sv3
As filed with the Securities and Exchange
Commission on May 27, 2011
Registration Statement
No.
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form S-3
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF
1933
Donegal Group Inc.
(Exact name of registrant as
specified in its charter)
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Delaware
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23-2424711
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(State or other jurisdiction
of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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1195 River Road
Marietta, Pennsylvania 17547
(888) 877-0600
(Address, including zip code,
and telephone number, including area code, of registrants
principal executive offices)
Donald H. Nikolaus
President
Donegal Group Inc.
1195 River Road
Marietta, Pennsylvania 17547
(888) 877-0600
(Name, address, including zip
code, and telephone number, including area code, of agent for
service)
Copies to:
Frederick W. Dreher, Esq.
Duane Morris LLP
30 South 17th Street
Philadelphia PA, 19103
(215) 979-1234
Approximate date of commencement of proposed sale to the
public: From time to time after the effective
date of this registration statement.
If the only securities being registered on this form are being
offered pursuant to dividend or interest reinvestment plans,
please check the
following box. o
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act, other than securities
offered only in connection with dividend or interest
reinvestment plans, check the following
box. þ
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
If this Form is a registration statement pursuant to General
Instruction I.D. or a post-effective amendment thereto that
shall become effective upon filing with the Commission pursuant
to Rule 462(e) under the Securities Act, check the
following
box. o
If this Form is a post-effective amendment to a registration
statement filed pursuant to General Instruction I.D. filed to
register additional securities or additional classes of
securities pursuant to Rule 413(b) under the Securities
Act, check the following
box. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer
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Accelerated filer
þ
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Non-accelerated filer
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(Do not check if a smaller reporting company)
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Smaller reporting company
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CALCULATION OF REGISTRATION
FEE
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Amount of
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Title of Each Class of
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Amount
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Proposed Maximum Offering
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Proposed Maximum Aggregate
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Registration
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Securities to be Registered
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to be Registered(1)
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Price per Share(2)
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Offering Price(2)
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Fee
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Class A common stock, $.01 par value
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300,000 shares
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$13.115
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$3,934,500
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$456.80
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(1)
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This registration statement, pursuant to Rule 416 under the
Securities Act of 1933, covers an indeterminate number of
additional shares of Class A common stock with respect to
the shares registered in the event of a stock split, stock
dividend or similar transaction.
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(2)
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Calculated pursuant to Rule 457(c), based on $13.115 per
share, which was the average of the high and low prices of the
registrants Class A common stock as reported by the
Nasdaq Global Select Market on May 20, 2011.
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The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act or until the Registration Statement shall
become effective on such date as the Securities and Exchange
Commission, acting pursuant to said Section 8(a), may
determine.
SUBJECT
TO COMPLETION DATED MAY 27, 2011
300,000 Shares of
Class A Common Stock
of
Donegal Group Inc.
Donegal Group Inc. 2011 Agency
Stock Purchase Plan
We offer pursuant to this prospectus 300,000 shares of our
Class A common stock to eligible insurance agencies under
our 2011 Agency Stock Purchase Plan, or our plan.
Our Class A common stock trades on the Nasdaq Global Select
Market under the symbol DGICA. On May 20, 2011,
the Nasdaq Global Select Market reported the last sales price of
our Class A common stock was $13.19 per share.
We will offer shares of our Class A common stock under our
plan directly to eligible agencies through our officers and will
not use a broker or a dealer. In addition, we will not pay
commissions, discounts or any other payments to any person for
any services in connection with the offer or sale of shares of
our Class A common stock under our plan. We will pay all
costs of administering our plan. We will not charge participants
any brokerage commissions or service charges in connection with
their purchase of shares under our plan. We will retain all
proceeds from the sale of shares of our Class A common
stock under our plan.
The location of our principal executive offices is 1195 River
Road, Marietta, Pennsylvania 17547; our telephone number is
(888) 877-0600;
our Internet web site is www.donegalgroup.com. The information
on our web site is not a part of this prospectus. We recommend
that you retain this prospectus for future reference.
The purchase of these securities involves investment risks.
Please read carefully the section we title Risk
Factors that begins on page 2 of this prospectus.
Neither the U.S. Securities and Exchange Commission, or
the SEC, any state securities commission nor any other
regulatory body has approved or disapproved of these securities
or passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
The date of this prospectus is May 27, 2011.
SUMMARY
This summary highlights some information from this
prospectus. This summary may not contain all of the information
that is important to you. To understand this offering fully, we
recommend that you read the entire prospectus carefully,
including the risk factors.
The
Company
We are an insurance holding company whose insurance subsidiaries
offer personal and commercial lines of property and casualty
insurance to businesses and individuals in 22 Mid-Atlantic,
Midwestern, New England and Southern states. Our insurance
subsidiaries provide their policyholders with a selection of
insurance products at competitive rates, while pursuing
profitability through adherence to a strict underwriting
discipline.
Donegal Mutual Insurance Company, or Donegal Mutual, owns
approximately 39% of our Class A common stock and
approximately 75% of our Class B common stock. Donegal
Mutuals stock ownership in the aggregate represents
approximately two-thirds of the voting power of our outstanding
common stock. Our insurance subsidiaries and Donegal Mutual have
interrelated operations. While each company maintains its
separate corporate existence, our insurance subsidiaries and
Donegal Mutual conduct business together as the Donegal
Insurance Group. As such, Donegal Mutual and our insurance
subsidiaries have the same business philosophy, the same
management, the same employees and the same facilities and offer
the same types of insurance products.
On May 6, 2011, Donegal Financial Services Corporation, or
DFSC, which Donegal Mutual and we wholly own, acquired Union
National Financial Corporation, or UNNF. On the same date,
Province Bank FSB, or Province, which DFSC wholly owns, acquired
by merger Union National Community Bank, formerly a UNNF
subsidiary. Following the merger, Province operates under the
name Union Community Bank FSB.
Offering
Under Our Plan
By this prospectus, we offer to the independent insurance
agencies that offer the insurance products of our subsidiaries
and affiliated insurance companies, including Donegal Mutual,
and that satisfy the eligibility requirements of our plan an
opportunity to acquire a proprietary interest in us through our
plan. We adopted our plan to foster our interests and the
interests of the agencies that help us achieve long-term
profitable growth.
We have reserved 300,000 shares of our Class A common
stock for sale to eligible agencies under our plan, which will
expire September 30, 2016. The purchase price for shares of
our Class A common stock we offer under our plan will equal
90% of the average closing prices of our Class A common
stock on the Nasdaq Global Select Market on the last ten trading
days of each applicable subscription period.
We will offer shares under our plan directly to eligible
agencies through our officers and will not use a broker or a
dealer. In addition, we will not pay commissions, discounts or
any other payments to any person for any services in connection
with the sale of shares of our Class A common stock under
our plan. We will pay all costs of administering our plan. We
will not charge participants in our plan any brokerage
commissions or service charges in connection with their purchase
of shares under our plan.
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RISK
FACTORS
We recommend that you carefully consider the specific risks we
describe under the caption Risk Factors in our
periodic reports we describe in Incorporation of Certain
Documents by Reference below.
THIS
PROSPECTUS
All references in this prospectus to Donegal Group,
the Company, we, our and
us refer to Donegal Group Inc. and its consolidated
subsidiaries unless the context otherwise requires.
We recommend that you read this prospectus together with the
documents we incorporate by reference in this prospectus and the
additional information we refer to below under Where You
Can Find More Information and Incorporation of
Certain Documents by Reference.
We have filed a registration statement on
Form S-3
with the SEC relating to the securities this prospectus covers.
This prospectus is a part of the registration statement, but
does not contain all of the information we included in the
registration statement. Whenever we refer in this prospectus to
a company contract or other document, such reference is only a
summary. You should refer to the exhibits we have included as a
part of the registration statement for a copy of the applicable
contract or other document.
WHERE YOU
CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read and copy any
documents we file with the SEC at the SECs public
reference room at 100 F Street, N.E.,
Washington, D.C. 20549. You may call the SEC at
1-800-SEC-0330
for further information on the use of its public reference room.
You may also review our filings with the SEC through the
SECs Internet site at www.sec.gov or by visiting
our web site at www.donegalgroup.com. The information
these Internet sites contain does not constitute a part of this
prospectus.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to incorporate information in this prospectus
by reference. Incorporation by reference means that we can
disclose important information to you by referring to another
document we have filed with the SEC or may file with the SEC in
the future. The information we incorporate by reference in this
prospectus is a part of this prospectus.
This prospectus incorporates by reference important business and
financial information and risk factors about us from documents
that we have previously filed with the SEC. SEC rules do not
require us to include, and we have not included, these documents
as part of this prospectus. You may obtain these documents from
us at the following address and telephone number without charge
upon written or oral request:
Donegal Group Inc.
1195 River Road, P.O. Box 302
Marietta, Pennsylvania 17547
Attention: Jeffrey D. Miller
Telephone:
(888) 877-0600
We incorporate by reference into this prospectus the following
documents that we have previously filed with the SEC (SEC File
No. 0-15341):
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Our Annual Report on
Form 10-K
for the year ended December 31, 2010.
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Our Proxy Statement dated March 18, 2011.
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Our Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2011.
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Our Current Reports on
Form 8-K
that we filed on February 17, 2011, February 25, 2011,
March 22, 2011, March 24, 2011, April 20, 2011,
April 22, 2011, May 5, 2011 and May 9, 2011,
other than the portions of those documents that the SEC rules do
not consider as filed.
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The description of our Class A common stock under our
registration statement on Form
8-A we filed
pursuant to Section 12 of the Securities Exchange Act of
1934, or the Exchange Act, including any amendment or report we
filed with the SEC, for the purpose of updating this description.
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In addition, we incorporate by reference any documents we file
with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this prospectus.
SPECIAL
NOTE ON FORWARD-LOOKING INFORMATION
This prospectus, including documents we incorporate by reference
in this prospectus, contains a number of forward-looking
statements within the meaning of the Private Securities
Litigation Reform Act of 1995 regarding our financial condition,
results of operations, earnings outlook, business and prospects.
You can find many of these statements by looking for words such
as plan, believe, expect,
intend, anticipate,
estimate, project,
potential, possible or other similar
expressions.
These forward-looking statements involve certain risks and
uncertainties. Our ability to predict results or the actual
effects of our plans and strategies is inherently uncertain.
Accordingly, our actual results may differ materially from our
anticipated results. Some of the factors that may cause actual
results or earnings to differ materially from those our
forward-looking statements contemplate include those we
incorporate by reference under Risk Factors on
page 8. We caution you not to place undue reliance on these
statements, which speak only as of the date of this prospectus
or as of the date of any document we incorporate by reference in
this prospectus.
DESCRIPTION
OF OUR 2011 AGENCY STOCK PURCHASE PLAN
We describe the provisions of our plan below in question and
answer form. Under our plan, the term subsidiary and
affiliated insurance companies means subsidiary insurance
companies we and Donegal Mutual control. Our board of directors
approved our plan on March 7, 2011.
Purpose
and Advantages of Our Plan
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1.
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What
is the purpose of our plan?
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Our plan provides an eligible agency, as we describe in Question
and Answer 6, an opportunity to acquire a long-term proprietary
interest in us through the purchase of our Class A common
stock at a discount from current market prices. In offering our
plan, we seek to foster our interests and the interests of
eligible agencies by helping us achieve long-term profitable
growth. Accordingly, we adopted our plan for the purpose of
facilitating an eligible agencys purchase of and long-term
investment in shares of our Class A common stock. We expect
that an eligible agency that purchases shares under our plan
will hold those shares on a long-term basis, because we do not
intend that our plan benefit an agency that demonstrates a
pattern of immediate resale of shares it acquires under our
plan. As we discuss in Question and Answer 6 below regarding
eligibility, immediate resale of shares is a factor we consider
in our determination whether an otherwise eligible agency should
remain eligible for continued participation in our plan.
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2.
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What
are the advantages of our plan?
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Under our plan, an eligible agency can utilize three convenient
payment methods to purchase our Class A common stock at a
10% discount from the current market price. The eligible agency
will not pay any brokerage commissions or service charges in
connection with its purchase.
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Administration
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3.
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Who
administers our plan for participants?
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A committee of three persons our board of directors appoints
from time to time administers our plan. The committee may adopt
rules and regulations for the administration of our plan. The
committees interpretations or constructions of the
provisions of our plan are final and conclusive unless our board
of directors takes contrary action.
Our board of directors appointed Donald H. Nikolaus, Jeffrey D.
Miller and Daniel J. Wagner to serve on the committee. We do not
compensate members of the committee for administering our plan.
Donald H. Nikolaus is our President, Chief Executive Officer and
a director and holds the same positions with Donegal Mutual.
Jeffrey D. Miller is our Senior Vice President and Chief
Financial Officer and holds the same positions with Donegal
Mutual. Daniel J. Wagner is our Senior Vice President and
Treasurer and holds the same positions with Donegal Mutual. The
address of each member of the committee is
c/o Donegal
Group Inc., 1195 River Road, P.O. Box 302, Marietta,
PA 17547; the telephone for each member is
(888) 877-0600.
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4.
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Where
may I obtain additional information about our plan and its
administrators?
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You may obtain additional information about our plan and its
administrators by contacting Jeffrey D. Miller, our Senior Vice
President and Chief Financial Officer, at
(888) 877-0600.
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5.
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What
is the term of our plan?
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Our plan will expire on September 30, 2016 unless our board
of directors terminates our plan earlier. Our board of directors
has the right to terminate our plan at any time without notice
provided that the termination does not adversely affect any
participants then existing rights. During the term of our
plan, our plan will have ten consecutive semi-annual
subscription periods. Each subscription period will extend from
October 1 through March 31 and from April 1 through September 30
of each year, with the first subscription period beginning on
October 1, 2011.
Participation
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6.
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Which
agencies may participate in our plan?
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An eligible agency is an independent insurance agency that
brings value to us, Donegal Mutual and our subsidiary and
affiliated insurance companies, directly or indirectly, as we
determine in our discretion, and with which we seek a long-term
relationship. Only eligible agencies may participate in our
plan. The eligibility criteria we consider include the
agencys volume of direct premiums written, the ability of
the agency to increase sales and grow its volume of direct
premiums written, the historic loss ratio of the agencys
direct premiums written and whether we have placed the agency on
rehabilitation, meaning that we notified the agency of
operational deficiencies, or we have revoked its binding
authority. We may base eligibility on agency segmentation class
or any other factors that indicate value to the companies,
directly or indirectly, in our discretion.
We periodically review an eligible agencys continued
eligibility. We will consider a pattern of immediate resale of
shares the eligible agency has acquired under our plan as a
factor in our determination whether that agency should remain
eligible for continued participation in our plan. Immediate
resales would tend to indicate that an agency is not interested
in the long-term profitable growth of the companies. If we
determine to discontinue an agencys participation in our
plan, we will notify the agency in writing that we have
discontinued its eligibility to participate in our plan. We will
send this notice to the agency as promptly as possible, but in
no event later than two weeks after the end of the subscription
period during which we made the decision. We will treat our
decision, in our discretion, to discontinue the eligibility of
an agency under our plan as an automatic withdrawal from our
plan. See Questions and Answers 24 and 25 below.
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7.
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How
may an eligible agency participate in our plan?
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An eligible agency may enroll in our plan by completing and
filing a subscription agreement with us, as we describe in
Question and Answer 8. We will send to each eligible agency a
subscription agreement and a copy of this prospectus and any
prospectus supplements prior to the beginning of the first
enrollment period following the agencys designation as an
eligible agency.
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8.
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What
does a subscription agreement provide?
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A subscription agreement allows each eligible agency to decide
and identify the date on which the agency desires to enroll in
our plan, the amounts of contribution and the payment method(s)
it selects for purchases under our plan. Eligible agencies that
participated in our former agency stock purchase plan may
participate in our plan by checking the appropriate box on the
subscription agreement. If the eligible agency participated in
our former agency stock purchase plan using the direct bill
commission payment method, we will automatically continue that
agencys participation in our plan. In either such event,
we will continue that agencys prior contribution amounts
and payment method(s) from our former agency stock purchase plan
unless the eligible agency provides new instructions in the
subscription agreement.
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9.
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When
may an eligible agency enroll in our plan?
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If an eligible agency chooses the direct bill commission payment
method, as we explain in Question and Answer 15, enrollment in
our plan may occur only during the enrollment period preceding
each subscription period, which is from the 1st through the
31st day of March and from the 1st through the
30th day of September of each year, commencing
September 1, 2011. An eligible agency that desires to
subscribe to purchase shares of our Class A common stock
through withholding from direct bill commissions must duly
execute and complete a subscription agreement and return it to
us during the applicable enrollment period. Once it enrolls in
the direct bill commission payment method, an eligible
agencys participation in our plan continues for each
succeeding subscription period unless the agency ceases to be an
eligible agency or withdraws from enrollment in our plan.
If an eligible agency chooses the lump-sum payment method, as we
explain in Question and Answer 17, an eligible agency may enroll
by submitting a supplemental subscription agreement to us and
making a lump-sum payment by the last day of the applicable
subscription period, September 30 or March 31 of each year.
If an eligible agency chooses the contingent commission payment
method, as we explain in Question and Answer 18, an eligible
agency may enroll by submitting a subscription agreement to us
during the enrollment period immediately preceding each
subscription period.
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10.
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May an
eligible agency transfer its subscription rights to another
person or agency?
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No. An eligible agency may not assign its subscription payments
or rights to subscribe to any other person, and we will consider
any attempt to do so as void, except for designations our plan
permits as we describe in Question and Answer 23.
Costs and
Expenses
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11.
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Are
participants responsible for any expenses in connection with
purchases under our plan?
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No. We will not charge an eligible agency any brokerage
commissions or other charges in connection with its purchase of
shares of our Class A common stock under our plan.
Purchases
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12.
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How
many shares are available for purchase under our
plan?
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Our board of directors has reserved 300,000 shares of our
Class A common stock for sale under our plan.
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13.
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What
is the purchase price of shares of our Class A common stock
under our plan?
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The subscription price for each share of our Class A common
stock an eligible agency purchases under our plan is 90% of the
average of the closing prices of our Class A common stock
on the Nasdaq Global Select Market on the last ten trading days
of the applicable subscription period.
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14.
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How
may an eligible agency pay for shares it purchases under our
plan?
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An eligible agency can pay for shares it purchases under our
plan by means of three payment methods: direct bill commission
deduction, lump-sum payment or contingent commission deduction.
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15.
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What
is the direct bill commission payment method?
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Under the direct bill commission payment method, an eligible
agency may elect to purchase shares of our Class A common
stock under our plan through deductions from its monthly direct
bill commission payment by designating that we withhold a
minimum of 1% and up to a maximum of 10% of the eligible
agencys monthly direct bill commission payments from the
eligible agencys direct bill commission payments. The
total subscription limit under all payment methods, including
the direct bill commission payment method, is $12,000 per
subscription period. Direct bill commission payments
means those commissions that an eligible agency earns and that
actually are available for payment in a monthly period to an
eligible agency for personal and commercial direct bill policies
after the application of all offsetting debits and credits.
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16.
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May an
eligible agency that chooses the direct bill commission payment
method change the method or amount of contribution under our
plan?
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Yes. An eligible agency choosing the direct bill commission
payment method may change the method or the rate of contribution
by filing a new subscription agreement with us during the
enrollment period for the next subscription period. This change
will become effective during the next subscription period.
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17.
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What
is the lump-sum payment method?
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Under the lump-sum payment method, an eligible agency may, by
September 30 and March 31 of each subscription period, elect to
make lump-sum cash payments for the purchase of shares of our
Class A common stock under our plan. The minimum lump-sum
cash payment is $1,000 per subscription period with a total
subscription limit under all payment methods, including the
lump-sum payment method, of $12,000 per subscription period.
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18.
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What
is the contingent commission payment method?
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An eligible agency may designate that we withhold a percentage
of the contingent commission payable to it under the terms of
the applicable agency profit-sharing plan, or its equivalent,
for the purchase of shares of our Class A common stock
under our plan during the enrollment period immediately
preceding a subscription period. The total subscription limit
under all payment methods, including the contingent commission
payment method, is $12,000 per subscription period.
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19.
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Are
there limitations on the amount of contributions or purchases
that an eligible agency can make?
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Yes. Each eligible agencys total contributions for
purchases under all payment methods, which we describe in
Questions and Answers 15, 17 and 18 above, may not exceed
$12,000 during each subscription period. At the close of each
subscription period, we will total each agencys
contributions from all payment methods. If at any time
throughout a subscription period, an eligible agencys
total payments exceed the $12,000 maximum amount and the agency
so requests, we will return the excess amount without interest
to the agency within a reasonable period after its request. We
will apply through our plan any amount we do not return to the
purchase of shares of our Class A common stock during the
next subscription period without increasing the $12,000
limitation applicable to that subscription period.
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20.
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How
does an eligible agency make purchases under our
plan?
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We maintain a plan account for each enrolled eligible agency. We
will hold all contributions an eligible agency makes through
deductions from an eligible agencys direct bill commission
and contingent commission payments and lump-sum payments during
a subscription period, up to $12,000, in a separate bank account
we maintain until we issue the shares to the eligible agency
that has purchased the shares under our plan.
At the end of each subscription period, we will divide the
amount we have credited to each eligible agencys plan
account by the subscription price for the subscription period,
and we will credit the eligible agencys plan account with
the number of whole shares that results. We will carry forward
any amount remaining in that plan account to the next
subscription period without increasing the $12,000 limitation
applicable to that subscription period or, if the eligible
agency requests, we will return any remaining amount to the
eligible agency. If the number of shares the eligible agency
subscribes for during any subscription period exceeds the number
of shares available for sale under our plan, we will allocate
the remaining available shares among the participating eligible
agencies in proportion to their total plan account balances,
without regard to any amount we carried forward from a previous
subscription period.
Shares;
Certificates for Shares
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21.
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May an
eligible agency transfer, pledge, hypothecate or assign shares
credited to the agencys plan account?
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An eligible agency may not transfer, pledge, hypothecate or
assign its subscription rights under our plan or shares that we
credit to its plan account, except for designations we permit
under our plan as we describe in Question and Answer 23.
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22.
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Will
we issue stock certificates for shares of our Class A
common stock an eligible agency purchases?
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We will issue and deliver to each eligible agency stock
certificates for the shares it has purchased under our plan
within a reasonable time after purchase, but in no event later
than three weeks after the end of the subscription period during
which the eligible agency has purchased the shares.
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23.
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In
whose name are accounts maintained and certificates registered
when issued?
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We will maintain accounts in our plan in the name of the
eligible agency. Consequently, we will register certificates
when we issue them for full shares in the same name. An eligible
agency may, upon written request to us, designate that we issue
shares to a shareholder, partner, other principal or other
licensed employee of that eligible agency or designate that any
retirement plan that the eligible agency maintains for the
benefit of the eligible agency or any of its shareholders,
partners, other principals or other licensed employees of the
eligible agency may purchase shares instead of the eligible
agency through lump-sum payments the designee makes. These
permitted designations are subject to the maximum amount
limitation of $12,000, compliance with all laws that apply,
including the Employee Retirement Income Security Act of 1974,
payment by the eligible agency or its designee of any necessary
transfer taxes and satisfaction of our usual requirements for
recognition of a transfer of shares of our Class A common
stock.
Withdrawals
from Our Plan
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|
24.
|
How
and when may an eligible agency withdraw from our
plan?
|
An eligible agency that has enrolled in our plan may withdraw
from our plan at any time if an authorized representative of the
eligible agency notifies us of the withdrawal in writing. We
will treat a termination of agency status for any reason as an
automatic withdrawal. If an agency withdraws from our plan, that
agency may not resubscribe until after the next full
subscription period has elapsed, and then only if we have
redesignated the agency as an eligible agency.
7
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|
25.
|
What
happens to any shares and cash we have credited to an eligible
agencys plan account at the time of
withdrawal?
|
Promptly after the withdrawal or termination of an agencys
eligibility, but in no event later than three weeks after the
end of the subscription period during which the withdrawal or
termination occurs, we will issue certificates representing the
whole shares we hold in the eligible agencys plan account,
and will refund in cash any amount we have credited to an
eligible agencys plan account at the time of withdrawal to
that eligible agency without interest.
Other
Information
|
|
26.
|
What
happens if we declare a stock split or stock dividend or change
or exchange our Class A common stock for shares of stock or
other securities of our own or another
corporation?
|
Our committee will make appropriate adjustments in the total
number and kind of our shares that we have reserved for sale
under our plan if we increase or decrease or change the
outstanding shares of our Class A common stock into or
exchange them for a different number or kind of our shares or
other securities or stock or securities of another corporation,
by reason of reorganization, merger, consolidation,
recapitalization, reclassification, stock
split-up,
stock dividend, spin-off or combination of shares.
|
|
27.
|
What
are the federal income tax consequences of an eligible
agencys participation in our plan?
|
At the time of purchase, and where an eligible agency purchases
shares of our Class A common stock in its own name, federal
tax laws will treat the eligible agency as having received
ordinary income in an amount equal to the difference between the
subscription price it has paid and the fair market value of the
our Class A common stock on the date it purchased the
shares. At the end of each calendar year, we will mail to each
participating agency a Form 1099 reflecting the amount of
ordinary income the eligible agency has received under our plan.
We will have a tax deduction at the same time in a corresponding
amount. The participating agency will have a basis in the shares
of our Class A common stock it purchases under our plan
equal to the purchase price plus the amount of ordinary income
it recognizes.
When an agency disposes of shares of our Class A common
stock it has purchased under our plan, it will recognize a
long-term or short-term capital gain, depending upon the holding
period of the shares, on any amount it receives in excess of its
basis in the shares of our Class A common stock. If the
amount the eligible agency receives is less than its basis, it
will recognize the loss as a long-term or short-term capital
loss, depending upon the holding period of the shares, which
begins on the day after it acquires each share.
We also advise you to consult with a tax advisor to determine
the tax consequences of a given transaction, particularly if you
designate a taxpayer other than you to become a participant in
our plan.
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|
28.
|
May we
change or discontinue our plan?
|
Yes. Our board of directors may amend, modify or terminate our
plan at any time without notice if the amendment, modification
or termination does not adversely affect your existing rights
under our plan.
|
|
29.
|
How
may eligible agencies sell shares of our Class A common
stock they purchase under our plan?
|
As we discuss in Question and Answer 22, we will issue and
deliver to each participating agency stock certificates
representing the shares it has purchased under our plan after
the end of the subscription period during which it purchased the
shares. Participants will have the sole discretion as to whether
or when to sell their shares and may transfer or dispose of them
at any time without restriction after receipt of their stock
certificates. An eligible agency may choose to sell shares
through the broker of its choice.
8
PLAN OF
DISTRIBUTION
We have reserved 300,000 shares of our Class A common
stock for sale to eligible agencies under our plan until our
plan terminates on September 30, 2016. We will offer the
shares of our Class A common stock under our plan directly
to eligible agencies through our officers and will not use a
broker or a dealer. In addition, we will not pay commissions,
discounts or any other payments to any person for services in
connection with the offer or sale of shares of our Class A
common stock under our plan. We will pay all costs of
administering our plan. We will not charge participants any
brokerage commissions or service charges in connection with
their purchase of shares under our plan.
USE OF
PROCEEDS
We will retain all proceeds from the sale of the shares of our
Class A common stock under our plan. We intend to use the
proceeds from sales of these shares for general corporate
purposes, including making investments in and advances to our
subsidiaries.
EXPERTS
The consolidated financial statements and schedule of Donegal
Group Inc. and subsidiaries as of December 31, 2010 and
2009, and for each of the years in the three-year period ended
December 31, 2010, and managements assessment of the
effectiveness of internal control over financial reporting as of
December 31, 2010 have been incorporated by reference
herein and in the registration statement in reliance upon the
reports of KPMG LLP, independent registered public accounting
firm, incorporated by reference herein, and upon the authority
of said firm as experts in accounting and auditing.
The audit report on the effectiveness of internal control over
financial reporting as of December 31, 2010, contains an
explanatory paragraph that states Donegal Group Inc. acquired
Michigan Insurance Company on December 1, 2010 and
management excluded from its assessment of the effectiveness of
Donegal Group Inc.s internal control over financial
reporting as of December 31, 2010, Michigan Insurance
Companys internal control over financial reporting
associated with total assets of approximately
$213.5 million and total revenues of approximately
$2.4 million included in the consolidated financial
statements of Donegal Group Inc. as of and for the year ended
December 31, 2010. KPMGs audit of internal control
over financial reporting of Donegal Group Inc. also excluded an
evaluation of the internal control over financial reporting of
Michigan Insurance Company as of December 31, 2010.
LEGAL
OPINION
Duane Morris LLP, Philadelphia, Pennsylvania, has passed upon
the validity of the issuance of the shares of our Class A
common stock we offer pursuant to this prospectus. As of
May 1, 2011, Frederick W. Dreher, a partner of Duane Morris
LLP, who is a director of Donegal Mutual, beneficially owned
63,772 shares of our Class A common stock, of which
25,000 shares represent shares of our Class A common
stock purchasable under currently exercisable stock options, and
35,622 shares of our Class B common stock. Donegal
Mutual owns approximately 39% of the outstanding shares of our
Class A common stock and approximately 75% of the
outstanding shares of our Class B common stock and thereby
controls the election of all of the members of our board of
directors.
9
DONEGAL GROUP INC.
2011
AGENCY STOCK PURCHASE PLAN
300,000
Shares of
Class A Common
Stock
PROSPECTUS
We recommend that you rely only on the information we include
or incorporate by reference in this prospectus. We have not
authorized anyone to provide you with different information.
We do not claim the accuracy of the information in this
prospectus as of any date other than the date stated above.
Dated May 27, 2011
PART II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item 14. Other
Expenses of Issuance and Distribution.
We estimate our expenses in connection with this registration
statement, other than underwriting discounts and commissions, as
follows:
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|
|
|
|
SEC registration fee
|
|
$
|
456.80
|
|
Printing expenses
|
|
|
8,000.00
|
|
Legal and accounting expenses
|
|
|
10,000.00
|
|
Miscellaneous
|
|
|
1,000.00
|
|
|
|
|
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|
TOTAL
|
|
$
|
19,456.80
|
|
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|
|
|
|
Item 15. Indemnification
of Directors and Officers.
Section 145 of the Delaware General Corporation Law, the
law of the state of incorporation, empowers a corporation,
subject to certain limitations, to indemnify its officers and
directors against expenses, including attorneys fees,
judgments, fines and certain settlements, they actually and
reasonably incur in any suit or proceeding to which they are
parties as long as they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to a criminal
action or proceeding, as long as they had no reasonable cause to
believe their conduct to be unlawful. Our by-laws provide that
we shall indemnify to the fullest extent Delaware law permits
any person, including our directors and our officers, 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, his testator or his intestate is or
was our director, officer or employee or served or serves any
other enterprise at our request.
The by-laws of Donegal Mutual, a Pennsylvania corporation,
provide that Donegal Mutual shall indemnify to the fullest
extent Pennsylvania law permits any person, including Donegal
Mutual directors and officers, 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,
his testator or his intestate is or was our director, officer or
employee or served or serves any other enterprise at our request.
Our by-laws provide that, to the fullest extent Delaware law
permits, our directors shall not have any personal liability for
monetary damages for any action taken or any failure to take any
action.
Donegal Mutuals by-laws provide that, to the fullest
extent Pennsylvania law permits, the directors of Donegal Mutual
shall not have any personal liability for monetary damages for
any action taken or any failure to take any action.
Item 16. Exhibits.
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No.
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Description
|
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4
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.1
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Donegal Group Inc. Agency Stock Purchase Plan (filed herewith)
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5
|
.1
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|
Opinion of Duane Morris LLP (filed herewith)
|
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23
|
.1
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|
Consent of Duane Morris LLP (included in Exhibit 5.1)
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23
|
.1
|
|
Consent of KPMG LLP (filed herewith)
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24
|
.1
|
|
Powers of Attorney (included in signature pages)
|
II-1
Item 17. Undertakings.
We hereby undertake:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(i) to include any prospectus required by
Section 10(a)(3) of the Securities Act;
(ii) to reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in this registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the
Calculation of Registration Fee table in the
effective registration statement; and
(iii) to include any material information with respect to
the plan of distribution not previously disclosed in this
registration statement or any material change to such
information in this registration statement;
provided, however, that paragraphs (i), (ii) and
(iii) above do not apply if the information required to be
included in a post-effective amendment by those clauses is
contained in reports filed with or furnished to the SEC by us
pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in this
registration statement, or is contained in a form of prospectus
filed pursuant to Rule 424(b) that is part of the
registration statement.
(2) That, for the purpose of determining any liability
under the Securities 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 offering thereof.
(3) 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.
(4) That, for the purpose of determining liability under
the Securities Act, to any purchaser:
(i) Each prospectus filed by us pursuant to
Rule 424(b)(3) shall be deemed to be part of the
registration statement as of the date the filed prospectus was
deemed part of and included in the registration
statement; and
(ii) Each prospectus required to be filed pursuant to
Rule 424(b)(2), (b)(5) or (b)(7) as part of a registration
statement in reliance on Rule 430B relating to an offering
made pursuant to Rule 415(a)(1)(i), (vii) or
(x) for the purpose of providing the information required
by Section 10(a) of the Securities Act shall be deemed to
be part of and included in the registration statement as of the
earlier of the date such form of prospectus is first used after
effectiveness or the date of the first contract of sale of
securities in the offering described in the prospectus. As
provided in Rule 430B, for liability purposes of the issuer
and any person that is at that date an underwriter, such date
shall be deemed to be a new effective date of the registration
statement relating to the securities in the registration
statement to which the prospectus relates, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof. Provided, however, that no statement
made in a registration statement or prospectus that is part of
the registration statement or made in a document incorporated or
deemed incorporated by reference into the registration statement
or prospectus that is part of the registration statement will,
as to a purchaser with a time of contract of sale prior to such
effective date, supersede or modify any statement that was made
in the registration
II-2
statement or prospectus that was part of the registration
statement or made in any such document immediately prior to such
effective date;
(5) That, for the purpose of determining our liability
under the Securities Act, to any purchaser in the initial
distribution of the securities, we undertake that in a primary
offering of our securities pursuant to this registration
statement, regardless of the underwriting method used to sell
the securities to the purchaser, if the securities are offered
or sold to such purchaser by means of any of the following
communications, we will be a seller to the purchaser and will be
considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of ours
relating to the offering required to be filed pursuant to
Rule 424;
(ii) Any free writing prospectus relating to the offering
prepared by or on behalf of us or used or referred to by us;
(iii) The portion of any other free writing prospectus
relating to the offering containing material information about
us or our securities provided by or on behalf of us; and
(iv) Any other communication that is an offer in the
offering made by us to the purchaser.
(6) That, for purposes of determining any liability under
the Securities Act, each filing of our annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act
(and, where applicable, each filing of an employee benefit
plans 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.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors, officers and
controlling persons pursuant to the provisions described in
Item 15 above, or otherwise, we have been advised that in
the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities, other than the payment by us of
expenses incurred or paid by a director, officer or controlling
person of us 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, that
we 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 Securities Act and will be governed by the final
adjudication of such issue.
II-3
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-3
and has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in
Marietta, Pennsylvania, on May 26, 2011.
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
Jeffrey D. Miller, and each or either of them, as such
persons true and lawful attorneys-in-fact and agents, with
full power of substitution, for such person, and in such
persons 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, the
registration statement has been signed by the following persons
in the capacities and on the dates indicated.
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|
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|
|
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|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Donald
H. Nikolaus
Donald
H. Nikolaus
|
|
President (principal executive officer)
|
|
May 26, 2011
|
|
|
|
|
|
/s/ Jeffrey
D. Miller
Jeffrey
D. Miller
|
|
Senior Vice President and Chief Financial Officer (principal
financial and accounting officer)
|
|
May 26, 2011
|
|
|
|
|
|
/s/ Robert
S. Bolinger
Robert
S. Bolinger
|
|
Director
|
|
May 26, 2011
|
|
|
|
|
|
/s/ Patricia
A. Gilmartin
Patricia
A. Gilmartin
|
|
Director
|
|
May 26, 2011
|
|
|
|
|
|
/s/ Philip
H. Glatfelter, II
Philip
H. Glatfelter, II
|
|
Director
|
|
May 26, 2011
|
|
|
|
|
|
/s/ Jack
L. Hess
Jack
L. Hess
|
|
Director
|
|
May 26, 2011
|
|
|
|
|
|
/s/ Kevin
M. Kraft, Sr.
Kevin
M. Kraft, Sr.
|
|
Director
|
|
May 26, 2011
|
II-4
|
|
|
|
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Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ John
J. Lyons
John
J. Lyons
|
|
Director
|
|
May 26, 2011
|
|
|
|
|
|
/s/ Jon
M. Mahan
Jon
M. Mahan
|
|
Director
|
|
May 26, 2011
|
|
|
|
|
|
/s/ S.
Trezevant Moore, Jr.
S.
Trezevant Moore, Jr.
|
|
Director
|
|
May 26, 2011
|
|
|
|
|
|
/s/ R.
Richard Sherbahn
R.
Richard Sherbahn
|
|
Director
|
|
May 26, 2011
|
|
|
|
|
|
/s/ Richard
D. Wampler, II
Richard
D. Wampler, II
|
|
Director
|
|
May 26, 2011
|
II-5