exv10w2



 





 




    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:



 


			
	 	    • 
	
    a stock dividend, spinoff, recapitalization, stock split or
    combination or exchange of shares;

	 
	 	    • 
	
    a merger, reorganization or consolidation;

	 
	 	    • 
	
    a reclassification or change in par value; or

	 
	 	    • 
	
    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,





    

     








 





 



    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:



 


			
	 	    • 
	
    in cash;





    
 









 





 


			
	 	    • 
	
    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;

	 
	 	    • 
	
    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

	 
	 	    • 
	
    by any other method authorized by the Board.




 



    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:



 


			
	 	    • 
	
    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.

	 
	 	    • 
	
    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.




 


			
	 	    • 
	
    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.




 


			
	 	    • 
	
    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.




 



    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.