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8-K - FORM 8-K - DONEGAL GROUP INC | w82460e8vk.htm |
EX-99.1 - EX-99.1 - DONEGAL GROUP INC | w82460exv99w1.htm |
EX-10.3 - EX-10.3 - DONEGAL GROUP INC | w82460exv10w3.htm |
EX-10.1 - EX-10.1 - DONEGAL GROUP INC | w82460exv10w1.htm |
Exhibit 10.2
DONEGAL
GROUP INC.
2011
EQUITY INCENTIVE PLAN FOR EMPLOYEES
1. Purpose. The purpose of this
2011 equity incentive plan for employees (this Plan)
is to encourage the employees of Donegal Group Inc. (the
Company) and its subsidiaries 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 Companys stockholders
to generate an increased incentive for such person to contribute
to the growth, development and financial success of the Company
and the member companies of the Donegal Insurance Group,
including companies from which the Company or Donegal Mutual
assumes 100% quota share reinsurance (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 Companys 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, which
initially shall be the compensation committee to assist in the
administration of this Plan. The committee, with the advice of
the Companys 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
3,500,000 shares, subject to adjustment as described below.
The Company may issue each of the shares authorized under this
Plan pursuant to incentive stock options awards within the
meaning of Section 422 of the Code. The shares may be
authorized but unissued shares or reacquired shares for purposes
of this Plan.
(b) Share Counting. For
administrative purposes, when the Board approves an award
payable in shares of Class A common stock, the Board shall
reserve, and count against the share limit, shares equal to the
maximum number of shares that 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 paid in full, the Company shall
make the shares reserved for such awards available again for
purposes of this Plan.
(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 250,000 shares, subject to adjustment as described
below.
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(d) 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 Companys 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 Companys 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 be automatically
equitably adjusted to reflect any increase or decrease in the
number of, or change in the kind or value of, issued shares of
Class A common stock to preclude, to the extent
practicable, the enlargement or dilution of rights and benefits
under this Plan and such outstanding grants. 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 the Company
and its subsidiaries and the member companies of the Group,
including employees who are officers or members of the Board of
any of the foregoing companies, shall be eligible to participate
in this Plan. The committee shall recommend to the Board the
employees to receive awards and the number of shares of
Class A common stock subject to each award.
5. Awards. Awards under this Plan
may consist of stock options as described in Section 7,
stock 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 grantees signed agreement to accept the award and to
acknowledge that all decisions and determinations of the
committee and the Board shall be final and binding on the
grantee, his or her beneficiaries and any other person having or
claiming an interest under the award. Awards under this Plan
need not be uniform as among the grantees. The Board may grant
awards that are contingent on, and subject to, stockholder
approval of this Plan or an amendment to this Plan.
6. Definition of Fair Market
Value. For purposes of this Plan, fair
market value shall mean the last sales price of a share of
Class A common stock on the NASDAQ Global Select Stock
Market, or NASDAQ, on the day on which the Board is determining
the fair market value, 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 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 by NASDAQ,
the Board shall determine the fair market value pursuant to
Section 422 of the Code.
7. Stock Options. The committee
may recommend to the Board the grant of stock options to an
employee upon such terms and conditions as the committee deems
appropriate under this Section 7.
(a) Number of Shares. The
committee shall recommend the number of shares of Class A
common stock that will be subject to each grant of stock options.
(b) Type of Stock Option, Price and
Term. The committee may recommend to the
Board the grant of stock options to purchase Class A common
stock that 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. The
committee shall recommend the exercise price of shares of
Class A common stock subject to a stock option, which shall
be equal to or greater than the fair market value of a share of
Class A common stock on the date of grant.
(c) Exercisability of Stock
Options. Each stock option agreement shall
specify the period or periods of time within which a grantee may
exercise a stock option, in whole or in part, as the Board
determines. No
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grantee may exercise a stock option after ten years from the
grant date of the stock option. The Board may accelerate the
exercisability of any or all outstanding stock options at any
time for any reason.
(d) Termination of
Employment. Except as provided in the stock
option agreement, a grantee may exercise a stock option only
while the Company, Donegal Mutual or any of their respective
subsidiaries 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:
| 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 committee or the Board may determine from time to time and subject to the terms and conditions as the committee or the Board may prescribe; | |
| 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 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 of the shares.
(f) Incentive Stock Options. 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 that section:
| 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; | |
| The exercise price of any incentive stock option granted to an individual who owns stock having more than 10% of the total combined voting power of all classes of stock of the Company must be at least 110% of the fair market value of the shares subject to the incentive stock option on the grant date, and the individual may not exercise the incentive stock option after the expiration of five years from the date of grant; and | |
| The grantee may not exercise the incentive stock option more than three months, or one year in the case of death or disability within the meaning of the applicable Code provisions, after termination of employment. |
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
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according to other criteria as the committee deems appropriate,
including restrictions based upon the achievement of specific
performance goals.
(a) Number of Shares. The
committee shall recommend the number of shares of Class A
common stock to be issued pursuant to a stock award and any
restrictions applicable to the stock award.
(b) Requirement of Employment. The
Board shall specify in the stock award agreement under what
circumstances a grantee may retain stock awards after
termination of the grantees employment and under what
circumstances the grantee may 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 of
the stock award except upon death as described in
Section 13. Each certificate representing a share of
Class A common stock issued under the stock award shall
contain a legend giving appropriate notice of the restrictions
on the stock award. The grantee shall be entitled to have the
legend removed when all restrictions on the shares subject to
the stock award have lapsed. The Company may maintain possession
of any certificates representing shares subject to the stock
award until all restrictions on the shares subject to the stock
award have lapsed.
(d) Right To Vote and To Receive
Dividends. The committee shall recommend to
what extent, and under what conditions, the grantee shall have
the right to vote the shares subject to the stock award and to
receive any dividends or other distributions paid on the shares
during the restriction period.
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, as
recommended by the committee 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 may be determined
by the Board at the time it authorizes the award. The Board may
not make retroactive grants of awards under this Plan. The
Company shall provide notice of the award to the grantee within
a reasonable time after the grant date.
11. Withholding. All grants under
this Plan shall be subject to applicable federal, including
FICA, state and local tax withholding requirements. The Company
may require that the grantee or other person receiving or
exercising a grant pay to the Company the amount of any federal,
state or local taxes that the Company is required to withhold
with respect to the grant, or the Company may deduct from other
wages paid to the grantee the amount of any withholding taxes
due with respect to the grants. The Board or the committee may
permit a grantee to elect to satisfy the Companys 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 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 grant during the grantees
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
grantees will or under the applicable laws of descent and
distribution.
13. 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 the issuance of the shares complies with all
applicable legal requirements to the satisfaction of the Board.
The Board shall have the right to condition any award made to
any employee under this Plan on the employees 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 the Company may
legend certificates representing those shares to reflect any
such restrictions. Certificates representing shares of
Class A common stock issued under this Plan will be subject
to
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such stop-transfer orders and other restrictions as applicable
laws, regulations and interpretations may require, including any
requirement that a legend be placed thereon. No grantee shall
have any right as a stockholder with respect to shares of
Class A common stock covered by an award until shares have
been issued to the grantee.
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 such approval is required in order to comply
with the Code or applicable laws, or to comply with applicable
stock exchange requirements. The Board may not, without the
consent of the grantee, negatively affect the rights of a
grantee under any award previously granted under this Plan.
(b) No Repricing Without Stockholder
Approval. The Board may not reprice stock
options nor may the Board amend this Plan to permit repricing of
options unless the stockholders of the Company provide prior
approval for the repricing.
(c) Termination. This Plan shall
terminate on April 20, 2021, unless the Board terminates
this Plan earlier or the term is extended with the approval of
the stockholders of the Company. The termination of this Plan
shall not impair the power and authority of the Board or the
committee with respect to an outstanding award.
15. Grants in Connection with Corporate Transactions
and Otherwise. Nothing contained in this Plan
shall be construed to:
| limit the right of the Board to grant awards under this Plan in connection with the acquisition, by purchase, lease, merger, consolidation or otherwise, of the business or assets of any corporation, firm or association, including awards to employees of those entities who become employees, or for other proper corporate purposes; or | |
| limit the right of the Company to grant stock options or make other stock-based awards outside of this Plan. |
Without limiting the foregoing, the Board may grant an award to
an employee of another corporation or other entity who becomes
an employee by reason of a corporate merger, consolidation,
acquisition of stock or property, reorganization or liquidation
involving the Company in substitution for a grant made by that
corporation or other entity. The terms and conditions of the
awards may vary from the terms and conditions 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 the Company or any of its subsidiaries or the Group or affect
any right that the Company or any of its subsidiaries or the
Group may have to terminate the employment of the grantee.
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 the requirements of this Plan.
The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which the Companys
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.
18. Effect on Other
Plans. Participation in this Plan shall not
affect an employees eligibility to participate in any
other benefit or incentive plan of the Company or any of its
subsidiaries or 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 his employment that damaged
the Company or any of its subsidiaries or the Group or that the
grantee has disclosed confidential information of the Company or
any of its subsidiaries or the Group,
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the grantee shall forfeit all unexercised or unvested awards and
all exercised or vested awards under which the Company has not
yet delivered the certificates or cash payments therefor. The
decision of the Board in interpreting and applying the
provisions of this Section 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
Companys 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 grantees 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 the 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 members 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 he or she may be involved by reason of being
or having been a member of the committee or the Board, whether
or not he or she continues to be such member at the time of
incurring such expenses; provided, however, that this indemnity
shall not include any expenses such member incurs (i) in
respect of matters as to which he or she shall be finally
adjudged in any such action, suit or proceeding to have been
guilty of gross negligence or willful misconduct in the
performance of his or her duty as such member of the committee
or the Board; or (ii) in respect of any matter in which any
settlement is effected for an amount in excess of the amount
approved by the Company on the advice of its legal counsel; and
provided further that no right of indemnification under the
provisions set forth in this Section 21 shall be available
to or enforceable by any such member of the committee or the
Board unless, within 60 days after institution of any such
action, suit or proceeding, he or she shall have offered the
Company in writing the opportunity to handle and defend 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 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 until the Company and the grantee 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 such rule.
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(d) Section 409A
Compliance. This Plan is intended to comply
with the requirements of Section 409A of the Code and the
regulations issued thereunder. To the extent of any
inconsistencies with the requirements of Section 409A, this
Plan shall be interpreted and amended in order to meet the
requirements of Section 409A. Notwithstanding anything
contained in this Plan to the contrary, it is the intent of the
Company to have this Plan interpreted and construed to comply
with any and all provisions Section 409A including any
subsequent amendments, rulings or interpretations from
appropriate governmental agencies.
(e) Effects of Acceptance of the
Award. By accepting any award or other
benefit under this Plan, each grantee and each person claiming
under or through the grantee shall be conclusively deemed to
have indicated his acceptance and ratification of, and consent
to, any action taken under this Plan by the Company, the Board
or the committee or its delegates.
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