As filed with the Securities and Exchange Commission on June 24, 1996.
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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DONEGAL GROUP INC.
(Exact name of registrant as specified in its charter)
Delaware 23-2424711
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1195 River Road
Marietta, Pennsylvania 17547
(Address of Principal Executive Offices) (Zip Code)
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DONEGAL GROUP INC.
1996 EQUITY INCENTIVE PLAN
(Full title of the plan)
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Donald H. Nikolaus, President
Donegal Group Inc.
1195 River Road
Marietta, Pennsylvania 17547
(Name and address of agent for service)
(717) 426-1931
(Telephone number, including area code,
of agent for service)
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Copy to:
Kathleen M. Shay, Esquire
Duane, Morris & Heckscher
One Liberty Place
Philadelphia, PA 19103-7396
CALCULATION OF REGISTRATION FEE
============================================================================================================
Proposed Proposed
Title of securities Amount to be maximum offering maximum aggregate Amount of
to be registered registered(1) price per share(2) offering price(2) registration fee
- ------------------------------------------------------------------------------------------------------------
Common Stock, 345,850 shares $17.41 $6,021,248.50 $2,077
par value $1.00
============================================================================================================
(1) In addition, pursuant to Rule 416(c) under the Securities Act of 1933,
this registration statement also covers an indeterminate amount of
interests to be offered or sold pursuant to the Donegal Group Inc. 1996
Equity Incentive Plan.
(2) Estimated solely for the purpose of calculating the registration fee based
on the average of the high and low sales prices of the Common Stock of the
Company on the Nasdaq Stock Market on June 17, 1996, or $17.41 per share.
DONEGAL GROUP INC.
Cross-Reference Sheet
Pursuant to Item 501(b) of Regulation S-K
Item Number and Caption Heading in Prospectus
- ----------------------- ---------------------
1. Plan Information................................. *
2. Registrant Information and Employee
Plan Annual Information.......................... *
- ---------------
* Omitted because no Prospectus is being filed herewith. All information
required in the Section 10(a) Prospectus will be furnished to plan
participants pursuant to a memorandum or other plan documents, as
supplemented or amended from time to time.
PART II
INFORMATION REQUIRED IN REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following material is incorporated herein by reference:
(a) The Annual Report on Form 10-K of Donegal Group Inc. (the "Company")
for the year ended December 31, 1995 as filed by the Company with the Securities
and Exchange Commission (the "Commission").
(b) The Quarterly Report on Form 10-Q of the Company for the quarter ended
March 31, 1996 as filed by the Company with the Commission.
(c) The description of the Company's Common Stock set forth in the
Company's Registration Statement on Form S-1 filed with the Commission under the
Securities Act of 1933, as amended, (the "Act") on October 29, 1986 under the
caption "Description of Capital Stock," "Dividend Policy" and
"Business--Regulation," which is incorporated by reference in response to Item 1
of the Registration Statement on Form 8-A filed by the Company with the
Commission on January 27, 1987 pursuant to Section 12(g) of the Securities
Exchange Act of 1934, as amended, (the "Exchange Act").
All reports or other documents filed pursuant to Sections 13, 14 and 15(d)
of the Exchange Act subsequent to the date of this Registration Statement, in
each case filed by the Company prior to the filing of a post-effective amendment
that indicates that all securities offered have been sold or that deregisters
all securities then remaining unsold, shall be deemed to be incorporated by
reference in this Registration Statement and to be a part hereof from the date
of filing of such reports and documents. Any statement contained in a document
incorporated or deemed to be incorporated herein by reference shall be deemed to
be modified or superseded for the purposes of this Registration Statement to the
extent that a statement contained herein or in any other subsequently filed
document, which also is or is deemed to be incorporated herein by reference,
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Registration Statement.
Item 4. Description of Securities.
No answer to this item is required because the class of securities to be
offered is registered under Section 12 of the Exchange Act.
Item 5. Interests of Named Experts and Counsel.
The consolidated financial statements and schedules of the Company as of
December 31, 1995 and 1994 and for each of the years in the three-year period
ended December 31, 1995 have
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been incorporated by reference herein and in this Registration Statement in
reliance upon the reports of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing. Such reports refer to a change in
the Company's method of accounting for investment securities by adopting the
provisions of Statement of Financial Accounting Standards No. 115 "Accounting
for Certain Investments in Debt and Equity Securities."
The validity of the issuance of the shares of Common Stock registered
hereby will be passed upon for the Company by Duane, Morris & Heckscher,
Philadelphia, Pennsylvania.
Item 6. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware
empowers a Delaware corporation to indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that such person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person 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
such person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon plea of nolo
contendere or its equivalent, does not, of itself, create a presumption that the
person did not act in good faith and in a manner which such person 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 reasonable cause to
believe that such person's conduct was unlawful.
In the case of an action or suit by or in the right of the corporation to
procure a judgment in its favor, Section 145 empowers a corporation to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by reason of the fact that such
person is or was acting in any of the capacities set forth above against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection with the defense or settlement of such action or suit if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the corporation, except that
indemnification is not permitted in respect of any claim, issue or matter as to
which such person is adjudged to be liable to the corporation unless and only to
the extent that the Court of Chancery or the court in which such action or suit
was brought determines 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 of
Chancery or such other court deems proper.
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Section 145 further provides: that a Delaware corporation is required to
indemnify a director, officer, employee or agent against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
with any action, suit or proceeding or in defense of any claim, issue or matter
therein as to which such person has been successful on the merits or otherwise;
that indemnification provided for by Section 145 shall not be deemed exclusive
of any other rights to which the indemnified party may be entitled; that
indemnification provided for by Section 145 shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of such
person's heirs, executors and administrators; and empowers the corporation to
purchase and maintain insurance on behalf of a director or officer against any
liability asserted against such person and incurred by such person in any such
capacity or arising out of such person's status as such whether or not the
corporation would have the power to indemnify such person against such liability
under Section 145. A Delaware corporation may provide indemnification only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because such
person has met the applicable standard of conduct. Such determination is to be
made (i) by the board of directors by a majority vote of a quorum consisting of
directors who were not party to such action, suit or proceeding, or (ii) if such
a quorum is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion or (iii)
by the stockholders.
Article Five of the Company's By-laws provides for indemnification of
directors and officers of the Company to the fullest extent permitted by the
General Corporation Law of the State of Delaware, as presently or hereafter in
effect. The By-laws of Donegal Mutual Insurance Company also provide that
Donegal Mutual Insurance Company shall indemnify to the full extent authorized
by law any director or officer of Donegal Mutual Insurance Company who is made,
or threatened to be made, a party to any action or proceeding, whether criminal,
civil, administrative or investigative, by reason of the fact that he is or was
serving as a director, officer or employee of the Company at the request of
Donegal Mutual Insurance Company.
The Company provides liability insurance for directors and officers for
certain losses arising from claims or charges made against them while acting in
their capacities as directors or officers of the Company up to an aggregate of
$5,000,000 inclusive of defense costs, expenses and charges.
Additionally, as permitted by the General Corporation Law of the State of
Delaware, Article Six of the Company's Certificate of Incorporation provides
that no director of the Company shall incur personal liability to the Company or
its stockholders for monetary damages for breach of such person's fiduciary duty
as a director; provided, however, that the provision does not eliminate or limit
the liability of a director for (i) any breach of the director's duty of loyalty
to the Company or its stockholders; (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii) the
unlawful payment of dividends or unlawful purchase or redemption of stock under
Section 174 of the General Corporation Law of the State of Delaware; or (iv) any
transaction from which the director derived an improper personal benefit.
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Item 7. Exemption from Registration Claimed.
No answer to this item is required because no restricted securities are to
be reoffered or resold pursuant to this Registration Statement.
Item 8. Exhibits.
(4) Donegal Group Inc. 1996 Equity Incentive Plan.
(5) Opinion of Duane, Morris & Heckscher.
(23)(A) Consent of Duane, Morris & Heckscher (included in their opinion
filed as Exhibit 5).
(23)(B) Consent of KPMG Peat Marwick LLP.
(24) Power of Attorney (see page II-6 of this Registration Statement).
Item 9. Undertakings.
The registrant hereby undertakes:
(a) to file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to include any material
information with respect to the plan of distribution not previously disclosed in
the Registration Statement or any material change to such information in the
Registration Statement;
(b) that for the purpose of determining any liability under the Act, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offer thereof; and
(c) to remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned registrant hereby further undertakes that, for purposes of
determining any liability under the Act, each filing of the registrant's annual
report pursuant to section 13(a) or section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Exchange Act) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby further undertakes that, insofar as
indemnification for liabilities arising under the Act may be permitted to
directors, officers and controlling persons of the registrant, the registrant
has been advised that in the opinion of the Commission such
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indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Marietta, Pennsylvania on June 20, 1996.
DONEGAL GROUP INC.
By: /s/ DONALD H. NIKOLAUS
---------------------------------
Donald H. Nikolaus, President
Know all men by these presents, that each person whose signature appears
below constitutes and appoints Donald H. Nikolaus and Ralph G. Spontak, and each
or either of them, as such person's true and lawful attorneys-in-fact and
agents, with full power of substitution, for such person, and in such person's
name, place and stead, in any and all capacities to sign any or all amendments
or post-effective amendments to this Registration Statement, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as such person might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them or their substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/s/ C. Edwin Ireland Chairman of the Board and a Director June 20, 1996
- ------------------------------------
C. Edwin Ireland
/s/ Donald H. Nikolaus President and a Director June 20, 1996
- ------------------------------------ (principal executive officer)
Donald H. Nikolaus
/s/ Ralph G. Spontak Senior Vice President, Chief Financial June 20, 1996
- ------------------------------------ Officer and Secretary
Ralph G. Spontak (principal financial and
accounting officer)
/s/ Patricia A. Gilmartin Director June 20, 1996
- ------------------------------------
Patricia A. Gilmartin
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Signature Title Date
- --------- ----- ----
/s/ Philip H. Glatfelter, II Director June 20, 1996
- ------------------------------------
Philip H. Glatfelter, II
/s/ R. Richard Sherbahn Director June 20, 1996
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R. Richard Sherbahn
/s/ Thomas J. Finley, Jr. Director June 20, 1996
- ------------------------------------
Thomas J. Finley, Jr.
/s/ Robert S. Bolinger Director June 20, 1996
- ------------------------------------
Robert S. Bolinger
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EXHIBIT INDEX
(Pursuant to Item 601 of Regulation S-K)
Exhibit No. Exhibit Reference
- ----------- ------- ---------
(4) Donegal Group Inc. 1996 Equity Filed herewith
Incentive Plan
(5) Opinion of Duane, Morris & Heckscher. Filed herewith
(23)(A) Consent of Duane, Morris & Heckscher
(included in their opinion filed
as Exhibit 5).
(23)(B) Consent of KPMG Peat Marwick LLP. Filed herewith
(24) Power of Attorney (see Page II-6 of this
Registration Statement).
EXHIBIT (4)
DONEGAL GROUP INC.
1996 EQUITY INCENTIVE PLAN
1. Purpose. The purpose of the Donegal Group Inc. 1996 Equity Incentive
Plan (the "Plan") is to further the growth, development and financial success of
Donegal Group Inc. (the "Company"), its parent and the subsidiaries of the
Company and its parent by providing additional incentives to those officers and
key employees who are responsible for the management of the business affairs of
the Company, its parent and/or subsidiaries of the Company or its parent, which
will enable them to participate directly in the growth of the capital stock of
the Company. The Company intends that the Plan will facilitate securing,
retaining and motivating management employees of high caliber and potential. To
accomplish these purposes, the Plan provides a means whereby management
employees may receive stock options ("Options") to purchase the Company's Common
Stock, $1.00 par value (the "Common Stock").
2. Administration.
(a) Composition of the Committee. The Plan shall be administered by a
committee of at least three persons (the "Committee") appointed by the Company's
Board of Directors. No member of the Committee shall have been, or shall be,
granted Options under the Plan, or options or other awards under any other plan
of the Company or any of its affiliates, in the year preceding his appointment
or while serving on the Committee, except for participation in any plan in which
participation would be permitted in accordance with the applicable rules of the
Securities and Exchange Commission relating to disinterested administration
under the Securities Exchange Act of 1934 (the "Exchange Act"). Subject to the
foregoing, from time to time the Board of Directors may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies,
however caused, or remove all members of the Committee and thereafter directly
administer the Plan.
(b) Authority of the Committee. The Committee shall have full and
final authority, in its sole discretion, to interpret the provisions of the
Plan and to decide all questions of fact arising in its application; to
determine the employees to whom Options shall be granted and the type, amount,
size and terms of each such grant; to determine the time when Options shall be
granted; and to make all other determinations necessary or advisable for the
administration of the Plan. All decisions, determinations and interpretations of
the Committee shall be final and binding on all optionees and all other holders
of Options granted under the Plan.
3. Stock Subject to the Plan. Subject to Section 16 hereof, the shares that
may be issued under the Plan shall not exceed in the aggregate 345,850 shares of
Common Stock. Such shares may be authorized and unissued shares or shares issued
and subsequently reacquired by the Company. Except as otherwise provided herein,
any shares subject to an Option that for any reason expires or is terminated
unexercised as to such shares shall again be available under the Plan.
4. Eligibility To Receive Options. Persons eligible to receive Options
under the Plan shall be limited to those officers and other key employees of the
Company, its parent and any subsidiary of the Company or its parent (as defined
in Section 425 of the Internal Revenue Code of 1986 (the "Code") or any
amendment or substitute thereto) who are in positions in which their decisions,
actions and counsel significantly impact upon the profitability and success of
the Company, its parent or any subsidiary of the Company or its parent.
Directors of the Company who are not also officers or employees of the Company,
its parent or any subsidiary of the Company or its parent shall not be eligible
to participate in the Plan.
5. Types of Options. Grants may be made at any time and from time to time
by the Committee in the form of stock options to purchase shares of Common
Stock. Options granted hereunder may be Options that are intended to qualify as
incentive stock options within the meaning of Section 422 of the Code or any
amendment or substitute thereto ("Incentive Stock Options") or Options that are
not intended to so qualify ("Nonqualified Stock Options").
6. Option Agreements. Options for the purchase of Common Stock shall be
evidenced by written agreements in such form not inconsistent with the Plan as
the Committee shall approve from time to time. The Options granted hereunder may
be evidenced by a single agreement or by multiple agreements, as determined by
the Committee in its sole discretion. Each option agreement shall contain in
substance the following terms and conditions:
(a) Type of Option. Each option agreement shall identify the Options
represented thereby either as Incentive Stock Options or Nonqualified Stock
Options, as the case may be.
(b) Option Price. Each option agreement shall set forth the purchase
price of the Common Stock purchasable upon the exercise of the Option
evidenced thereby. Subject to the limitation set forth in Section 6(d)(ii) of
the Plan, the purchase price of the Common Stock subject to an Incentive Stock
Option shall be not less than 100% of the fair market value of such stock on the
date the Option is granted, as determined by the Committee, but in no event less
than the par value of such stock. The purchase price of the Common Stock subject
to a Nonqualified Stock Option shall be not less than 100% of the fair market
value of such stock on the date the Option is granted, as determined by the
Committee. For this purpose, fair market value on any date shall mean the
closing price of the Common Stock, as reported in The Wall Street Journal (or if
not so reported, as otherwise reported by the National Association of Securities
Dealers Automated Quotation ("Nasdaq") System), or if the Common Stock is not
reported by Nasdaq, the fair market value shall be as determined by the
Committee pursuant to Section 422 of the Code.
(c) Exercise Term. Each option agreement shall state the period or
periods of time within which the Option may be exercised, in whole or in
part, as determined by the Committee, provided that no Option shall be
exercisable after ten years from the date of grant thereof. The Committee shall
have the power to permit an acceleration of previously established exercise
terms, subject to the requirements set forth herein, upon such circumstances and
subject to such terms and conditions as the Committee deems appropriate.
(d) Incentive Stock Options. In the case of an Incentive Stock Option,
each option agreement shall contain such other terms, conditions and
provisions as the Committee determines to be necessary or desirable in order to
qualify such Option as a tax-favored Option (within the meaning of Section 422
of the Code or any amendment or substitute thereto or regulation thereunder)
including without limitation, each of the following, except that any of these
provisions may be omitted or modified if it is no longer required in order to
have an Option qualify as a tax-favored Option within the meaning of Section 422
of the Code or any amendment or substitute therefor:
(i) The aggregate fair market value (determined as of the date the
Option is granted) of the Common Stock with respect to which Incentive Stock
Options are first exercisable by any employee during any calendar year (under
all plans of the Company) shall not exceed $100,000.
(ii) No Incentive Stock Options shall be granted to any employee
if at the time the Option is granted such employee owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company or its subsidiaries unless at the time such Option is granted the Option
price is at least 110% of the fair market value of the stock subject to the
Option and, by its terms, the Option is not exercisable after the expiration of
five years from the date of grant.
(iii) No Incentive Stock Options shall be exercisable more than
three months (or one year, in the case of an employee who dies or becomes
disabled within the meaning of Section 22(e)(3) of the Code or any amendment or
substitute therefor) after termination of employment.
(e) Substitution of Options. Options may be granted under the Plan
from time to time in substitution for stock options held by employees of
other corporations who are about to become, and who do concurrently with the
grant of such options become, employees of the Company, its parent or a
subsidiary of the Company or its parent as a result of a merger or consolidation
of the employing corporation with the Company, its parent or a subsidiary of the
Company or its parent, or the acquisition by the Company, its parent or a
subsidiary of the Company or its parent of the assets of the employing
corporation, or the acquisition by the Company, its parent or a subsidiary of
the Company or its parent of stock of the employing corporation. The terms and
conditions of the substitute options so granted may vary from the terms and
conditions set forth in this Section 6 to such extent as the Committee at the
time of grant may deem appropriate to conform, in whole or in part, to the
provisions of the stock options in substitution for which they are granted.
7. Date of Grant. The date on which an Option shall be deemed to have been
granted under the Plan shall be the date of the Committee's authorization of the
Option or such later date as may be determined by the Committee at the time the
Option is authorized. Notice of the determination shall be given to each
individual to whom an Option is so granted within a reasonable time after the
date of such grant.
8. Exercise and Payment for Shares. Options may be exercised in whole or in
part, from time to time, by giving written notice of exercise to the Secretary
of the Company, specifying the number of shares to be purchased, except that no
Option may be exercised in whole or in part during the first six months after
such Option is granted unless expressly permitted by the Committee. The purchase
price of the shares with respect to which an Option is exercised shall be
payable in full with the notice of exercise in cash, Common Stock at fair market
value, or a combination thereof, as the Committee may determine from time to
time and subject to such terms and conditions as may be prescribed by the
Committee for such purpose. The Committee may also, in its discretion and
subject to prior notification to the Company by an optionee, permit an optionee
to enter into an agreement with the Company's transfer agent or a brokerage firm
of national standing whereby the optionee will simultaneously exercise the
option and sell the shares acquired thereby through the Company's transfer agent
or such a brokerage firm and either the Company's transfer agent or the
brokerage firm executing the sale will remit to the Company from the proceeds of
sale the exercise price of the shares as to which the option has been exercised.
9. Rights upon Termination of Employment. In the event that an optionee
ceases to be an employee of the Company, its parent or any subsidiary of the
Company or its parent for any reason other than death, retirement, as
hereinafter defined, or disability (within the meaning of Section 22(e)(3) of
the Code or any substitute therefor), the optionee shall have the right to
exercise the Option during its term within a period of three months after such
termination to the extent that the 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 Committee. In the event that an optionee
dies, retires or becomes disabled prior to the expiration of his Option and
without having fully exercised his Option, the optionee or his successor shall
have the right to exercise the Option during its term within a period of one
year after termination of employment due to death, retirement or disability to
the extent that the 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 Committee. As used in this Section 9, "retirement" means a termination of
employment by reason of an optionee's retirement at or after his earliest
permissible retirement date pursuant to and in accordance with his employer's
regular retirement plan or personnel practices. Notwithstanding the provisions
of Section 6(d)(iii) hereof, if the term of an Incentive Stock Option continues
for more than three months after termination of employment due to retirement or
more than one year after termination of employment due to death or disability,
such Option shall thereupon lose its status as an Incentive Stock Option and
shall be treated as a Nonqualified Stock Option.
10. General Restrictions. Each Option granted under the Plan shall be
subject to the requirement that if at any time the Committee shall determine
that (i) the listing, registration or qualification of the shares of Common
Stock subject or related thereto upon any securities exchange or under any state
or federal law, or (ii) the consent or approval of any government regulatory
body, or (iii) an agreement by the recipient of an Option with respect to the
disposition of shares of Common Stock is necessary or desirable as a condition
of or in connection with the granting of such Option or the issuance or purchase
of shares of Common Stock thereunder, such Option shall not be consummated in
whole or in part unless such listing, registration, qualification,
consent, approval or agreement shall have been effected or obtained free of any
conditions not acceptable to the Committee.
11. Rights of a Stockholder. The recipient of any Option under the Plan,
unless otherwise provided by the Plan, shall have no rights as a stockholder
unless and until certificates for shares of Common Stock are issued and
delivered to him.
12. Right to Terminate Employment. Nothing contained in the Plan or in any
option agreement entered into pursuant to the Plan shall confer upon any
optionee the right to continue in the employment of the Company, its parent or
any subsidiary of the Company or its parent or affect any right that the
Company, its parent or any subsidiary of the Company or its parent may have to
terminate the employment of such optionee.
13. Withholding. Whenever the Company proposes or is required to issue or
transfer shares of Common Stock under the Plan, the Company shall have the right
to require the recipient 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 or certificates for such shares. If and to the extent
authorized by the Committee, in its sole discretion, an optionee may make an
election, by means of a form of election to be prescribed by the Committee, to
have shares of Common Stock that are acquired upon exercise of an Option
withheld by the Company or to tender other shares of Common Stock or other
securities of the Company owned by the optionee to the Company at the time of
exercise of an Option to pay the amount of tax that would otherwise be required
by law to be withheld by the Company as a result of any exercise of an Option.
Any such election shall be irrevocable and shall be subject to termination by
the Committee, in its sole discretion, at any time. Any securities so withheld
or tendered will be valued by the Committee as of the date of exercise.
14. Non-Assignability. No Option under the Plan shall be assignable or
transferable by the recipient thereof except by will or by the laws of descent
and distribution or by such other means as the Committee may approve. During the
life of the recipient, such Option shall be exercisable only by such person or
by such person's guardian or legal representative.
15. Non-Uniform Determinations. The Committee's determinations under the
Plan (including without limitation determinations of the persons to receive
Options, the form, amount and timing of such grants, the terms and provisions of
Options, and the agreements evidencing same) need not be uniform and may be made
selectively among persons who receive, or are eligible to receive, grants of
Options under the Plan whether or not such persons are similarly situated.
16. Adjustments.
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and the number of shares of Common Stock that have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Committee, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, all outstanding Options will
terminate immediately prior to the consummation of such proposed action, unless
otherwise provided by the Committee. The Committee may, in the exercise of its
sole discretion in such instances, declare that any Option shall terminate as of
a date fixed by the Committee and give each Option holder the right to exercise
his Option as to all or any part of the shares of Common Stock covered by the
Option, including shares as to which the Option would not otherwise be
exercisable.
(c) Sale or Merger. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, the Committee, in the exercise of its
sole discretion, may take such action as it deems desirable, including, but not
limited to: (i) causing an Option to be assumed or an equivalent option to be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation, (ii) providing that each Option holder shall have the
right to exercise his Option as to all of the shares of Common Stock covered by
the Option, including shares as to which the Option would not otherwise be
exercisable, or (iii) declare that an Option shall terminate at a date fixed by
the Committee provided that the Option holder is given notice and opportunity to
exercise his Option prior to such date.
17. Amendment. The Committee may terminate or amend the Plan at any time,
except that without stockholder approval the Committee may not (i) materially
increase the maximum number of shares that may be issued under the Plan (other
than increases pursuant to Section 16 hereof), (ii) materially increase the
benefits accruing to participants under the Plan or (iii) materially modify the
requirements as to eligibility for participation in the Plan. The termination or
any modification or amendment of the Plan shall not, without the consent of a
participant, affect his rights under an Option previously granted.
18. Reservation of Shares. The Company, during the term of the Plan, will
at all times reserve and keep available such number of shares as shall be
sufficient to satisfy the requirements of the Plan. 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 such shares as to which such
requisite authority shall not have been obtained.
19. Effect on Other Plans. Participation in the Plan shall not affect an
employee's eligibility to participate in any other benefit or incentive plan of
the Company, its parent or any subsidiary of the Company or its parent. Any
Options granted pursuant to the Plan shall not be used in determining the
benefits provided under any other plan of the Company, its parent or any
subsidiary of the Company or its parent unless specifically provided.
20. Duration of the Plan. The Plan shall remain in effect until all Options
granted under the Plan have been satisfied by the issuance of shares, but no
Option shall be granted more than ten years after the earlier of the date the
Plan is adopted by the Company or is approved by the Company's stockholders.
21. Forfeiture for Dishonesty. Notwithstanding anything to the contrary in
the Plan, if the Committee finds, by a majority vote, after full consideration
of the facts presented on behalf of both the Company and any optionee, that the
optionee has been engaged in fraud, embezzlement, theft, commission of a felony
or dishonest conduct in the course of his employment or retention by the
Company, its parent or any subsidiary of the Company or its parent that damaged
the Company, its parent or any subsidiary of the Company or its parent or that
the optionee has disclosed confidential information of the Company, its parent
or any subsidiary of the Company or its parent, the optionee shall forfeit all
unexercised Options and all exercised Options under which the Company has not
yet delivered the certificates. The decision of the Committee in interpreting
and applying the provisions of this Section 21 shall be final. No decision of
the Committee, however, shall affect the finality of the discharge or
termination of such optionee by the Company, its parent or any subsidiary of the
Company or its parent in any manner.
22. No Prohibition on Corporate Action. No provision of the 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 the Plan or any Options granted hereunder, and no optionee or
optionee'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 such action.
23. Indemnification. With respect to the administration of the Plan, the
Company shall indemnify each present and future member of the Committee and the
Board of Directors against, and each member of the Committee and the Board of
Directors shall be entitled without further action on his 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 in connection with or arising out of, any action, suit or proceeding in
which he may be involved by reason of his being or having been a member of the
Committee or the Board of Directors, whether or not he continues to be such
member at the time of incurring such expenses; provided, however, that such
indemnity shall not include any expenses incurred by any such member of the
Committee or the Board of Directors (i) in respect of matters as to which he
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 duty as such member
of the Committee or the Board of Directors; 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 herein shall be
available to or enforceable by any such member of the Committee or the Board of
Directors unless, within 60 days after institution of any such action, suit or
proceeding, he 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 of Directors
and shall be in addition to all other rights to which such member may be
entitled as a matter of law, contract or otherwise.
24. Miscellaneous Provisions.
(a) Compliance with Plan Provisions. No optionee or other person
shall have any right with respect to the Plan, the Common Stock reserved
for issuance under the Plan or in any Option until a written option agreement
shall have been executed by the Company and the optionee and all the terms,
conditions and provisions of the Plan and the Option applicable to such optionee
(and each person claiming under or through him) have been met.
(b) Approval of Counsel. In the discretion of the Committee, no
shares of Common Stock, other securities or property of the Company or other
forms of payment shall be issued hereunder with respect to any Option 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 Options granted under the Plan, it is the intent of
the Company that the Plan comply in all respects with the requirements of Rule
16b-3, that any ambiguities or inconsistencies in construction of the Plan be
interpreted to give effect to such intention and that if the 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 the Plan shall be deemed
to be automatically amended so as to bring them into full compliance with such
rule.
(d) Effects of Acceptance of Option. By accepting any Option or other
benefit under the Plan, each optionee and each person claiming under or through
him shall be conclusively deemed to have indicated his acceptance and
ratification of, and consent to, any action taken under the Plan by the Company,
the Board of Directors and/or the Committee or its delegates.
(e) Construction. The masculine pronoun shall include the feminine
and neuter, and the singular shall include the plural, where the context
so indicates.
25. Stockholder Approval. The exercise of any Option granted under the Plan
shall be subject to the approval of the Plan by the affirmative vote of the
holders of a majority of the
outstanding shares of the Common Stock present, or represented, and entitled to
vote at a meeting duly held.
EXHIBIT (5)
June 20, 1996
The Board of Directors of
Donegal Group Inc.
1195 River Road
Marietta, PA 17547
Gentlemen:
We have acted as counsel to Donegal Group Inc. (the "Company") in
connection with the preparation and filing with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, of a registration
statement on Form S-8 (the "Registration Statement") relating to the offer and
sale by the Company of up to 345,850 shares (the "Shares") of Common Stock,
$1.00 par value, of the Company, pursuant to the Company's 1996 Equity Incentive
Plan (the "Plan").
As counsel to the Company, we have supervised all corporate proceedings in
connection with the preparation and filing of the Registration Statement. We
have also examined the Company's Certificate of Incorporation and By-laws, as
amended to date, the corporate minutes and other proceedings and the records
relating to the authorization, sale and issuance of the Shares, and such other
documents and matters of law as we have deemed necessary or appropriate in order
to render this opinion.
Based upon the foregoing, it is our opinion that each of the Shares, when
issued in accordance with the terms and conditions of the Plan, will be duly
authorized, legally and validly issued and outstanding, fully paid and
nonassessable.
We hereby consent to the use of this opinion in the Registration Statement.
Sincerely,
Duane, Morris & Heckscher
KMS/ccc
EXHIBIT (23)(B)
Independent Auditors' Consent
The Board of Directors
Donegal Group Inc.
We consent to the use of our reports incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the registration statement.
Our reports refer to a change in the Company's method of accounting for
investment securities by adopting the provisions of Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities".
KPMG Peat Marwick LLP
Harrisburg, Pennsylvania
June 20, 1996