Exhibit 10.1

DONEGAL GROUP INC.

2019 EQUITY INCENTIVE PLAN FOR EMPLOYEES

1.    Purpose. The purpose of this 2019 Equity Incentive Plan for Employees
(this “Plan”) is to encourage the employees of Donegal Group Inc. (the
“Company”), its subsidiaries and its affiliates to acquire a proprietary
interest in the growth and performance of the Company, and to continue to align
the interests of those employees with the interests of the Company’s
stockholders to generate an increased incentive for such persons to contribute
to the growth, development and financial success of the Company, Donegal Mutual
Insurance Company and their respective subsidiaries and affiliates (the
“Group”). To accomplish these purposes, this Plan provides a means whereby
employees may receive stock options, 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.

(a)    Administrators. The Board of Directors of the Company (the “Board”) shall
administer this Plan. The Board shall appoint a committee, the initial members
of which shall be the members of the compensation committee of the Board (the
“Committee”), to assist in the administration of this Plan. The Committee, with
the advice of the Company’s chief executive officer, shall recommend to the
Board the employees to whom the Company should grant awards 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)    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 (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 (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 the Company may issue under this Plan is 4,500,000 shares, subject to
adjustment as described below, each of which may be granted as incentive stock
options. 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
the Company may issue 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 issued
in full, the Company shall make the shares reserved for such awards available
again for purposes of this Plan.

 

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(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 the Company may issue 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 for such
extraordinary or unusual event 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 in cash,

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 and 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 the dilution of rights and benefits under this Plan and such
outstanding grants. The Company shall eliminate any fractional shares resulting
from such adjustment. 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 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 from time to time the names of 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 awards as described in Section 8 and other stock-based
awards as described in Section 9. 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 execution of an agreement accepting the award
and acknowledging that all decisions and determinations of the Committee and the
Board shall be final and binding on the grantee, the grantee’s 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 of
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 Global Select Market (“NASDAQ”) on the day immediately preceding the date
on which the Board determines the fair market value. In the event that there are
no transactions in shares of Class A common stock on NASDAQ on such day, the
Board will determine the fair market value 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 on 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 Subject to a Stock Option. The Committee shall recommend
the number of shares of Class A common stock that will be subject to each grant
of a stock option.

 

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(b)    Type of Stock Option and Price. The Committee may recommend to the Board
the grant of stock options to purchase Class A common stock that the Company
intends to qualify as incentive stock options within the meaning of Section 422
of the Code, or incentive stock options, or stock options that the Company does
not intend to so qualify, or non-qualified stock options. All options shall be
exercisable for a term of five years from the date of grant at a price equal to
the closing market value of a share of Class A common stock on the day before
the date of the 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 the Board determines. No grantee may
exercise a stock option after five 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 exercise a stock option only while a member company of
the Group employs the grantee. 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 the Company shall treat such stock option as a non-qualified 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 such
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 the Committee or the Board authorizes.

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 the Committee specifies depending on the type of payment being made, but in
all cases prior to the issuance and delivery of the shares to the grantee.

(f)    Incentive Stock Options. The Company may issue each of the shares
authorized under this Plan pursuant to incentive stock option awards within the
meaning of Section 422 of the Code. The Committee shall recommend other terms
and conditions of an incentive stock option as the Committee deems 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 the
Committee may omit or modify if no longer required under Section 422 of the
Code:

 

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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
outstanding shares 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
after termination of employment or one year in the case of death or disability
within the meaning of the applicable Code provisions.

8.    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 8. 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 Subject to a Stock Award. 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 Service. 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 under what circumstances the grantee
must forfeit the stock awards.

(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 subject to the stock award except upon death as
described in Section 13. Each certificate representing a share of Class A common
stock issued under a stock award shall contain a legend giving appropriate
notice of the transfer restrictions on the stock award. The grantee shall have
the right to have the legend removed when all transfer 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 transfer restrictions on the shares subject to a stock award have
lapsed.

(d)    Right To Vote and To Receive Dividends. 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.

9.    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 9. 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 of Class A common stock, as the Committee
recommends in the stock-based award agreement.

10.    Grant Date. The grant date of an award under this Plan shall be the date
of the Board of Directors approval or such later date as the Board may determine
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 commercially reasonable time after the grant date.

11.    Withholding. All grants under this Plan shall be subject to applicable
federal taxes, including FICA, and 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 taxes, state or local taxes
that applicable law requires the Company to withhold with respect to the grant,
or the Company may deduct from other salary paid to the grantee the amount of
any withholding taxes due with respect to the grants. The Board or

 

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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. The Board or the Committee will value any shares so withheld as of
the date the grants become taxable.

12.    Transferability of Grants. Only the grantee of an award may exercise
rights under the award 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 the grantee’s right
to succeed to the award under the grantee’s will or under the applicable laws of
descent and distribution.

13.    Requirements for Issuance of Shares. The Company shall not issue shares
of Class A common stock in connection with any award under this Plan until and
unless the issuance of the shares complies with all applicable legal
requirements to the satisfaction of the Board. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which the
Company’s counsel has deemed such authority to be necessary to the lawful
issuance and sale of any shares under this Plan, shall relieve the Company of
any liability for the failure to issue or sell any shares as to which the
Company has not obtained such requisite authority. The Board shall have the
right to condition any award made to any employee under this Plan on the
employee’s undertaking in writing to comply with the restrictions on the
grantee’s subsequent disposition of shares subject to the award as the Board
shall deem necessary or advisable. Certificates representing shares of Class A
common stock issued under this Plan shall be subject to such stop-transfer
orders and other restrictions as applicable laws, regulations and
interpretations may require, including any requirement that the certificate bear
a restrictive legend. 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.

14.    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 the Code or applicable laws require such approval
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 nor may the Board amend this Plan to permit repricing of options
unless the stockholders of the Company provide prior approval of the repricing.

(c)    Termination. This Plan shall terminate on April 18, 2024, unless the
Board terminates this Plan earlier or extends the term of this Plan 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.

15.    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, 100% reinsurance, consolidation or
otherwise, of the business or assets of any corporation, firm or association,
including awards to employees of those entities who become employees of the
Company, 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
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 this Plan requires and from those of the
substituted stock awards, as the Board determines.

16.    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 any member company of the Group or
affect any right that any member company of the Group may have to terminate the
employment of the grantee.

17.    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 options and awards granted under this Plan.

18.    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
any member company of the Group. The Company shall not use any awards granted
pursuant to this Plan in determining the benefits provided under any other plan
unless specifically provided.

19.    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 engaged in fraud, embezzlement, theft, commission of a felony or
dishonest conduct in the course of the employee’s employment that damaged any
member company of the Group or that the grantee has disclosed confidential
information of any member company of 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 for shares that shall
automatically terminate without any further action by the Board and all of such
awards shall be of no further force or effect. The decision of the Board in
interpreting and applying the provisions of this Section 19 shall be final. No
decision of the Board, however, shall affect the finality of the discharge or
termination of the grantee.

20.    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 the Company or such officer or director of the Company deems
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 of the Company as
a result of the taking of any such action.

21.    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, such member reasonably incurs in
connection with or arising out of, any action, suit or proceeding in which the
member may be involved by reason of being or having been a member of the
Committee or the Board, whether or not the member continues to be such member at
the time of incurring such expenses; provided, however, that this indemnity
shall not include any expenses such member incurs (i) in respect of matters as
to which the member 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 the member’s 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 21 shall be available to or enforceable by
any such member of the Committee or the Board unless,

 

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within 60 days after institution of any such action, suit or proceeding, the
member shall have offered the Company in writing the opportunity to represent
the member of the Committee or the Board and defend the 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 of the
Committee or the Board may be entitled as a matter of law, contract or
otherwise.

22.    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 granted pursuant to this Plan until the
Company and the grantee have executed a written agreement 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 under this Plan with respect to any award unless counsel
for the Company is 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 Rule 16b-3.

(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 of this Plan with the requirements of
Section 409A, the Committee and the Board shall interpret this Plan 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 of 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.

 

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