of directors, the only
persons who may be nominated for such election are candidates who are nominated pursuant to (i) the
Corporation’s notice of meeting (ii) by or at the discretion of the Board of Directors of the
Corporation or (iii) by any stockholder of record of the Corporation (A) who is a stockholder of
record at the time of giving of notice provided for in this Section 2.4 (b), (B) who shall be
entitled to vote at the special meeting and (C) who furnishes all of the information with respect
to nominees and the Proposing Stockholder set forth in Section 2.3(c) of these By-laws within the
time limits set forth in Section 2.4(c) of these By-laws.
(c) Nominations by stockholders of candidates for election to the Board of Directors of the
Corporation may be made at a special meeting of stockholders if timely notice in writing of such
nominations is given to the Secretary of the Corporation. To be timely, such notice must be
received by the Secretary of the Corporation at the principal executive offices of the Corporation
not later than the close of business on the later of (x) the 90
th
day prior to the
special meeting of the stockholders or (y) the 10
th
day following the day on which a
Public Announcement of the date of such special meeting is first made.
Section 2.5
.
Notice of Meetings
. Written notice of all meetings of
stockholders other than adjourned, postponed or continued meetings of stockholders, stating the
place, date and hour, and, in the case of special meetings of stockholders, the purpose or purposes
thereof, shall be served upon or mailed, postage prepaid, or telegraphed, charges prepaid, not less
than ten nor more than sixty days before the date of the meeting to each stockholder entitled to
vote thereat at such address as appears on the books of the Corporation. Such notices may be given
at the discretion of, or in the name of, the Board of Directors, the President, any Vice President,
the Secretary or any Assistant Secretary. When a meeting is adjourned, postponed or continued, it
shall not be necessary to give any notice of the adjourned, postponed or continued meeting or of
the business to be transacted at the adjourned, postponed or continued meeting, other than by
announcement at the meeting at which such adjournment, postponement or continuation is taken,
provided, however, that if the date of any adjourned meeting is more than 30 days after the date
for which the meeting was originally noticed, or if a new record date is fixed for the adjourned
meeting, notice of the place, date and time of the adjourned meeting shall be given in conformity
with this Section 2.5. At any adjourned meeting, any business may be transacted that might have
been transacted at the originally noticed meeting.
Section 2.6
.
Quorum of and Action by Stockholders
. The presence, in person
or by proxy, of the holders of a majority of the voting power of all of the shares of stock which
all
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stockholders are entitled to cast on the particular matter shall constitute a quorum for
purposes of considering such matter, and, unless otherwise specifically provided by the DGCL, the
acts of such stockholders at a duly organized meeting shall be the acts of stockholders with
respect to such matter. If, however, such quorum shall not be present at any meeting of the
stockholders, the stockholders entitled to vote present in person or by proxy at the meeting may,
except as otherwise provided by the DGCL, adjourn, postpone or continue the meeting from time to
time to such time, date and place as they may determine, without notice other than an announcement
at the meeting, except as otherwise provided in Section 2.5 of these By-laws, until a quorum shall
be present in person or by proxy.
At any adjourned, postponed or continued meeting at which a quorum had been present,
stockholders present in person or by proxy at a duly organized and constituted meeting, can
continue to do business with respect to any matter properly submitted to the meeting until
adjournment, postponement or continuation thereof notwithstanding the withdrawal of enough
stockholders to leave less than a quorum for the purposes of considering any particular such
matter.
Section 2.7
.
Organization and Conduct of Business at Meetings of
Stockholders
.
(a) Such person as the Board of Directors may have designated or, in the absence of such a
designation, the President of the Corporation or, in the absence of the President, such person as
may be chosen by the holders of a majority of the voting power of the shares of the Corporation’s
stock entitled to vote who are present, in person or by proxy, shall call to order any meeting of
stockholders and serve as chairman of the meeting. In the absence of the Secretary of the
Corporation, the chairman of the meeting shall appoint the Secretary of the meeting.
(b) The chairman of the meeting of stockholders shall determine the order of the business and
the procedure at such meeting, including such regulation of the manner of voting and the conduct of
discussion as the chairman of the meeting determines, in his sole discretion, to be in order. The
chairman of the meeting shall have the power to adjourn the meeting to another place, date and
time. The time of the opening and closing of the polls for each matter upon which the stockholders
will vote at the meeting shall be announced at the meeting.
Section 2.8
.
Voting
. Except as may be otherwise provided by the DGCL or by
the Certificate of Incorporation, at every meeting of the stockholders, every holder of Class A
Common Stock entitled to vote thereat shall have the right to one-tenth of one vote for every share
of Class A Common Stock standing in such stockholder’s name on the stock transfer books of the
Corporation on the record date fixed for the meeting and every holder of Class B Common Stock
entitled to vote thereat shall have the right to one vote for every share of Class B Common Stock
standing in such stockholder’s name on the stock transfer books of the Corporation on the record
date fixed for the meeting.
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When a quorum exists at any meeting, the vote of the holders of Class A Common Stock and Class
B Common Stock having a majority of the voting power present at such meeting in person or by proxy,
shall decide any question brought before such meeting, unless the question is one for which, by
express provision of the DGCL or of the Certificate of Incorporation or of these By-laws, a
different vote is required. At any election of directors, the election shall be by ballot, and the
inspector or inspectors of election or, if none, the Secretary of the meeting, shall tabulate the
ballots and certify the results of such vote.
Section 2.9
.
Voting by Proxy
. At any meeting of stockholders, every
stockholder entitled to vote may vote in person or by proxy authorized by an instrument in writing
or by a transmission permitted by the DGCL filed in accordance with the procedure established for
the meeting. Any copy, facsimile telecommunication or other reliable reproduction of the writing
or transmission created pursuant to this Section 2.9 may be substituted or used in lieu of the
original writing or transmission for any and all purposes for which the original writing or
transmission could be used, provided that such copy, facsimile telecommunication or other
reproduction shall be a complete reproduction of the entire original writing or transmission.
Every proxy shall be filed with the Secretary of the Corporation. A proxy, unless coupled with an
interest, shall be revocable at will, notwithstanding any other agreement or any provision in the
proxy to the contrary, but the revocation of a proxy shall not be effective until written notice
thereof has been given to the Secretary of the Corporation. A proxy shall not be revoked by the
death or incapacity of the maker, unless, before the vote is counted or the authority is exercised,
written notice of such death or incapacity is given to the Secretary of the Corporation.
Section 2.10
.
Record Date
. The Board of Directors may fix a time, not more
than sixty nor less than ten days prior to the date of any meeting of the stockholders, or the date
fixed for the payment of any dividend or distribution, or the date for the allotment of rights or
the date when any change or conversion or exchange of shares will be made or go into effect, as the
record date for the determination of the stockholders entitled to notice of, or to vote at, such
meeting, or to receive any such allotment of rights or to exercise the rights in respect to any
such change or conversion or exchange of shares. In such case, only such stockholders as shall be
stockholders of record on the date so fixed shall be entitled to notice of, or to vote at, such
meeting or to receive payment of such dividend, or to receive such allotment of rights or to
exercise such rights, as the case may be, notwithstanding any transfer of any shares on the books
of the Corporation after any record date fixed as aforesaid.
Section 2.11
.
Stockholders List
. The officer or agent having charge of the
stock transfer books for shares of the Corporation shall make, at least ten days before each
meeting of the stockholders, a complete alphabetical list of the holders of each class of stock
entitled to vote at the meeting, with their addresses and the number and class of shares held by
each, which list shall be kept on file either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting or, if not so specified, at the
place
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where the meeting is to be held and shall be subject to inspection by any stockholder for any
purpose germane to the meeting during usual business hours for a period of at least 10 days prior
to the meeting. Such list shall be produced and kept at the time and place of the meeting during
the whole time thereof and may be inspected by any stockholder who is present. The original stock
transfer books of the Corporation shall be prima facie evidence as to who are the stockholders
entitled to exercise the rights of a stockholder.
Section 2.12
.
Inspectors of Election
. In advance of any meeting of the
stockholders, the Board of Directors shall appoint one or more inspectors of election, who need not
be stockholders, to act at such meeting or any adjournment, postponement or continuation thereof.
Each inspector of election, before conducting his duties, shall take and sign an oath of office to
execute faithfully the duties of inspector with strict impartiality and to the best of his ability.
The number of inspectors of election shall be one or three. If no inspector of election so
appointed is able to act at a meeting of stockholders, the chairman of any such meeting shall make
such appointment at the meeting. No person who is a candidate for office shall act as an inspector
of election.
All elections shall be determined by a plurality of the votes cast, and, except as otherwise
provided by the DGCL, all other matters shall be determined by a majority of the voting power of
the shares cast affirmatively or negatively.
The inspectors of election shall do all such acts as may be proper to conduct the election or
vote and such other duties as may be prescribed by the DGCL with fairness to all stockholders, and
shall make a written report of any matter determined by them and execute a certificate as to any
fact found by them. If there is more than one inspector of election, the decision, act or
certificate of a majority shall be the decision, act or certificate of all.
Section 2.13
.
Action by Majority Consent of the Stockholders
. Any action
required to be taken at an annual or special meeting of stockholders, or of a class thereof, or any
action which may be taken at any annual or special meeting of such stockholders, or of a class
thereof, may be taken without a meeting, without prior notice and without a vote, if a consent or
consents in writing setting forth the action so taken shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were present and voted and
shall be delivered to the Secretary of the Corporation at its principal place of business as
specified in Section 1.2.
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Article 3
DIRECTORS
Section 3.1
.
Powers
.
(a)
General Powers
. The Board of Directors shall have all the power and authority
granted by law to the Board of Directors, including all powers necessary or appropriate to the
management of the business and affairs of the Corporation.
(b)
Specific Powers
. Without limiting the general powers conferred by the last
preceding clause and the powers conferred by the Certificate of Incorporation and the By-laws of
the Corporation, it is hereby expressly declared that the Board of Directors shall have the
following powers:
(i) To appoint any person, firm or corporation to accept and hold in trust for the Corporation
any property belonging to the Corporation or in which it is interested, and to authorize any such
person, firm or corporation to execute any documents and perform any duties that may be requisite
in relation to any such trust;
(ii) To appoint a person or persons to vote shares of another corporation held and owned by
the Corporation and, in the absence of any such appointment, the Board of Directors of the
Corporation shall have the authority to vote any such shares;
(iii) By resolution adopted by a majority of the Whole Board, to designate one or more
committees, each committee to consist of two or more of the directors of the Corporation. To the
extent provided in any such resolution, and to the extent permitted by law, a committee so
designated shall have and may exercise the authority of the Board of Directors in the management of
the business and affairs of the Corporation. The Board of Directors may designate one or more
directors as alternate members of any committee, who may replace any absent or disqualified member
at any meeting of the committee. If specifically granted this power by the Board of Directors in
its resolution establishing the committee, in the absence or disqualification of any member and all
designated alternates of such committee or committees or if the Whole Board has failed to designate
alternate members, the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint another director to
act at the meeting in the place of any such absent or disqualified member;
(iv) To fix the place, time and purpose of meetings of the stockholders;
(v) To appoint or terminate officers of the Corporation and to fix the compensation of
officers for their services as set forth in Article 4 of these By-laws; and
(vi) To fix the compensation of directors for their services.
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Section 3.2
.
Number and Terms of Directors
. The number of directors which
shall constitute the whole Board of Directors shall be not less than seven nor more than twelve.
Directors shall be natural persons of full age and need not be residents of Delaware or
stockholders of the Corporation. Within the limits above specified, the number of directors shall
be as determined from time to time by resolution of the Board of Directors. Except as hereinafter
provided in the case of vacancies, each director shall be elected by the affirmative vote of a
plurality of the votes cast by the holders of Class A Common Stock and of Class B Common Stock
voting together as a single class for a term of three years and until his successor has been
elected.
Section 3.3
.
Classes
. The Board of Directors shall be divided into three
classes: Class A, Class B and Class C. At each annual meeting of the stockholders, the successors
to the directors of the class whose term shall expire in that year shall be elected for a term of
three years so that the term of office of one class of directors shall expire in each year. The
number of directors in each class shall be as nearly equal as possible so that, except for
temporary vacancies, the number in any class shall not exceed the number in any other class by more
than one.
Section 3.4
.
Powers and Duties of the Chairman of the Board of Directors
.
The Board of Directors shall appoint one of their number as the Chairman of the Board who shall
preside at all meetings of the Board of Directors and who shall have such other powers and duties
as may be assigned to him from time to time by the Board of Directors.
Section 3.5
.
Powers and Duties of the Vice Chairman of the Board of
Directors
. The Board of Directors may, in its discretion, appoint one of its number as a Vice
Chairman of the Board of Directors. In the absence of the Chairman of the Board of Directors, the
Vice Chairman of the Board of Directors shall preside at all meetings of the Board of Directors.
In addition, the Vice Chairman of the Board of Directors shall have such other powers and duties as
may be assigned to him from time to time by the Board of Directors.
Section 3.6
.
Vacancies
. Vacancies on the Board of Directors, including
vacancies resulting from an increase in the number of directors or resulting from a death,
resignation, retirement, removal from office or other cause, shall be filled by a majority of the
remaining members of the Board of Directors, though less than a quorum (and not by stockholders) ,
or by the sole remaining director, as the case may be, irrespective of whether holders of any class
or series of stock or other voting securities of the Corporation are entitled to elect one or more
directors to fill such vacancies or newly created directorships at the next annual meeting of the
stockholders. Each person so elected shall be a director until his successor is elected by the
stockholders at the annual meeting of the stockholders at which the class of directors to which he
was elected is up for election. No decrease in the number of authorized directors shall shorten
the term of any incumbent director.
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Section 3.7
.
Organization Meetings
. The organization meeting of each newly
elected Board of Directors shall be held immediately following each annual meeting of the
stockholders at which directors were elected without the necessity of notice to such directors to
constitute a legally convened meeting or at such time and place as may be fixed by a notice, or a
waiver of notice, or a consent signed by all of such directors. At such meeting, the Board of
Directors shall elect officers of the Corporation and may also choose an Executive Committee
consisting of two members of the Board of Directors in addition to the President.
Section 3.8
.
Regular Meetings
. The Board of Directors shall have the power
to fix by resolution the place, date and hour of regular meetings of the Board of Directors. A
notice of each regular meeting shall not be required.
Section 3.9
.
Special Meetings
. Special meetings of the Board of Directors
may be called by the President of the Corporation on one day’s notice to each director, either
personally or by mail, telephone or electronic mail. Special meetings of the Board of Directors
shall be called by the President or the Secretary of the Corporation in like manner and on like
notice upon the written request of any five directors. Unless otherwise indicated in the notice
thereof, any and all business may be transacted at a special meeting.
Section 3.10
.
Notices of Meetings
. All meetings of the Board of Directors
may be held at such times and places as may be specified in the notice of meeting or in a duly
executed waiver of notice thereof. One or more directors may participate in any meeting of the
Board of Directors, or of any committee thereof, by means of a conference telephone or similar
communications equipment which enables all persons participating in the meeting to hear one
another, and such participation in a meeting shall constitute presence in person at the meeting.
Section 3.11
.
Quorum
. At all meetings of the Board of Directors, the
presence, in person or by telephonic or similar communications equipment, of a majority of the
members of the Whole Board shall constitute a quorum for the transaction of business and the acts
of a majority of the directors present at a duly convened meeting at which a quorum is present
shall be the acts of the Board of Directors, except as may be otherwise specifically provided by
the DGCL, by the Certificate of Incorporation of the Corporation or by these By-laws. If a quorum
shall not be present, in person or by telephonic or similar communications equipment, at any
meeting of the Board of Directors, the directors present may adjourn, postpone or continue the
meeting from time to time, without notice other than announcement at the meeting, until a quorum
shall be so present.
Section 3.12
.
Action by Unanimous Written Consent
. Any action required or
permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be
taken without a meeting if all members of the Board of Directors or a committee
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thereof, as the case may be, consent thereto in writing, and such consent is filed with the
minutes of proceedings of the Board of Directors or committee.
Section 3.13
.
Compensation
. Directors, as such, may receive a stated salary
for their services, or a fixed sum and expenses for attendance at regular or special meetings of
the Board of Directors, or any committee thereof, or any combination of the foregoing as may be
determined from time to time by resolution of the Board of Directors, and nothing contained herein
shall be construed to preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor.
Section 3.14
.
Coordinating Committee
. The Coordinating Committee shall
consist of two members of the Corporation’s Board of Directors, each of whom is not a member of the
Board of Directors or an officer of Donegal Mutual Insurance Company (“Donegal Mutual”), and two
members of the Board of Directors of Donegal Mutual, each of whom is not a member of the Board of
Directors or an officer of the Corporation. The Coordinating Committee shall review and either
approve or disapprove all contracts and other matters involving actual or potential conflicts of
interest between the Corporation and Donegal Mutual, including any proposed amendment to this
Section 3.14. Whenever any new contract between the Corporation and Donegal Mutual is proposed,
any change is proposed in any existing contract between the Corporation and Donegal Mutual, any
amendment is proposed to this Section 3.14 or any other matter arises that presents an actual or
potential conflict of interest between the Corporation and Donegal Mutual, such new contract,
change in an existing contract, proposed amendment to this Section 3.14 or other matter shall (i)
first be submitted to the Coordinating Committee for its consideration thereof and only if (A) both
of the Corporation’s members of the Coordinating Committee conclude that such new contract, change
in an existing contract, amendment to this Section 3.14 or other matter is fair and equitable to
the Corporation and its stockholders and (B) both of Donegal Mutual’s members of the Coordinating
Committee conclude that such new contract, change in an existing contract, amendment to this
Section 3.14 or other matter is fair and equitable to Donegal Mutual and its policyholders and (ii)
if conditions (A) and (B) have been satisfied, such proposed new contract, change in an existing
contract, amendment to this Section 3.14 or other matter shall be submitted for approval to the
respective Boards of Directors of the Corporation and Donegal Mutual. For purposes of this Section
3.14, the term “the Corporation” shall mean Donegal Group Inc. and its direct and indirect wholly
owned subsidiaries and the term “Donegal Mutual” shall mean Donegal Mutual Insurance Company and
its direct and indirect wholly owned subsidiaries.
Section 3.15
.
Executive Committee
. There shall be an Executive Committee
that shall have and exercise all power and authority of the Board of Directors between meetings of
the Board of Directors to the extent consistent with the DGCL. The Executive Committee shall
consist of not fewer than three members of the Board of Directors, one of whom shall be the Chief
Executive Officer of the Corporation and who shall be Chairman of the Executive
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Committee, unless another member shall be designated by resolution of the Board of Directors.
The members of the Executive Committee shall be designated from time to time by resolution of the
Board of Directors. Not less than one-third of the members of the Executive Committee must be
directors who are not officers or employees of the Corporation or of any entity controlling,
controlled by or under common control with the Corporation and who are not beneficial owners of a
controlling interest in the voting securities of the Corporation. The Executive Committee shall
meet at any time and place designated upon not fewer than six hours oral or written notice given by
or on behalf of the Chairman of the Executive Committee. The Executive Committee shall report
promptly to the entire Board of Directors the substance of any action taken by the Executive
Committee.
Section 3.16
.
Audit Committee
. The Board of Directors shall appoint annually
an Audit Committee that shall consist of not fewer than three directors who satisfy applicable
independence requirements, are not officers or employees of the Corporation or of any entity
controlling, controlled by or under common control with the Corporation and who are not beneficial
owners of a controlling interest in the voting securities of the Corporation. The Audit Committee
shall operate in accordance with its written charter adopted by the Board of Directors on March 19,
2004 as the same may be amended from time to time and shall have responsibility for the selection
of the Corporation’s independent registered public accounting firm, reviewing the scope and results
of the audit and reviewing the adequacy of the Corporation’s accounting, financial, internal and
operating controls.
Section 3.17
.
Nominating Committee
. The Board of Directors shall appoint
annually a Nominating Committee which shall consist of not fewer than two directors who satisfy
applicable independence requirements, are not officers or employees of the Corporation or of any
entity controlling, controlled by or under common control with the Corporation and who are not
beneficial owners of a controlling interest in the voting securities of the Corporation. The
Nominating Committee shall operate in accordance with its written charter, as adopted by the Board
of Directors on March 19, 2004, as the same may be amended from time to time, and shall have
responsibility for identification of individuals believed to be qualified to become members of the
Board of Directors and to recommend to the Board of Directors nominees to stand for election as
directors, identification of members of the Board of Directors qualified to serve on the various
committees of the Board of Directors, evaluation of the procedures and processes by which the
committees of the Board of Directors conduct a self-evaluation of their performance and provision
to the Board of Directors of an annual performance evaluation of the Nominating Committee.
Section 3.18
.
Compensation Committee
. The Board of Directors shall appoint
annually a Compensation Committee that shall consist of not fewer than two directors who satisfy
applicable independence requirements, are not officers or employees of the Corporation or of any
entity controlling, controlled by or under common control with the Corporation and who are not
beneficial owners of a controlling interest in the voting
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securities of the Corporation. The Compensation Committee shall be responsible for the annual
review of the compensation of the Corporation’s executive officers, the provision of annual
compensation recommendations to the Board of Directors for all of the Corporation’s employees,
including its executive officers, the determination of employees who participate in the
Corporation’s employee stock option plans and the provision of recommendations to the Board of
Directors as to individual stock option grants, the review of the Corporation’s employee benefit
plans and the performance of such other responsibilities as may be assigned to it by the Board of
Directors.
Section 3.19
.
Conduct of Business by Committees
. Each committee of the Board
of Directors of the Corporation may determine the procedural rules for meeting and conducting its
business and shall act in accordance therewith, except as otherwise provided in these By-laws or
the DGCL. Adequate provision shall be made for notice to members of all Committee meetings.
Article 4
OFFICERS
Section 4.1
.
Election and Office
. The officers of the Corporation shall be
elected annually by the Board of Directors at its organization meeting and shall consist of a
President, a Secretary and a Treasurer. The Board of Directors may also elect one or more Vice
Presidents and such other officers and appoint such agents as it shall deem necessary. Each
officer of the Corporation shall hold office for such term, have such authority and perform such
duties as set forth in these By-laws or as may from time to time be prescribed by the Board of
Directors in consultation with the President. Any two or more offices may be held by the same
person.
Section 4.2
.
Salaries
. The salaries of all officers of the Corporation shall
be fixed by the Board of Directors.
Section 4.3
.
Removal and Vacancies
. The Board of Directors may remove any
officer or agent elected or appointed at any time and within the period, if any, for which such
person was elected or employed whenever in the judgment of the Board of Directors it is in the best
interests of the Corporation, and all persons shall be elected and employed subject to the
provisions hereof. If the office of any officer becomes vacant for any reason, the vacancy shall
be filled by the Board of Directors.
Section 4.4
.
Powers and Duties of the President
. Unless otherwise determined
by the Board of Directors, the President shall have the usual duties of a chief executive officer
with general supervision over and direction of the affairs of the Corporation. In the exercise of
these duties and subject to the limitations of the DGCL or any other applicable law, the
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Amended and Restated Certificate of Incorporation, these By-laws and the actions of the Board
of Directors, he may appoint, suspend and discharge officers, employees and agents, may fix the
compensation of all officers and assistant officers, shall preside at all meetings of the
stockholders at which he shall be present, and, unless there is a Chairman of the Board of
Directors, shall preside at all meetings of the Board of Directors and shall be a member of all
committees. He shall also do and perform such other duties as from time to time may be assigned to
him by the Board of Directors.
Unless otherwise determined by the Board of Directors, the President shall have full power and
authority on behalf of the Corporation to attend and to act and to vote at any meeting of the
stockholders of any corporation in which the Corporation may hold stock, and, at any such meeting,
shall possess and may exercise any and all the rights and powers incident to the ownership of such
stock and which, as the owner thereof, the Corporation might have possessed and exercised.
Section 4.5
.
Powers and Duties of Vice Presidents
. Each Vice President shall
have such duties as may be assigned to him from time to time by the Board of Directors, the
Executive Committee or the President. In the event of a temporary absence of the President on
vacation or business, the President may designate a Vice President or Vice Presidents who will
perform the duties of the President in such absence. In the event of a prolonged absence of the
President due to illness or disability or for any other reason, the Board of Directors shall
designate a Vice President or Vice Presidents who will perform the duties of the President during
such absence.
Section 4.6
.
Powers and Duties of the Secretary
. The Secretary of the
Corporation shall attend all meetings of the Board of Directors and of the stockholders and shall
keep accurate records thereof in one or more minute books kept for that purpose, shall give, or
cause to be given, the required notice of all meetings of the stockholders and of the Board of
Directors, shall keep in safe custody the corporate seal of the Corporation and affix the same to
any instrument requiring it, and when so affixed, it shall be attested by his signature or by the
signature of the Treasurer or any Assistant Secretary or Assistant Treasurer of the Corporation.
The Secretary also shall keep, or cause to be kept, the stock certificate books, stock transfer
books and stock ledgers of the Corporation, in which shall be recorded all stock issues, transfers,
the dates of same, the names and addresses of all stockholders and the number of shares held by
each, shall, when necessary, for holders of certificated shares, prepare new certificates upon the
transfer of shares and the surrender of the old certificates, shall cancel such surrendered
certificates and shall perform such other duties as may be assigned to him by the President.
Section 4.7
.
Powers and Duties of the Treasurer
. The Treasurer of the
Corporation shall have the custody of the Corporation’s funds and securities, shall keep full and
accurate accounts of receipts and disbursements in books belonging to the Corporation, shall
deposit all moneys and other valuable effects in the name and to the credit of the Corporation in
such
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depositories as shall be designated by the President, shall disburse the funds of the
Corporation as may be ordered by the President or the Board of Directors, taking proper vouchers
for such disbursements, shall render to the President and the Board of Directors, at the regular
meetings of the Board of Directors or whenever they may require it, an account of all his
transactions as Treasurer and of the financial condition of the Corporation and shall have the
right to affix the seal of the Corporation to any instrument requiring it, and to attest to the
same by his signature and, if so required by the Board of Directors, he shall give bond in such sum
and with such surety as the Board of Directors may from time to time direct.
Section 4.8
.
Designation of a Chief Financial Officer
. The Board of
Directors shall have the power to designate from among the President, any Vice President or the
Treasurer of the Corporation a Chief Financial Officer who shall be deemed the principal financial
and accounting officer.
Article 5
INDEMNIFICATION
Section 5.1
.
Indemnification
. The Corporation shall indemnify any director
or officer of the Corporation and any director or officer of its subsidiaries against expenses,
including legal fees, judgments, fines and amounts paid in settlement, actually and reasonably
incurred by him to the fullest extent now or hereafter permitted by law in connection with any
threatened, pending or completed action, suit, investigation or proceeding, whether derivative or
nonderivative, and whether civil, criminal, administrative or investigative, brought or threatened
to be brought against him by reason of his performance or status as a director or officer of the
Corporation, any of its subsidiaries or any other entity in which he was serving at the request of
the Corporation or in any other capacity on behalf of the Corporation, its parent or any of its
subsidiaries if such officer or director acted in good faith and in a manner he reasonably believed
to be in, or not opposed to, the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.
Notwithstanding the foregoing, in the case of any threatened, pending or completed action or
suit by or in the right of the Corporation, no indemnification shall be made in respect of any
claim, issue or matter as to which such officer or director shall have been adjudged to be liable
to the Corporation unless and only to the extent the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the court shall deem proper.
The Board of Directors by resolution adopted in each specific instance may similarly indemnify
any person other than a director or officer of the Corporation for liabilities
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incurred by him in connection with services rendered by him for or at the request of the
Corporation or any of its subsidiaries.
The provisions of this Section 5.1 shall be applicable to all actions, suits, investigations
or proceedings commenced after its adoption, whether such arise out of acts or omissions which
occurred prior or subsequent to such adoption and shall continue as to a person who has ceased to
be a director or officer or to render services for or at the request of the Corporation and shall
inure to the benefit of the heirs, executors and administrators of such a person. The rights of
indemnification provided for herein shall not be deemed the exclusive rights to which any such
director, officer or other person may be entitled.
Section 5.2
.
Authorization and Determination of Indemnification
. Any
indemnification under this Article 5, unless ordered by a court, shall be made by the Corporation
only as authorized in the specific case upon a determination that indemnification of the director,
officer or other person is proper in the circumstances because he has met the applicable standard
of conduct as specified in Section 5.1 of this Article 5. A person shall be deemed to have met
such applicable standard of conduct if his action is based in good faith on the records or books of
account of the Corporation or another enterprise, or on information supplied to him by the officers
of the Corporation or another enterprise in the course of their duties, or on the advice of legal
counsel for the Corporation or another enterprise or on information or records given or reports
made to the Corporation or another enterprise by an independent certified public accountant or by
an appraiser or other expert selected with reasonable care by the Corporation or another
enterprise.
Such determination shall be made (i) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or proceeding, or (ii) if such a
quorum is not obtainable, or, even if obtainable, a majority vote of a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion or (iii) by the
stockholders. To the extent, however, that a director, officer or other person has been successful
on the merits or otherwise in defense of any action, suit or proceeding described above, or in
defense of any claim, issue or matter therein, he shall be indemnified against expenses, including
attorneys’ fees, actually and reasonably incurred by him in connection therewith, without the
necessity of authorization in the specific case.
The provisions of this Section 5.2 shall not be deemed to be exclusive or to limit in any way
the circumstances in which a person may be deemed to have met such applicable standard of conduct.
Section 5.3
.
Advances
. Expenses incurred in defending or investigating a
threatened or pending action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf
of the director, officer or other person to repay such amount if it shall ultimately be
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determined that he is not entitled to be indemnified by the Corporation as authorized in this
Article 5.
Section 5.4
.
Scope and Alteration of Indemnification Provisions
. The
indemnification and advancement of expenses provided by, or granted pursuant to, the other sections
of this Article 5 shall not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any By-law, agreement, contract,
vote of the stockholders or disinterested directors or pursuant to the direction, howsoever
embodied, of any court of competent jurisdiction or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office, it being the policy of the
Corporation that indemnification of, and advancement of expenses to, the persons specified in
Section 5.1 of this Article 5 shall be made to the fullest extent permitted by the DGCL.
To this end, the provisions of this Article 5 shall be deemed to have been amended for the
benefit of such persons effective immediately upon any modification of the DGCL which expands or
enlarges the power or obligation of corporations organized under such law to indemnify, or advance
expenses to, such persons. The provisions of this Article 5 shall not be deemed to preclude the
indemnification of, or advancement of expenses to, any person who is not specified in this Section
5.4 or Section 5.1 of this Article 5 but whom the Corporation has the power or obligation to
indemnify, or to advance expenses for, under the provisions of the DGCL.
Section 5.5
.
Insurance
. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer or employee of the Corporation, or is or
was serving at the request of the Corporation as a director, officer or employee of another
corporation, partnership, joint venture, trust or other enterprise against any liability asserted
against him and incurred by him in any such capacity, or arising out of his status as such, whether
or not the Corporation would have the power or the obligation to indemnify him against such
liability under the provisions of this Article 5.
Section 5.6
.
Definitions
. For purposes of this Article 5, references to the
“Corporation” shall include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or merger which, if its
separate existence had continued, would have had power and authority to indemnify its directors,
officers, and employees or agents, so that any person who is or was a director, officer or employee
of such constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer or employee of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions of this Article 5
with respect to the resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
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The term “another enterprise” as used in this Article 5 shall mean any other corporation or
any partnership, joint venture, trust or other entity of which such person is or was serving at the
request of the Corporation as a director, officer, employee or agent and shall include employee
benefit plans.
Section 5.7
.
Nature of Rights to Indemnification
. The rights of
indemnification conferred upon directors and officers of the Corporation in this Article 5 shall be
contract rights. Any amendment, alteration or repeal of this Article 5 that adversely affects any
right of a person indemnified under this Article 5 shall be prospective only and shall not limit or
eliminate any such right with respect to any proceeding involving any occurrence or alleged
occurrence of any action or omission to act that took place prior to such amendment, alteration or
repeal.
Article 6
CAPITAL STOCK
Section 6.1
.
Certificated or Uncertificated Shares
.
(a) Shares of any or all of the Corporation’s classes or series of capital stock may be
evidenced by certificates for shares of stock, in such form as the Board of Directors may from time
to time prescribe, or may be issued in uncertificated form. The issuance of shares in
uncertificated form shall not affect shares already represented by a certificate until the
certificate is surrendered to the Corporation. Except as expressly provided by law, there shall be
no differences in the rights and obligations of stockholders based on whether or not their shares
are represented by certificates. The Corporation shall issue to any holder who so requests share
certificates representing shares registered in the holder’s name.
(b) Each certificate for shares of the Corporation’s capital stock shall be numbered and
registered in a share register as it is issued, shall bear the name of the registered holder, the
number and class of shares represented thereby and the par value of each share represented by the
certificate or a statement that such shares are without par value, as the case may be, shall be
signed by the President or any Vice President of the Corporation and the Secretary, any Assistant
Secretary or the Treasurer of the Corporation or any other person properly authorized by the Board
of Directors and shall bear the seal of the Corporation, which seal may be a facsimile engraved or
printed. Where the certificate is signed by a transfer agent or a registrar, the signature of any
corporate officer on such certificate may be a facsimile engraved or printed. In case any officer
who has signed, or whose facsimile signature has been placed on, any share certificate shall have
ceased to be such officer because of death, resignation or otherwise before the certificate is
issued, the certificate may nevertheless be issued by the Corporation with the same effect as if
the officer had not ceased to be such at the date of its issue.
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(c) Within a reasonable time after the issuance or transfer of uncertificated shares, the
Corporation shall send to the registered owner thereof a written notice containing the information
required to be set forth or stated on stock certificates pursuant to the DGCL or a statement that
the Corporation will furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative participating, optional or other special rights of each
class of stock or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 6.2
.
Transfers
. Transfers of shares of capital stock of the
Corporation shall be made only on the stock record of the Corporation by the holder of record
thereof or by his attorney thereunto authorized by the power of attorney duly executed and filed
with the Secretary of the Corporation or the transfer agent thereof, and (i) in the case of
certificated shares, only on surrender of the certificate or certificates representing such shares,
properly endorsed or accompanied by a duly executed stock transfer power, or (ii) in the case of
uncertificated shares, upon receipt of proper transfer instructions from the registered owner of
such uncertificated shares, or from a duly authorized attorney or from an individual presenting
proper evidence of succession, assignment or authority to transfer the shares. The Board of
Directors may make such additional rules and regulations as it may deem expedient concerning the
issue and transfer of certificates representing shares of capital stock of the Corporation.
Section 6.3
.
Lost Certificates
. Should any stockholder of the Corporation
allege the loss, theft or destruction of one or more certificates for shares of the Corporation and
request the issuance by the Corporation of a substitute certificate or uncertificated shares
therefor, the Board of Directors may direct that a new certificate of the same tenor and for the
same number of shares or uncertificated shares be issued to such person upon such person’s making
of an affidavit in form satisfactory to the Board of Directors setting forth the facts in
connection therewith, provided that prior to the receipt of such request the Corporation shall not
have either registered a transfer of such certificate or received notice that such certificate has
been acquired by a bona fide purchaser. When authorizing such issuance of a new certificate or
uncertificated shares, the Board of Directors may, in its discretion and as a condition precedent
to the issuance of such certificate or uncertificated shares, require the owner of such lost,
stolen or destroyed certificate, or his heirs or legal representatives, as the case may be, to
advertise the same in such manner as the Board of Directors shall require and/or to give the
Corporation a bond in such form and for such sum and with such surety or sureties, with fixed or
open penalty, as shall be satisfactory to the Board of Directors, as indemnity for any liability or
expense that it may incur by reason of the original certificate remaining outstanding.
Section 6.4
.
Dividends
. The Board of Directors may, from time to time, at
any duly convened regular or special meeting or by unanimous consent, declare and pay dividends
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upon the outstanding shares of capital stock of the Corporation in cash, property or shares of
the Corporation.
Before payment of any dividend, there may be set aside out of any funds of the Corporation
available for dividends such sum or sums as the Board of Directors from time to time, in its
absolute discretion, shall deem proper as a reserve fund to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation or for such other
purposes as the Board of Directors shall believe to be in the best interests of the Corporation,
and the Board of Directors may reduce or abolish any such reserve in the manner in which it was
created.
Article 7
FINANCIAL REPORT TO STOCKHOLDERS
The President of the Corporation and the Board of Directors shall present at each annual
meeting of the stockholders a full and complete statement of the business and affairs of the
Corporation for the preceding year. Such statement shall be prepared and presented in whatever
manner the Board of Directors shall deem advisable and need not be verified by a certified public
accountant or sent to the stockholders of the Corporation.
Article 8
CHECKS AND NOTES
All checks or demands for money and notes of the Corporation shall be signed by such officer
or officers or such other person or persons as the Board of Directors or the President may from
time to time designate.
Article 9
FISCAL YEAR
The fiscal year of the Corporation shall be as determined from time to time by resolution of
the Board of Directors.
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Article 10
SEAL
The seal of the Corporation shall have inscribed thereon the name of the Corporation, the year
of its organization and the words “Corporate Seal, Delaware.” Said seal may be used by causing it
or a facsimile thereof to be impressed or affixed or in any manner reproduced.
Article 11
NOTICES; COMPUTING TIME PERIODS
Section 11.1
.
Method and Contents of Notice
. Whenever, under the provisions
of the DGCL or of the Certificate of Incorporation or of these By-laws, written notice is required
to be given to any person, it may be given to such person either personally or by sending a copy
thereof through the mail, postage prepaid or by electronic mail, to his address appearing on the
books of the Corporation or supplied by him to the Corporation for the purpose of notice. If the
notice is sent by mail, it shall be deemed to have been given to the person entitled thereto when
deposited in the United States mail. Such notice shall specify the place, day and hour of the
meeting, if any, and, in the case of a special meeting of the stockholders, the general nature of
the business to be transacted.
Section 11.2
.
Waiver of Notice
. Any written notice required to be given to
any person may be waived in a writing signed by the person entitled to such notice whether before
or after the time stated therein. Attendance of any person entitled to notice, whether in person
or by proxy, at any meeting shall constitute a waiver of notice of such meeting, except where any
person attends a meeting for the express purpose of objecting to the transaction of any business
because the meeting was not lawfully called or convened. Where written notice is required for any
meeting, the waiver thereof must specify the purpose only if it is for a special meeting of the
stockholders.
Section 11.3
.
Computing Time Periods
. In computing the number of days for
purposes of these By-laws, all days shall be counted, including Saturdays, Sundays or holidays;
provided, however, that if the final day of any time period falls on a Saturday, Sunday or holiday,
then the final day shall be deemed to be the next day which is not a Saturday, Sunday or holiday.
In computing the number of days for the purpose of giving notice of any meeting, the date upon
which the notice is given shall be counted but the day set for the meeting shall not be counted.
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Article 12
AMENDMENTS
These By-laws may be altered, amended or repealed by an affirmative vote of holders of a
majority of the voting power of the shares of common stock of the Corporation entitled to vote
thereon at any annual or special meeting duly convened after notice to the stockholders of that
purpose or by a majority vote of the members of the Board of Directors at any regular or special
meeting of the Board of Directors duly convened after notice to the Board of Directors of that
purpose, subject always to the power of the stockholders to change such action of the Board of
Directors.
Article 13
INTERPRETATION OF BY-LAWS
All words, terms and provisions of these By-laws shall be interpreted and defined by and in
accordance with the DGCL and as the same may be amended from time to time hereafter.
Last Amended April 19, 2007
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Exhibit
10.1
DONEGAL
GROUP INC.
2007
EQUITY INCENTIVE PLAN FOR EMPLOYEES
1.
Purpose
.
The purpose this Plan
is to encourage the employees of Donegal Group Inc., or the
Company, and its subsidiaries to acquire a proprietary interest
in the growth and performance of the Company, and continuing to
align the interests of those employees with the interests of the
Company’s stockholders to generate an increased incentive
for such person to contribute to the future success and
prosperity of the Company and the member companies of the
Donegal Insurance Group, or the Group. To accomplish these
purposes, this Plan provides a means whereby employees may
receive stock options, stock appreciation rights, stock awards
and other stock-based awards that are based on, or measured by,
or payable in shares of the Company’s Class A Common
Stock.
2.
Administration by the Board of Directors and Role
of the Committee
.
(a)
Administration by the Board of
Directors
.
The Board of Directors, or the
Board, shall administer this Plan. The Board of the Company
shall appoint a committee, which initially shall be the
Compensation Committee. The Committee, with the advice of the
Company’s chief executive officer, shall recommend to the
Board the employees to whom awards will be granted and the type,
size and terms of each grant. The Board has the authority to
make all other determinations necessary or advisable for the
administration of this Plan. All decisions, determinations and
interpretations of the Board shall be final and binding on all
grantees and all other holders of awards granted under this Plan.
(b)
Composition and Role of the
Committee
.
The Committee shall be comprised
of two or more members of the Board, each of whom shall be a
“non-employee director” within the meaning of
Rule 16b-3
under the Securities Exchange Act of 1934, or the Exchange Act.
In addition, each member of the Committee shall be an
“outside director” within the meaning of
Section 162(m) of the Internal Revenue Code of 1986, as
amended, or the Code. Subject to the foregoing, from time to
time the Board may increase or decrease the size of the
Committee, appoint additional members, remove members, with or
without cause, appoint new members, fill vacancies or remove all
members of the Committee and thereafter directly administer this
Plan. The Committee shall have those duties and responsibilities
assigned to it under this Plan, and the Board may assign to the
Committee the authority to make certain other determinations and
interpretations under this Plan. All decisions, determinations
and interpretations of the Committee in such cases shall be
final and binding on all grantees and all other holders of
awards granted under this Plan.
3.
Shares Subject to this Plan
.
(a)
Shares Authorized
.
The
total aggregate number of shares of Class A Common Stock
that may be issued under this Plan is 3,500,000 shares,
subject to adjustment as described below. Each of the shares
authorized under this Plan may be issued pursuant to incentive
stock options awards within the meaning of Section 422 of
the Code. The shares may be authorized but unissued shares or
reacquired shares for purposes of this Plan.
(b)
Share Counting
.
For
administrative purposes, when the Board approves an award
payable in shares of Class A Common Stock, the Board shall
reserve, and count against the share limit, shares equal to the
maximum number of shares that may be issued under the award. If
and to the extent options or stock appreciation rights granted
under this Plan terminate, expire or are canceled, forfeited,
exchanged or surrendered without having been exercised, and if
and to the extent that any restricted stock awards are forfeited
or terminated, or otherwise are not paid in full, the shares
reserved for such awards shall again be available for purposes
of this Plan. If stock appreciation rights are granted, the full
number of shares subject to the stock appreciation right shall
be considered issued under this Plan, without regard to the
number of shares issued upon settlement of the stock
appreciation rights.
(c)
Individual Limits
.
All awards
under this Plan shall be expressed in shares of Class A
Common Stock. The maximum number of shares of Class A
Common Stock with respect to all awards that may be
made to any individual under this Plan during any calendar year
shall be 200,000 shares, subject to adjustment as described
below.
(d)
Adjustments
.
If any change in
the number or kind of shares of Class A Common Stock
outstanding occurs by reason of:
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a stock dividend, spinoff, recapitalization, stock split or
combination or exchange of shares;
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a merger, reorganization or consolidation;
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a reclassification or change in par value; or
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any other extraordinary or unusual event affecting the
outstanding Class A Common Stock as a class without the
Company’s receipt of consideration, or if the value of
outstanding shares of Class A Common Stock is substantially
reduced as a result of a spinoff or the Company’s payment
of any extraordinary dividend or distribution,
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the maximum number of shares of Class A Common Stock
available for issuance under this Plan, the maximum number of
shares of Class A Common Stock for which any individual may
receive grants in any year, the kind and number of shares
covered by outstanding awards, the kind and number of shares to
be issued or issuable under this Plan and the price per share or
applicable market value of such grants shall be automatically
equitably adjusted to reflect any increase or decrease in the
number of, or change in the kind or value of, issued shares of
Class A Common Stock to preclude, to the extent
practicable, the enlargement or dilution of rights and benefits
under this Plan and such outstanding grants. Any fractional
shares resulting from such adjustment shall be eliminated. Any
adjustments to outstanding awards shall be consistent with
Section 409A of the Code, to the extent applicable.
4.
Eligibility for
Participation
.
All employees of the Company
and its subsidiaries and the member companies of the Group,
including employees who are officers or members of the Board of
any of the foregoing companies, shall be eligible to participate
in this Plan. The Committee shall recommend to the Board the
employees to receive awards and the number of shares of
Class A Common Stock subject to each award.
5.
Awards
.
Awards under this Plan
may consist of stock options as described in Section 7,
stock appreciation rights as described in Section 8, stock
awards as described in Section 9 and other stock-based
awards as described in Section 10. The Committee shall
specify the terms and conditions of the award granted to the
grantee in an agreement. The award shall be conditioned upon the
grantee’s signed agreement to accept the award and to
acknowledge that all decisions and determinations of the
Committee and the Board shall be final and binding on the
grantee, his or her beneficiaries and any other person having or
claiming an interest under the award. Awards under this Plan
need not be uniform as among the grantees. The Board may grant
awards that are contingent on, and subject to, stockholder
approval of this Plan or an amendment to this Plan.
6.
Definition of Fair Market
Value
.
For purposes of this Plan, “fair
market value” shall mean the last sales price of a share of
Class A Common Stock on the NASDAQ Stock Market, or Nasdaq,
on the day on which fair market value is being determined, as
reported by Nasdaq. In the event that there are no transactions
in shares of Class A Common Stock on Nasdaq on such day,
the fair market value will be determined as of the immediately
preceding day on which there were transactions in shares of
Class A Common Stock on that exchange. If shares of Common
Stock are not listed by Nasdaq, the Board shall determine the
fair market value pursuant to Section 422 of the Code.
7.
Stock Options
.
The Committee
may recommend to the Board the grant of stock options to an
employee upon such terms and conditions as the Committee deems
appropriate under this Section 7.
(a)
Number of Shares
.
The
Committee shall recommend the number of shares of Class A
Common Stock that will be subject to each grant of stock options.
(b)
Type of Stock Option, Price and
Term
.
The Committee may recommend to the
Board the grant of stock options to purchase Class A Common
Stock that are intended to qualify as incentive stock options
within the meaning of Section 422 of the Code, or incentive
stock options, or stock options that are not intended to
so qualify, or nonqualified stock options. The Committee shall
recommend the exercise price of shares of Class A Common
Stock subject to a stock option, which shall be equal to or
greater than the fair market value of a share of Class A
Common Stock on the date of grant.
(c)
Exercisability of Stock
Options
.
Each stock option agreement shall
specify the period or periods of time within which a grantee may
exercise a stock option, in whole or in part, as determined by
the Board. No grantee may exercise a stock option after ten
years from the grant date of the stock option. The Board may
accelerate the exercisability of any or all outstanding stock
options at any time for any reason.
(d)
Termination of
Employment
.
Except as provided in the stock
option agreement, a grantee may only exercise a stock option
while the grantee is employed by the Company or any of its
subsidiaries or by Donegal Mutual or any of its subsidiaries.
The Board shall specify in the option agreement under what
circumstances and during what time periods a grantee may
exercise a stock option after employment terminates. If the term
of an incentive stock option continues for more than three
months after employment terminates due to retirement or more
than one year after termination of employment due to death or
disability, the stock option shall lose its status as an
incentive stock option and shall be treated as a nonqualified
stock option.
(e)
Exercise of Stock Options
.
A
grantee may exercise a stock option that has become exercisable,
in whole or in part, by delivering a notice of exercise to the
Company. The grantee shall pay the exercise price for the stock
option:
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in cash;
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by delivery of shares of Class A Common Stock at fair
market value, shares of Class B Common Stock at fair market
value, or a combination of those shares, as the Committee or the
Board may determine from time to time and subject to the terms
and conditions as the Committee or the Board may prescribe;
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by payment through a brokerage firm of national standing whereby
the grantee will simultaneously exercise the stock option and
sell the shares acquired upon exercise through the brokerage
firm and the brokerage firm shall remit to the Company from the
proceeds of the sale of the shares the exercise price as to
which the option has been exercised in accordance with the
procedures permitted by Regulation T of the Federal Reserve
Board; or
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by any other method authorized by the Committee or the Board.
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The Company must receive payment for the shares acquired upon
exercise of the stock option, and any required withholding taxes
and related amounts, by the time specified by the Committee
depending on the type of payment being made, but in all cases
prior to the issuance of the shares.
(f)
Incentive Stock Options
.
The
Committee shall recommend other terms and conditions of an
incentive stock option as shall be necessary or desirable in
order to qualify such stock option as an incentive stock option
under Section 422 of the Code, including the following
provisions, which may be omitted or modified if no longer
required under that section:
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As determined as of the grant date, the aggregate fair market
value of shares subject to incentive stock options that first
become exercisable by a grantee during any calendar year, under
all plans of the Company, shall not exceed $100,000;
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The exercise price of any incentive stock option granted to an
individual who owns stock having more than 10% of the total
combined voting power of all classes of stock of the Company
must be at least 110% of the fair market value of the shares
subject to the incentive stock option on the grant date, and the
individual may not exercise the incentive stock option after the
expiration of five years from the date of grant; and
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The grantee may not exercise the incentive stock option more
than three months, or one year in the case of death or
disability within the meaning of the applicable Code provisions,
after termination of employment.
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8.
Stock Appreciation Rights
.
The
Committee may recommend to the Board the grant of stock
appreciation rights to an employee separately or in tandem with
any stock option, for all or a portion of the applicable stock
option, under this Section 8.
(a)
Number of Shares, Term and Base
Amount
.
The Committee shall recommend the
number of shares, the term and the base amount of the stock
appreciation right at the time it grants the stock appreciation
right. The term of a stock appreciation right shall not exceed
ten years from the grant date. The Committee shall recommend the
base price of the stock appreciation right, which shall be equal
to or greater than the fair market value of a share of
Class A Common Stock on the date of grant.
(b)
Exercisability
.
Each stock
appreciation right agreement shall specify the period or periods
of time within which a grantee may exercise the stock
appreciation right, in whole or in part, as determined by the
Board. The Board may accelerate the exercisability of any or all
outstanding stock appreciation rights at any time for any
reason. A tandem stock appreciation right shall be exercisable
only during the period in which the stock option to which it is
related is also exercisable.
(c)
Termination of
Employment
.
Except as provided in the stock
appreciation right agreement, a grantee may exercise a stock
appreciation right only while the grantee is employed by the
Company or any of its subsidiaries or by Donegal Mutual or any
of its subsidiaries. The Board shall specify in the stock
appreciation right agreement under what circumstances and during
what time periods a grantee may exercise a stock appreciation
right after employment terminates.
(d)
Exercise of Stock Appreciation
Right
.
When a grantee exercises a stock
appreciation right, the grantee shall receive in settlement of
the stock appreciation right an amount equal to the value of the
appreciation in the Class A Common Stock for the number of
stock appreciation rights exercised. The appreciation in the
Class A Common Stock shall be the amount by which the fair
market value of the underlying shares of Class A Common
Stock on the date of exercise of the stock appreciation right
exceeds the base amount of the stock appreciation right as
specified in the stock appreciation right agreement. The Company
may pay the appreciation amount in shares of Class A Common
Stock, cash or any combination of the two, as determined by the
Board in the stock appreciation right agreement.
9.
Stock Awards
.
The Committee may
recommend to the Board the issuance of shares of Class A
Common Stock to an employee upon such terms and conditions as
the Committee deems appropriate under this Section 9. The
Committee may recommend to the Board the issuance of shares of
Class A Common Stock for cash consideration or for no cash
consideration, and subject to restrictions or no restrictions.
The Committee may recommend conditions under which restrictions
on stock awards shall lapse over a period of time or according
to other criteria as the Committee deems appropriate, including
restrictions based upon the achievement of specific performance
goals.
(a)
Number of Shares
.
The
Committee shall recommend the number of shares of Class A
Common stock to be issued pursuant to a stock award and any
restrictions applicable to the stock award.
(b)
Requirement of Employment
.
The
Board shall specify in the stock award agreement under what
circumstances a grantee may retain stock awards after
termination of the grantee’s employment and the
circumstances under with the stock awards may be forfeited.
(c)
Restrictions on
Transfer
.
During the period that the stock
award is subject to restrictions, a grantee may not sell,
assign, transfer, pledge or otherwise dispose of the shares of
the stock award except upon death as described in
Section 13. Each certificate representing a share of
Class A Common Stock issued under the stock award shall
contain a legend giving appropriate notice of the restrictions
on the stock award. The grantee shall be entitled to have the
legend removed when all restrictions on the shares subject to
the stock award have lapsed. The Company may maintain possession
of any certificates representing shares subject to the stock
award until all restrictions on the shares subject to the stock
award have lapsed.
(d)
Right To Vote and To Receive
Dividends
.
The Committee shall recommend to
what extent, and under what conditions, the grantee shall have
the right to vote the shares subject to the stock award and to
receive any dividends or other distributions paid on the shares
during the restriction period.
10.
Other Stock-Based Awards
.
The
Committee may recommend to the Board the grant of other awards
that are based on, measured by or payable in Class A Common
Stock to an employee on such terms and conditions as the
Committee deems appropriate under this Section 10. The
Committee may recommend to the Board the grant of other
stock-based awards subject to achievement of performance goals
or other conditions and may be payable in shares of Class A
Common Stock or cash, or a combination of cash and shares, as
recommended by the Committee in the stock-based award agreement.
11.
Date of Grant
.
The grant date
of an award under this Plan shall be the date of the Board of
Director’s approval or such later date as may be determined
by the Board at the time it authorizes the award. The Board may
not make retroactive grants of awards under this Plan. The
Company shall provide notice of the award to the grantee within
a reasonable time after the grant date.
12.
Withholding
.
All grants under
this Plan shall be subject to applicable federal, including
FICA, state and local tax withholding requirements. The Company
may require that the grantee or other person receiving or
exercising a grant pay to the Company the amount of any federal,
state or local taxes that the Company is required to withhold
with respect to the grant, or the Company may deduct from other
wages paid to the grantee the amount of any withholding taxes
due with respect to the grants. The Board or the Committee may
permit a grantee to elect to satisfy the Company’s tax
withholding obligations with respect to grants paid in shares of
Class A Common Stock by having shares of Class A
Common Stock withheld, at the time such grants become taxable,
up to an amount that does not exceed the minimum applicable
withholding tax rate for federal, including FICA, state and
local tax liabilities. Any shares so withheld will be valued by
the Board or the Committee as of the date the grants become
taxable.
13.
Transferability of
Grants
.
Only the grantee of an award may
exercise rights under the award grant during the grantee’s
lifetime, and a grantee may not transfer those rights except by
will or by the laws of descent and distribution. When a grantee
dies, the personal representative or other person entitled to
succeed to the rights of the grantee may exercise those rights.
Any successor to a grantee must furnish proof satisfactory to
the Company of his or her right to receive the award under the
grantee’s will or under the applicable laws of descent and
distribution.
14.
Requirements for Issuance of
Shares
.
The Company will not issue shares of
Class A Common Stock in connection with any award under
this Plan until all legal requirements applicable to the
issuance of the shares have been complied with to the
satisfaction of the Board. The Board shall have the right to
condition any award made to any employee hereunder on the
employee’s undertaking in writing to comply with the
restrictions on his or her subsequent disposition of shares
subject to the award as the Board shall deem necessary or
advisable, and certificates representing those shares may be
legended to reflect any such restrictions. Certificates
representing shares of Class A Common Stock issued under
this Plan will be subject to such stop-transfer orders and other
restrictions as may be required by applicable laws, regulations
and interpretations, including any requirement that a legend be
placed thereon. No grantee shall have any right as a stockholder
with respect to shares of Class A Common Stock covered by
an award until shares have been issued to the grantee.
15.
Amendment and Termination of this Plan
.
(a)
Amendments
.
The Board may
amend or terminate this Plan at any time, except that the Board
shall not amend this Plan without approval of the stockholders
of the Company if such approval is required in order to comply
with the Code or applicable laws, or to comply with applicable
stock exchange requirements. The Board may not, without the
consent of the grantee, negatively affect the rights of a
grantee under any award previously granted under this Plan.
(b)
No Repricing Without Stockholder
Approval
.
The Board may not reprice stock
options or stock appreciation rights, nor may the Board amend
this Plan to permit repricing of options or stock appreciation
rights unless the stockholders of the Company provide prior
approval for the repricing.
(c)
Termination
.
This Plan shall
terminate on April 19, 2017, unless the Board earlier
terminates this Plan or the term is extended with the approval
of the stockholders of the Company. The termination of this
Plan shall not impair the power and authority of the Board or
the Committee with respect to an outstanding award.
16.
Grants in Connection with Corporate Transactions
and Otherwise
.
Nothing contained in this Plan
shall be construed to:
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limit the right of the Board to grant awards under this Plan in
connection with the acquisition, by purchase, lease, merger,
consolidation or otherwise, of the business or assets of any
corporation, firm or association, including awards to employees
of those entities who become employees, or for other proper
corporate purposes, or
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limit the right of the Company to grant stock options or make
other stock-based awards outside of this Plan.
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Without limiting the foregoing, the Board may grant an award to
an employee of another corporation or other entity who becomes
an employee by reason of a corporate merger, consolidation,
acquisition of stock or property, reorganization or liquidation
involving the Company in substitution for a grant made by that
corporation or other entity. The terms and conditions of the
awards may vary from the terms and conditions required by this
Plan and from those of the substituted stock awards, as
determined by the Board.
17.
Right to Terminate
Employment
.
Nothing contained in this Plan or
in any award agreement entered into pursuant to this Plan shall
confer upon any grantee the right to continue in the employment
of the Company or any of its subsidiaries or the Group or affect
any right that the Company or any of its subsidiaries or the
Group may have to terminate the employment of the grantee.
18.
Reservation of Shares
.
The
Company, during the term of this Plan, shall at all times
reserve and keep available the number of shares of Class A
Common Stock needed to satisfy the requirements of this Plan.
The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed
by the Company’s counsel to be necessary to the lawful
issuance and sale of any shares hereunder, shall relieve the
Company of any liability for the failure to issue or sell any
shares as to which the requisite authority shall not have been
obtained.
19.
Effect on Other
Plans
.
Participation in this Plan shall not
affect an employee’s eligibility to participate in any
other benefit or incentive plan of the Company or any of its
subsidiaries or the Group. Any awards granted pursuant to this
Plan shall not be used in determining the benefits provided
under any other plan unless specifically provided.
20.
Forfeiture for
Dishonesty
.
Notwithstanding anything to the
contrary in this Plan, if the Board finds, by a majority vote,
after full consideration of the facts presented on behalf of
both the Company and any grantee, that the grantee has been
engaged in fraud, embezzlement, theft, commission of a felony or
dishonest conduct in the course of his employment that damaged
the Company or any of its subsidiaries or the Group or that the
grantee has disclosed confidential information of the Company or
any of its subsidiaries or the Group, the grantee shall forfeit
all unexercised or unvested awards and all exercised or vested
awards under which the Company has not yet delivered the
certificates or cash payments therefor. The decision of the
Board in interpreting and applying the provisions of this
Section 20 shall be final. No decision of the Board,
however, shall affect the finality of the discharge or
termination of the grantee.
21.
No Prohibition on Corporate
Action
.
No provision of this Plan shall be
construed to prevent the Company or any officer or director
thereof from taking any action deemed by the Company or such
officer or director to be appropriate or in the Company’s
best interest, whether or not such action could have an adverse
effect on this Plan or any awards granted under this Plan, and
no grantee or grantee’s estate, personal representative or
beneficiary shall have any claim against the Company or any
officer or director thereof as a result of the taking of the
action.
22.
Indemnification
.
With respect
to the administration of this Plan, the Company shall indemnify
each present and future member of the Committee and the Board
against, and each member of the Committee and the Board shall be
entitled without further action on such member’s part to
indemnity from the Company for, all expenses, including the
amount of judgments and the amount of approved settlements made
with a view to
the curtailment of costs of litigation, other than amounts paid
to the Company itself, reasonably incurred by him or her in
connection with or arising out of, any action, suit or
proceeding in which he or she may be involved by reason of being
or having been a member of the Committee or the Board, whether
or not he or she continues to be such member at the time of
incurring such expenses; provided, however, that this indemnity
shall not include any expenses incurred by any such member of
the Committee or the Board (i) in respect of matters as to
which he or she shall be finally adjudged in any such action,
suit or proceeding to have been guilty of gross negligence or
willful misconduct in the performance of his or her duty as such
member of the Committee or the Board; or (ii) in respect of
any matter in which any settlement is effected for an amount in
excess of the amount approved by the Company on the advice of
its legal counsel; and provided further that no right of
indemnification under the provisions set forth in this
Section 22 shall be available to or enforceable by any such
member of the Committee or the Board unless, within 60 days
after institution of any such action, suit or proceeding, he or
she shall have offered the Company in writing the opportunity to
handle and defend same at its own expense. The foregoing right
of indemnification shall inure to the benefit of the heirs,
executors or administrators of each such member of the Committee
or the Board and shall be in addition to all other rights to
which such member may be entitled as a matter of law, contract
or otherwise.
23.
Miscellaneous Provisions
.
(a)
Compliance with Plan
Provisions
.
No grantee or other person shall
have any right with respect to this Plan, the Class A
Common Stock reserved for issuance under this Plan or in any
award until a written agreement shall have been executed by the
Company and the grantee and all the terms, conditions and
provisions of this Plan and the award applicable to the grantee
have been met.
(b)
Approval of Counsel
.
In the
discretion of the Board, no shares of Class A Common Stock,
other securities or property of the Company or other forms of
payment shall be issued hereunder with respect to any award
unless counsel for the Company shall be satisfied that such
issuance will be in compliance with applicable federal, state,
local and foreign legal, securities exchange and other
applicable requirements.
(c)
Compliance with
Rule 16b-3
.
To
the extent that
Rule 16b-3
under the Exchange Act applies to this Plan or to awards granted
under this Plan, it is the intention of the Company that this
Plan comply in all respects with the requirements of
Rule 16b-3,
that any ambiguities or inconsistencies in 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.
(d)
Section 409A
Compliance
.
This Plan is intended to comply
with the requirements of Section 409A of the Code and the
regulations issued thereunder. To the extent of any
inconsistencies with the requirements of Section 409A, this
Plan shall be interpreted and amended in order to meet the
requirements of Section 409A. Notwithstanding anything
contained in this Plan to the contrary, it is the intent of the
Company to have this Plan interpreted and construed to comply
with any and all provisions Section 409A including any
subsequent amendments, rulings or interpretations from
appropriate governmental agencies.
(e)
Effects of Acceptance of the
Award
.
By accepting any award or other
benefit under this Plan, each grantee and each person claiming
under or through the grantee shall be conclusively deemed to
have indicated his acceptance and ratification of, and consent
to, any action taken under this Plan by the Company, the Board
or the Committee or its delegates.
Exhibit
10.2
DONEGAL GROUP INC.
2007 EQUITY INCENTIVE PLAN FOR DIRECTORS
1.
Purpose
.
The purpose this Plan
is to enhance the ability of Donegal Group Inc., or the Company,
and its subsidiaries and the member companies of the Donegal
Insurance Group, or the Group, to attract and retain highly
qualified directors, to establish a basis for providing a
portion of director compensation in the form of equity and, in
doing so, to strengthen the alignment of the interest of
directors of the Company and the members of the Group with the
interests of the Company’s stockholders.
2.
Administration
.
(a)
Administration by the
Board
.
The Board of Directors of the Company,
or the Board, shall administer this Plan.
(b)
Duty and Powers of the
Board
.
The Board shall have the power to
interpret this Plan and the awards granted under this Plan and
to adopt rules for the administration, interpretation and
application of this Plan. The Board shall have the discretion to
determine who will be granted stock options and to determine the
number of stock options to be granted to any director, the
timing of the grant and the terms of exercise. The Board shall
not have any discretion to determine who will be granted
restricted stock awards under this Plan.
(c)
Compensation; Professional Assistance; Good Faith
Actions
.
Members of the Board shall not
receive any compensation for their services in administering
this Plan. The Company shall pay all expenses and liabilities
incurred in connection with the administration of this Plan. The
Company may employ attorneys, consultants, accountants or other
experts. The Board, the Company and the officers and directors
of the Company shall be entitled to rely upon the advice,
opinions or valuations of any such experts. All actions taken
and all interpretations and determinations made by the Board in
good faith shall be final and binding upon all grantees, the
Company and all other interested persons. No member of the Board
shall be personally liable for any action, determination or
interpretation made in good faith with respect to this Plan, and
all members of the Board shall be fully protected and
indemnified by the Company in respect to any such action,
determination or interpretation.
3.
Shares Subject to this Plan
.
(a)
Shares Authorized
.
The
shares of stock issuable pursuant to awards shall be shares of
Class A Common Stock. The total aggregate number of shares
of Class A Common Stock that may be issued under this Plan
is 400,000 shares, subject to adjustment as described
below. The shares may be authorized but unissued shares or
reacquired shares for purposes of this Plan.
(b)
Share Counting
.
For
administrative purposes, when the Board approves an award
payable in shares of Class A Common Stock, the Board shall
reserve, and count against the share limit, shares equal to the
maximum number of shares that may be issued under the award. If
and to the extent options granted under this Plan terminate,
expire or are canceled, forfeited, exchanged or surrendered
without having been exercised, and if and to the extent that any
restricted stock awards are forfeited or terminated, or
otherwise are not paid in full, the shares reserved for such
awards shall again be available for purposes of this Plan.
(c)
Adjustments
.
If any change in
the number or kind of shares of Class A Common Stock
outstanding occurs by reason of:
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a stock dividend, spinoff, recapitalization, stock split or
combination or exchange of shares;
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a merger, reorganization or consolidation;
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a reclassification or change in par value; or
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any other extraordinary or unusual event affecting the
outstanding Class A Common Stock as a class without the
Company’s receipt of consideration, or if the value of
outstanding shares of Class A Common Stock is substantially
reduced as a result of a spinoff or the Company’s payment
of any extraordinary dividend or distribution,
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the maximum number of shares of Class A Common Stock
available for issuance under this Plan, the maximum number of
shares of Class A Common Stock for which any individual may
receive grants in any year, the kind and number of shares
covered by outstanding awards, the kind and number of shares to
be issued or issuable under this Plan and the price per share or
applicable market value of such grants shall automatically be
equitably adjusted to reflect any increase or decrease in the
number of, or change in the kind or value of, issued shares of
Class A Common Stock to preclude, to the extent
practicable, the enlargement or dilution of rights and benefits
under this Plan and such outstanding grants. Any fractional
shares resulting from such adjustment shall be eliminated. Any
adjustments to outstanding awards shall be consistent with
Section 409A of the Internal Revenue Code of 1986, as
amended, or the Code, to the extent applicable.
4.
Eligibility for
Participation
.
Each director of the Company
and each director of a member of the Group who is not eligible
to receive stock options under the Company’s Equity
Incentive Plan for Employees shall be eligible to receive stock
options under this Plan. Each director of the Company and each
director of the member companies of the Group shall be eligible
to receive restricted stock awards under this Plan.
5.
Awards
.
Awards under this Plan
may consist of stock options as described in Section 7 and
restricted stock awards as described in Section 8. Each
award shall be evidenced by a written agreement.
6.
Definition of Fair Market
Value
.
For purposes of this Plan, “fair
market value” shall mean the last sales price of a share of
Class A Common Stock on the NASDAQ Stock Market, or Nasdaq,
on the day on which fair market value is being determined, as
reported by Nasdaq. In the event that there are no transactions
in shares of Class A Common Stock on Nasdaq on such day,
the fair market value will be determined as of the immediately
preceding day on which there were transactions in shares of
Class A Common Stock on that exchange. If shares of
Class A Common Stock are not listed by Nasdaq, the Board
shall determine the fair market value pursuant to
Section 422 of the Code.
7.
Stock Options
.
(a)
Granting of Stock Options
.
The
Board may grant stock options to an outside director upon such
terms as the Board deems appropriate under this Section 7.
(b)
Type of Stock Option and
Price
.
The Board may grant stock options to
purchase Class A Common Stock that are not intended to
qualify as incentive stock options within the meaning of
Section 422 of the Code. The Board shall determine the
exercise price of shares of Class A Common Stock subject to
a stock option, which shall be equal to or greater than the fair
market value of a share of Class A Common Stock on the date
of grant.
(c)
Exercisability of Stock
Options
.
Each stock option agreement shall
specify the period or periods of time within which a grantee may
exercise a stock option, in whole or in part, as determined by
the Board. No grantee may exercise a stock option after ten
years from the grant date of the stock option. The Board may
accelerate the exercisability of any or all outstanding stock
options at any time for any reason.
(d)
Rights upon Termination of
Service
.
Upon an grantee’s termination
of service as an outside director, as a result of resignation,
failure to be re-elected, removal for cause or any reason other
than death, the grantee shall have the right to exercise the
stock option during its term within a period of three years
after such termination to the extent that the stock option was
exercisable at the time of termination, or within such other
period, and subject to such terms and conditions, as may be
specified by the Board. In the event that a grantee dies prior
to the expiration of his or her stock option and without having
fully exercised his or her stock option, the grantee’s
representative or successor shall have the right to exercise the
stock option during its term within a period of one year after
the grantee’s death to the extent that the stock option was
exercisable at the time of death, or within such other period,
and subject to such terms and conditions, as may be specified by
the Board.
(e)
Exercise of Stock Options
.
A
grantee may exercise a stock option that has become exercisable,
in whole or in part, by delivering a notice of exercise to the
Company. The grantee shall pay the exercise price for the stock
option:
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by delivery of shares of Class A Common Stock at fair
market value, shares of Class B Common Stock at fair market
value, or a combination of those shares, as the Board may
determine from time to time and subject to the terms and
conditions as the Board may prescribe;
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by payment through a brokerage firm of national standing whereby
the grantee will simultaneously exercise the stock option and
sell the shares acquired upon exercise through the brokerage
firm and the brokerage firm shall remit to the Company from the
proceeds of the sale of the shares the exercise price as to
which the option has been exercised in accordance with the
procedures permitted by Regulation T of the Federal Reserve
Board; or
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by any other method authorized by the Board.
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The Company must receive payment for the shares acquired upon
exercise of the stock option, and any required withholding taxes
and related amounts, by the time specified by the Board
depending on the type of payment being made, but in all cases
prior to the issuance of the shares.
8.
Restricted Stock Awards
.
(a)
Granting of Awards
.
Each
director of the Company and each director of Donegal Mutual
shall be granted an annual restricted stock award consisting of
311 shares of Class A Common Stock, except that a
person who serves as a director on both boards shall receive
only one annual grant. The restricted stock awards shall be made
on the first business day of January in each year, commencing
January 2, 2008, provided that the director served as a
member of the Board or of the board of directors of a member of
the Group during any portion of the preceding calendar year.
(b)
Terms of Restricted Stock
Awards
.
Each restricted stock award agreement
shall contain such restrictions, terms and conditions as are
required by this Plan:
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The shares of Class A Common Stock comprising the
restricted stock awards may not be sold or otherwise transferred
by the grantee until one year after the date of grant. Although
the shares of Class A Common Stock comprising each restricted
stock award shall be registered in the name of the grantee, the
Company reserves the right to place a restrictive legend on the
stock certificate. None of such shares of Class A Common
Stock shall be subject to forfeiture.
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Subject to the restrictions on transfer set forth in this
Section 8(b), a grantee shall have all the rights of a
stockholder with respect to the shares of Class A Common
Stock issued pursuant to restricted stock awards made under this
Plan, including the right to vote the shares and receive all
dividends and other distributions paid or made with respect to
the shares.
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In the event of changes in the capital stock of the Company by
reason of stock dividends,
split-ups
or
combinations of shares, reclassifications, mergers,
consolidations, reorganizations or liquidations while the shares
comprising a restricted stock award shall be subject to
restrictions on transfer, any and all new, substituted or
additional securities to which the grantee shall be entitled by
reason of the ownership of a restricted stock award shall be
subject immediately to the terms, conditions and restrictions of
this Plan.
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If a grantee receives rights or warrants with respect to any
shares comprising a restricted stock award, such rights or
warrants or any shares or other securities acquired by the
exercise of such rights or warrants may be held, exercised, sold
or otherwise disposed of by the grantee free and clear of the
restrictions and obligations set forth in this Plan.
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9.
Date of Grant
.
The grant date
of a stock option under this Plan shall be the date of the
Board’s approval or such later date as may be determined by
the Board at the time it authorizes the grant. The Board may not
make retroactive grants of stock options under this Plan. The
Company shall provide notice of the grant to the grantee within
a reasonable time after the grant date.
10.
Requirements for Issuance of
Shares
.
The Company will not issue shares of
Class A Common Stock in connection with any award under
this Plan until all legal requirements applicable to the
issuance of the shares have been complied with to the
satisfaction of the Board. The Board shall have the right to
condition any award made to any director on the director’s
undertaking in writing to comply with the restrictions on his
or her subsequent disposition of shares subject to the award as
the Board shall deem necessary or advisable, and certificates
representing those shares may be legended to reflect any such
restrictions. Certificates representing shares of Class A
Common Stock issued under this Plan will be subject to such
stop-transfer orders and other restrictions as may be required
by applicable laws, regulations and interpretations, including
any requirement that a legend be placed on the certificate.
11.
Withholding
.
The Company shall
have the right to require the grantee to remit to the Company an
amount sufficient to satisfy any federal, state or local
withholding tax requirements prior to the delivery of any
certificate for shares of Class A Common Stock. If and to
the extent authorized by the Board, in its sole discretion, a
grantee may make an election, by means of a form of election to
be prescribed by the Board, to have shares of Class A
Common Stock that are acquired upon exercise of a stock option
withheld by the Company or to tender other shares of
Class A Common Stock or other securities of the Company
owned by the grantee to the Company at the time of exercise of a
stock option to pay the amount of tax that would otherwise be
required by law to be withheld by the Company. Any such election
shall be irrevocable and shall be subject to termination by the
Board, in its sole discretion, at any time. Any securities so
withheld or tendered will be valued by the Board as of the date
of exercise.
12.
Transferability of
Awards
.
Only the grantee of an award may
exercise rights under the award grant during the grantee’s
lifetime, and a grantee may not transfer those rights except by
will or by the laws of descent and distribution. When a grantee
dies, the personal representative or other person entitled to
succeed to the rights of the grantee may exercise those rights.
Any successor to a grantee must furnish proof satisfactory to
the Company of his or her right to receive the award under the
grantee’s will or under the applicable laws of descent and
distribution. Except as stated in this Section 12, no stock
option or interest therein and, for a period of one year after
the date of grant, no restricted stock award or any interest
therein, shall be subject to the debts, contracts or engagements
of the grantee or his or her successors in interest, nor shall
they be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other
means, whether such disposition is 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.
13.
Amendment and Termination of this Plan
.
(a)
Amendments
.
The Board may
amend or terminate this Plan at any time, except that the Board
shall not amend this Plan without approval of the stockholders
of the Company if such approval is required in order to comply
with the Code or applicable laws, or to comply with applicable
stock exchange requirements. The Board may not, without the
consent of the grantee, negatively affect the rights of a
grantee under any award previously granted under this Plan.
(b)
No Repricings Without Stockholder
Approval
.
The Board may not reprice stock
options, nor may the Board amend this Plan to permit repricing
of stock options unless the stockholders of the Company provide
prior approval for the repricing.
(c)
Termination
.
This Plan shall
terminate on April 19, 2017, unless the Board earlier
terminates this Plan or the term is extended with the approval
of the stockholders of the Company. The termination of this Plan
shall not impair the power and authority of the Board with
respect to an outstanding award.
14.
Reservation of Shares
.
The
Company, during the term of this Plan, shall at all times
reserve and keep available the number of shares of Class A
Common Stock needed to satisfy the requirements of this Plan.
The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed
by the Company’s counsel to be necessary to the lawful
issuance and sale of any shares hereunder, shall relieve the
Company of any liability for the failure to issue or sell any
shares as to which the requisite authority shall not have been
obtained.
15.
No Prohibition on Corporate
Action
.
No provision of this Plan shall be
construed to prevent the Company or any officer or director of
the Company from taking any action deemed by the Company or such
officer or director to be appropriate or in the Company’s
best interest, whether or not such action could have an adverse
effect on this Plan or any awards granted under this Plan, and
no grantee or grantee’s estate, personal representative or
beneficiary shall have any claim against the Company or any
officer or director thereof as a result of the taking of the
action.
16.
Indemnification
.
With respect
to the administration of this Plan, the Company shall indemnify
each present and future member of the Board against, and each
member of the Board shall be entitled without further action on
such member’s part to indemnity from the Company for, all
expenses, including the amount of judgments and the amount of
approved settlements made with a view to the curtailment of
costs of litigation, other than amounts paid to the Company
itself, reasonably incurred by him or her in connection with or
arising out of, any action, suit or proceeding in which he or
she may be involved by reason of being or having been a member
of the Board, whether or not he or she continues to be such
member at the time of incurring such expenses; provided,
however, that this indemnity shall not include any expenses
incurred by any such member of the Board (i) in respect of
matters as to which he or she shall be finally adjudged in any
such action, suit or proceeding to have been guilty of gross
negligence or willful misconduct in the performance of his or
her duty as such member of the Board or (ii) in respect of
any matter in which any settlement is effected for an amount in
excess of the amount approved by the Company on the advice of
its legal counsel; and provided further that no right of
indemnification under the provisions set forth in this
Section 16 shall be available to or enforceable by any such
member of the Board unless, within 60 days after
institution of any such action, suit or proceeding, he or she
shall have offered the Company in writing the opportunity to
handle and defend same at its own expense. The foregoing right
of indemnification shall inure to the benefit of the heirs,
executors or administrators of each such member of the Board and
shall be in addition to all other rights to which such member
may be entitled as a matter of law, contract or otherwise.
17.
Miscellaneous Plan Provisions
.
(a)
Compliance with Plan
Provisions
.
No grantee or other person shall
have any right with respect to this Plan, the Class A
Common Stock reserved for issuance under this Plan or in any
award until a written agreement shall have been executed by the
Company and the grantee and all the terms, conditions and
provisions of this Plan and award applicable to the grantee have
been met.
(b)
Approval of Counsel
.
In the
discretion of the Board, no shares of Class A Common Stock,
other securities or property of the Company or other forms of
payment shall be issued hereunder with respect to any award
unless counsel for the Company shall be satisfied that such
issuance will be in compliance with applicable federal, state,
local and foreign legal, securities exchange and other
applicable requirements.
(c)
Compliance with
Rule 16b-3
.
To
the extent that
Rule 16b-3
under the Securities Exchange Act of 1934, as amended, applies
to awards granted under this Plan, it is the intention of the
Company that this Plan comply in all respects with the
requirements of
Rule 16b-3,
that any ambiguities or inconsistencies in 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 that rule.
(d)
Section 409A
Compliance
.
This Plan is intended to comply
with the requirements of Section 409A of the Code and the
regulations issued thereunder. To the extent of any
inconsistencies with the requirements of Section 409A, this
Plan shall be interpreted and amended in order to meet the
requirements of Section 409A. Notwithstanding anything
contained in this Plan to the contrary, it is the intent of the
Company to have this Plan interpreted and construed to comply
with any and all provisions Section 409A including any
subsequent amendments, rulings or interpretations from
appropriate governmental agencies.
(e)
Effects of Acceptance of the
Award
.
By accepting any award or other
benefit under this Plan, each grantee and each person claiming
under or through the grantee shall be conclusively deemed to
have indicated his acceptance and ratification of, and consent
to, any action taken under this Plan by the Company, the Board
or its delegates.