As filed with the Securities and Exchange Commission on September 26, 1997
Registration No. 333-
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)
Delaware 23-2424711
- - ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1195 River Road
Marietta, Pennsylvania 17547
(717) 426-1931
-------------------------------------------------------------
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
-----------------------
Donald H. Nikolaus, President
Donegal Group Inc.
1195 River Road
Marietta, Pennsylvania 17547
(717) 426-1931
--------------------------------------------------------
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-----------------------
Copy to:
Kathleen M. Shay, Esquire
Duane, Morris & Heckscher LLP
One Liberty Place
Philadelphia, PA 19103-7396
-----------------------
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration Statement.
-1-
<PAGE>
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |X|
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 of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. |_|
If this Form is filed to register additional securities for an offering
pursuant to Section 462(b) under the Securities Act, please check the following
box and list the Securities Act registration number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Section
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. |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of each Proposed maxi- Proposed maximum
class of securities Amount to mum offering aggregate Amount of
to be registered be registered price per unit offering price registration fee
- - ------------------- ------------- -------------------- --------------------- ----------------
<S> <C> <C> <C> <C>
Common Stock, 1,000,000 shares $20.00 (1) $20,000,000 (1) $6,061
$1.00 par value
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933 based on
$20.00, the average of the high and low sales prices of the Common
Stock of the Company on the Nasdaq National Market on September 23,
1997.
-----------------------
-2-
<PAGE>
PROSPECTUS
[LOGO]
DONEGAL GROUP INC.
DIVIDEND REINVESTMENT PLAN
1,000,000 Shares of Common Stock
This Prospectus relates to 1,000,000 shares of Common Stock of Donegal
Group Inc. (the "Company") being offered hereby to the stockholders of the
Company in connection with the Company's Dividend Reinvestment Plan (the
"Plan"). The Plan provides stockholders with a convenient and economical method
of increasing their equity ownership in the Company by investing cash dividends
in additional shares of the Company's Common Stock (the "Common Stock"), without
paying any brokerage commissions or administrative fees.
A stockholder who elects to participate in the Plan may have cash
dividends paid by the Company on the shares of Common Stock held by such
stockholder automatically reinvested in newly issued shares of Common Stock.
Stockholders electing to participate in the Plan may also deposit certificates
representing shares of Common Stock into the Plan for safekeeping and sell
shares of Common Stock credited to Plan accounts through the Plan.
The purchase price per share of Common Stock purchased under the Plan
will be the average of the closing prices of the Company's Common Stock on the
Nasdaq National Market for the five trading days preceding the applicable
dividend payment date. First Chicago Trust Company of New York ("First Chicago
Trust") is the agent for stockholders under the Plan.
Stockholders who elect not to participate in the Plan will continue to
receive cash dividends, as and when declared. This Prospectus sets forth the
provisions of the Plan and, therefore, it is recommended that participants in
the Plan ("Participants") retain this Prospectus for future reference.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
---------------
The date of this Prospectus is September 26, 1997.
<PAGE>
TABLE OF CONTENTS
Page
----
Available Information................................................ 2
Incorporation of Certain Documents by Reference...................... 3
The Company.......................................................... 4
The Plan............................................................. 4
Description of the Plan.............................................. 5
Use of Proceeds....................................................... 14
Experts............................................................... 14
Legal Opinion......................................................... 15
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files reports, proxy state ments and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, as well as at the following regional
offices of the Commission: 7 World Trade Center, Suite 1300, New York, New York
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials can also be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. In addition, the Commission maintains a Web site that
contains such materials at http://www.sec.gov.
The Company has filed with the Commission in Washington, D.C. a
registration statement on Form S-3 (the "Registration Statement") under the
Securities Act of 1933 (the "Securities Act") with respect to the securities
covered by this Prospectus. As permitted by the rules and regula tions of the
Commission, this Prospectus does not contain all of the information set forth in
the Registration Statement. For further information with respect to the Company
and the securities offered hereby, reference is made to the Registration
Statement, including the exhibits filed or incorporated as a part thereof.
Statements contained herein concerning the provisions of docu ments filed with,
or incorporated by reference in, the Registration Statement as exhibits are
necessarily summaries of such documents and each such statement is qualified in
its entirety by reference to the copy of the applicable documents filed with the
Commission. Copies of the Registration Statement and the exhibits thereto are on
file at the offices of the Commission and may be obtained upon payment of the
prescribed fee or may be examined without charge at the public reference
facilities of the Commission described above.
-2-
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company are
hereby incorporated in and made a part of this Prospectus by reference:
(a) The Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
(b) The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997 and June 30, 1997.
(c) The description of the Company's Common Stock set forth in the
Company's Registration Statement on Form S-1, initially filed with the
Commission under the Securities Act on October 29, 1986, under the captions
"Description of Capital Stock," "Dividend Policy" and "Business -- Regulation,"
which is incorporated by reference in response to Item 1 of the Registration
Statement on Form 8-A filed by the Company with the Commission on January 27,
1987 pursuant to Section 12(g) of the Exchange Act.
All documents subsequently filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of this
offering shall be deemed to be incorporated by reference in this Prospectus and
to be a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or super
seded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the written or oral
request of such person, a copy of any or all documents incorporated herein by
reference, other than exhibits to such documents unless such exhibits are
specifically incorporated by reference therein. Written requests should be
directed to:
Ralph G. Spontak
Senior Vice President and Chief Financial Officer
Donegal Group Inc.
1195 River Road
Marietta, Pennsylvania 17547
(888) 877-0600
-3-
<PAGE>
THE COMPANY
The Company is a regional insurance holding company offering property
and casualty insurance through its wholly owned subsidiaries and through a
pooling agreement with its affiliate, Donegal Mutual Insurance Company (the
"Mutual Company"). The Company offers full lines of personal and commercial
products, including business owners, commercial multi-peril, automobile,
homeowners, boatowners, workers' compensation and other coverages.
The Company was formed by the Mutual Company in August 1986 and was a
wholly owned subsidiary of the Mutual Company until November 1986, when the
Company sold a portion of its shares of Common Stock in a public offering. The
Mutual Company continues to own a majority of the outstanding shares of the
Company's Common Stock and may reinvest all of the dividends received on its
shares of Common Stock under the Plan.
The Company's principal executive offices are located at 1195 River
Road, Marietta, Pennsylvania 17547, and its telephone number is (888) 877-0600.
THE PLAN
The Plan provides stockholders of the Company with a convenient and
economical method of investing cash dividends in additional shares of Common
Stock without paying any brokerage commissions or administrative fees.
Each Participant in the Plan may have the cash dividends paid by the
Company on the Participant's shares of Common Stock automatically reinvested in
additional shares of Common Stock. Stockholders electing to participate in the
Plan may also deposit certificates representing shares of the Common Stock held
outside of the Plan into the Plan for safekeeping and sell shares of Common
Stock credited to Plan accounts through the Plan.
The purchase price per share of Common Stock purchased under the Plan
will be the average of the closing prices of the Company's Common Stock on the
Nasdaq National Market for the five trading days preceding the applicable
dividend payment date.
In conjunction with the Plan, the Company has reserved 1,000,000 shares
of Common Stock offered by this Prospectus.
Holders of the Company's Common Stock who do not elect to participate
in the Plan will continue to receive cash dividends by check as and when
declared.
-4-
<PAGE>
DESCRIPTION OF THE PLAN
The following is a description in question and answer form of the
provisions of the Plan.
Purpose
1. What are the purposes of the Plan?
The purposes of the Plan are to (i) provide stockholders of the Company
with a simple and convenient method of investing cash dividends in shares of
Common Stock without payment of any brokerage commissions or administrative fees
and (ii) provide the Company with additional funds for general corporate
purposes.
Advantages to Participants
2. What are the advantages of the Plan to Participants?
Participants may reinvest the dividends paid on their Common Stock to
purchase additional shares of Common Stock without paying any brokerage
commissions or administrative fees. See the answer to question 6. A
Participant's funds are fully invested in Common Stock through the purchase of
whole shares and fractional shares. Quarterly statements of account provide
Partici pants with a record of each transaction. See the answer to question 13.
Participants may also deposit Common Stock certificates, at no cost, in
the Plan for safekeeping and to facilitate the transfer or sale of shares of
Common Stock through the Plan in a convenient and efficient manner. A
Participant may direct First Chicago Trust to transfer, at no cost, all or a
portion of the shares of Common Stock credited to a Participant's Plan account
(including those shares deposited into the Plan for safekeeping). A Participant
may direct First Chicago Trust to sell shares of Common Stock credited to the
Participant's Plan account.
Administration
3. Who administers the Plan for Participants?
First Chicago Trust administers the Plan as the agent for Participants.
As agent, First Chicago Trust maintains records, sends statements of account to
Participants and performs other duties relating to the Plan. Shares of Common
Stock purchased under the Plan are registered in the name of First Chicago Trust
or one of its nominees as agent for Participants in the Plan.
All correspondence and inquiries relating to the Plan should be mailed
to:
Donegal Group Inc. Dividend Reinvestment Plan
c/o First Chicago Trust Company of New York
P.O. Box 2598
Jersey City, NJ 07303-2598
-5-
<PAGE>
Telephone
Shareholder Customer Service, Including Sale of Shares: 1-800-317-4445.
An automated voice response system is available 24 hours a day, 7 days
a week.
Customer Service Representatives are available 8:30 a.m. - 7:00 p.m.
Eastern time each business day.
Internet: Messages forwarded on the Internet will be responded to
within one business day. First Chicago Trust's Internet address is
"http://www.fctc.com"
E-Mail: First Chicago Trust's E-mail address is "[email protected]"
TDD: 1-201-222-4955 Telecommunications Device for the hearing impaired.
Foreign Language Translation Service for over 140 foreign languages is
available to support the needs of the Company's stockholder base.
All inquiries concerning the Plan should be directed to First Chicago
Trust. A Participant should include in all correspondence a reference to Donegal
Group Inc., the Participant's stock holder account number and taxpayer
identification number (social security number), and a daytime telephone number
where the Participant may be contacted during normal working hours to facilitate
a prompt response.
Participation
4. Who is eligible to participate in the Plan?
Any registered stockholder of the Company is eligible to participate in
the Plan, provided that (i) such stockholder completes an Enrollment
Authorization Form, as described in the answer to question 5 below, and (ii) in
the case of citizens or residents of a country other than the United States, its
territories and possessions, participation would not violate local laws
applicable to the Company, the Plan and the Participant.
5. How does a stockholder become a Participant?
Registered holders of Common Stock may join the Plan at any time after
being furnished with a copy of this Prospectus and completing an Enrollment
Authorization Form. Requests for copies of Enrollment Authorization Forms and
this Prospectus should be made in writing or by telephone to the First Chicago
Trust's address and telephone number listed in the answer to question 3 above.
Record holders of Common Stock should be sure to sign their name(s) on the
Enrollment Authorization Form exactly as they appear on their Enrollment
Authorization Form.
-6-
<PAGE>
Beneficial owners, i.e., stockholders whose shares are held in nominee
name by a bank or broker, must (i) become record holders (stockholders who are
registered on the books of the Company by having such shares transferred into
the stockholders' names), or (ii) make arrange ments with the broker, bank or
other nominee to participate on the stockholders' behalf.
Any person or entity will become a Participant only after fulfilling
the above prerequisites for participation and a properly completed Enrollment
Authorization Form has been received and accepted by First Chicago Trust.
Stockholders are cautioned that the Plan does not represent a change in
the Company's dividend policy or a guarantee of future dividends, which will
continue to depend upon the Company's earnings, financial condition and other
factors.
Costs
6. Are there any expenses to Participants in connection with purchases under
the Plan?
No. Participants will not be obligated to pay any brokerage commissions
or other charges with respect to purchases of Common Stock under the Plan.
A Participant who requests that First Chicago Trust sell shares of
Common Stock held in the Participant's account in the Plan will pay the
applicable brokerage commissions, a service fee and any other costs incurred in
connection with such sale. All other costs of administration of the Plan will be
paid by the Company. See the answer to question 12.
Purchases
7. When and how are purchases made?
Purchases for the account of Participants in the Plan will be made on
the applicable dividend payment dates. All purchases of Common Stock under the
Plan will be made directly from the Company and will be issued by the Company
out of its legally authorized but unissued shares of Common Stock.
First Chicago Trust will apply a Participant's cash dividend to
purchase whole and fractional shares of Common Stock and credit the shares to
such Participant's account. Dividends on all shares held by First Chicago Trust
in a Participant's account will also be reinvested to purchase additional shares
of Common Stock. The Plan will apply to all shares of the Company's Common Stock
that are registered in the name of a Participant at the time of enrollment, plus
all shares of the Company's Common Stock that the Participant acquires while the
authorization remains in effect.
-7-
<PAGE>
8. How many shares will a Participant purchase?
The number of shares purchased depends on the amount of a Participant's
dividend payment and the market price of the Common Stock. Each Participant's
account will be credited with the number of shares, including fractions computed
to no less than three decimal places, equal to the total amount invested by him
or her divided by the applicable purchase price per share. See the answer to
question 9.
9. What is the price of shares purchased under the Plan?
The price of shares purchased will be the average of the closing prices
of the Common Stock as reported on the Nasdaq National Market on the five
trading days preceding the applicable dividend payment date. No shares will be
sold by the Company at less than the par value of such shares.
Transfers
10. How may a Participant transfer Plan shares?
If a Participant wishes to change the ownership of all or part of the
Participant's Plan shares through gift, private sale or otherwise, the
Participant may do so by delivering to First Chicago Trust a written request.
The transfer will be done as soon as practicable following First Chicago Trust's
receipt of the required documentation, subject to the provisions of receipt on
or before the record date relating to a cash dividend payment. No fractional
shares of Common Stock credited to a Participant's account may be transferred
unless the Participant's entire account is transferred. Request for account
transfers are subject to the same requirements as for the transfer of
securities, including the requirement of receipt by First Chicago Trust of a
properly executed stock assignment with a medallion guarantee.
Shares transferred will continue to be held by First Chicago Trust as
agent under the Plan. An account will be opened in the name of the transferee,
if the transferee is not already a Participant, and such transferee will
automatically be enrolled in the Plan. All dividends on shares transferred to
the transferee's Plan account will be reinvested.
Transferees will be sent a statement showing the transfer of such
shares into the transferees' accounts. The transferor may request from First
Chicago Trust a non-negotiable gift certificate which may be presented to the
transferee.
Safekeeping
11. How may Participants use the Plan's safekeeping service?
At the time of enrollment in the Plan, or at any later time,
Participants may use the Plan's "Share Safekeeping Service" to deposit any
Common Stock certificates in their possession with First Chicago Trust. Shares
deposited will be transferred into the name of First Chicago Trust
-8-
<PAGE>
or its nominee and credited to the Participant's account under the Plan.
Thereafter, such shares will be treated in the same manner as shares purchased
through the Plan. By using the Plan's Share Safekeeping Service, Participants no
longer bear the risk associated with loss, theft or destruction of stock
certificates. Also, because shares deposited with First Chicago Trust are
treated in the same manner as shares purchased through the Plan, they may be
transferred or sold through the Plan in a convenient and efficient manner.
To insure against loss resulting from mailing stock certificates to
First Chicago Trust, First Chicago Trust provides mail insurance free of charge
for certificates valued at up to $25,000 current market value.
To be eligible for certificate mailing insurance, an individual
investor must observe the following guidelines. Certificates must be mailed in
brown, pre-addressed return envelopes supplied by First Chicago Trust.
Certificates mailed to First Chicago Trust must be mailed first class and should
not be endorsed. Participants will promptly receive a transaction advice confirm
ing each deposit. Individual investors must notify First Chicago Trust of any
claim within 30 calendar days of the date the certificates were mailed. To
submit a claim, an individual investor must be a current Participant or the loss
must be incurred in connection with becoming a Participant. In the latter case,
the claimant must enroll in the Plan at the time the insurance claim is
processed. The maximum insurance protection provided to the Participant and
coverage is available only when the certificates are sent to First Chicago Trust
in accordance with the guidelines described above.
If a brown pre-addressed envelope provided by First Chicago Trust is not
used, certificates (unendorsed) should be sent to the address listed in the
answer to question 3 above via registered mail, return receipt requested, and
insured for possible mail loss for 2% of the market value (minimum of $20.00);
this represents the replacement cost if the certificates are lost.
Insurance covers the replacement of shares of stock, but in no way
protects against any loss resulting from fluctuations in the value of such
shares from the time the individual mails the certificates until such time as
replacement can be effected.
Selling Shares
12. How may shares of Common Stock be sold through the Plan?
Participants may sell shares held through the Plan in most cases by
calling First Chicago Trust at 1-800-317-4445. Participants may also mail their
sale request using one of the transaction forms provided with each statement.
Certificated shares held outside the Plan can be deposited in a Participant's
Plan account and subsequently sold through the Plan.
First Chicago Trust will make every effort to process your order on the
day it is received, provided that instructions are received before 1 p.m.,
Eastern time, on a business day during which First Chicago Trust and the
relevant securities markets are open. The proceeds of the sale, less
-9-
<PAGE>
applicable service fees, brokerage commissions and other costs of sale, will be
sent to the Participant.
Participants have full control of their Plan shares and may transfer or
dispose of them at any time. Participants may choose to sell shares held for
them by First Chicago Trust through the broker of his or her choice. If a
Participant chooses to do so, he or she must call or write First Chicago Trust.
A certificate will be issued and mailed to the Participant or his or her broker
(if so requested), within two business days of First Chicago Trust's receipt of
the request.
Reports to Participants
13. What kind of reports will be sent to Participants in the Plan?
Each Participant will receive a quarterly statement showing any
dividends reinvested as well as all transactions for the Participant's account
during the current calendar year. Statements will also be provided whenever the
Participant has deposited or transferred shares of Common Stock or had cash
dividend payments reinvested in Common Stock. Participants should retain these
statements in order to establish the cost basis, for tax purposes, for shares of
Common Stock acquired under the Plan. First Chicago Trust may charge a
Participant for a transcript of the history of such Participant's account.
Participants will receive copies of all communications sent to holders
of Common Stock. This may include quarterly reports, annual reports, proxy
material, consent solicitation material and Internal Revenue Service
information, if appropriate, for reporting dividend income. All notices,
statements and other communications from First Chicago Trust to Participants
will be addressed to the latest address of record; therefore, it is important
that Participants promptly notify First Chicago Trust in writing of any change
of address.
Dividends
14. Are Participants credited with dividends on shares held in their account
under the Plan?
Yes. The Company pays dividends, as declared, to the record holders of
shares of its Common Stock. As the record holder and as agent for the
Participants, First Chicago Trust receives dividends for all shares of Common
Stock held in the Plan on the record date. First Chicago Trust credits such
dividends to Participants on the basis of full and fractional shares held in
their accounts and reinvests such dividends in shares of Common Stock.
Certificates for Shares
15. Are stock certificates issued for shares of Common Stock purchased under
the Plan?
Unless a Participant requests, certificates for Common Stock purchased
under the Plan will not be issued. The number of shares credited to a
Participant's account under the Plan will be shown on the Participant's
-10-
<PAGE>
statement of account. However, except as indicated below, a Participant may
receive certificates for full shares accumulated in his or her account under the
Plan at any time either by writing or calling First Chicago Trust. If
certificates for fewer than all of the shares held in a Participant's account
are issued, any remaining full shares and fractional shares will be reflected in
the Participant's account and the Participant will remain enrolled in the Plan
unless and until the Participant terminates his or her participation.
A Participant's rights under the Plan and shares credited to the
account of a Participant under the Plan may not be pledged. A Participant who
wishes to pledge his or her shares must request that certificates for such
shares be issued in his or her name.
Certificates for fractional shares will not be issued under any
circumstances. See the answer to question 18.
16. In whose name are accounts maintained and certificates registered when
issued?
Accounts in the Plan will be maintained in the names in which the
certificates of stock holders were registered at the time the stockholders
became Participants in the Plan. Likewise, certificates for full shares will be
registered in the same name when issued.
Upon written request, certificates will be registered and issued in
names other than the account name, subject to compliance with any applicable
laws and the payment by the Participant of any applicable taxes, provided that
the request meets the usual requirements of First Chicago Trust for the
recognition of a transfer of Common Stock of the Company.
Withdrawal from the Plan
17. When and how may a Participant withdraw shares purchased from the Plan?
A Participant may withdraw all or a portion of the shares of Common
Stock credited to his or her account either by writing to or calling First
Chicago Trust to that effect. When a Participant withdraws from the Plan, the
Participant will receive a certificate for the total number of whole shares
credited to such Participant's account under the Plan and a check for any
fraction of a share valued at the then current market price of the Common Stock
less any brokerage commission, any service fee and any other costs of sale.
However, whether or not a participant has requested termination, the Participant
may instruct First Chicago Trust to sell all or a portion of the shares of
Common Stock in the Participant's account and deliver the proceeds, less any
applicable brokerage commissions, a service fee and any other costs of sale, to
the Participant. See the answer to question 12.
18. What happens to any fractional interest withdrawn from the Plan?
Any fractional interest withdrawn will be sold by First Chicago Trust
at the then current market price less any brokerage commission, any service fee
and any other costs of sale. In no case will certificates representing a
fractional interest be issued.
-11-
<PAGE>
19. How does a Participant terminate participation in the Plan?
A Participant may terminate his or her participation in the Plan at any
time by notifying First Chicago Trust by telephone or in writing to that effect.
Such instructions will be processed as promptly as possible after receipt. If a
notice to terminate is received by First Chicago Trust on or after the record
date for a dividend payment, First Chicago Trust, in its sole discretion, may
either pay such dividend in cash or reinvest it in shares on behalf of the
terminating Participant. If such dividend is reinvested, First Chicago Trust may
sell the shares purchased and remit the proceeds to the Participant, less any
brokerage commission, any service fee and any other costs of sale.
Federal Income Tax Consequences
20. What are the federal income tax consequences of participation in the Plan?
The fair market value of the shares acquired through the reinvestment
of dividends will be included in a Participant's gross income as a dividend. It
should be noted that the fair market value on a dividend payment date may differ
from the purchase price, which is the average of the closing price on the five
trading days preceding the applicable dividend payment date.
The amount of dividends reinvested may be eligible, in the case of
corporate stockholders, for the 70% dividends received deduction.
To the extent that federal income tax withholding is required with
respect to dividends, First Chicago Trust will reinvest dividends net of the
amount of withholding required.
The tax basis of any shares acquired pursuant to the Plan will be their
fair market value on the dividend payment date, and the holding period
applicable to any such shares will com mence on the day following such date.
Fair market value will be calculated based upon the average of the high and low
trading prices of a share of Common Stock on the Nasdaq National Market on the
dividend payment date or, if such date is not a trading day, the average of
such average price for the trading day immediately preceding and the trading
day immediately following the dividend payment date.
The tax consequences under state and local tax laws, and for
Participants who do not reside in the United States, will vary from jurisdiction
to jurisdiction. Each Participant is advised to consult his or her own tax
advisor to determine the tax consequences of a particular transaction in his or
her account.
-12-
<PAGE>
Other Information
21. What happens when a Participant sells or transfers all of the shares of
the Company's Common Stock registered in the Participant's name?
If a Participant disposes of all of the shares of Common Stock
registered in his or her name, First Chicago Trust will continue to reinvest the
dividends on the shares of Common Stock held in the Participant's account in the
Plan until First Chicago Trust is otherwise notified.
22. What happens if the Company issues a stock dividend or declares a stock
split?
Any shares of Common Stock issued as a stock dividend or pursuant to a
stock split with respect to shares of Common Stock held in a Participant's
account will be credited to the Participant's account. Stock dividends or split
shares distributed on shares registered in a Participant's name may be mailed
directly to the Participant.
23. How will shares held in an account under the Plan be voted at meetings of
stockholders?
If a Participant has shares credited to an account under the Plan on a
record date for a meeting of stockholders, the Participant will be sent proxy
material with respect to that meeting. Each Participant will have the sole right
to vote any whole shares (but not fractional shares) that are held in such
Participant's account under the Plan on the record date for a vote. A
Participant may vote in person at meetings or by submitting a proxy to direct
one or more individuals to vote on the Participant's behalf. Participants under
the Plan who are registered holders of Common Stock will receive only one proxy,
which will include any shares credited to such Participant's account. Shares of
Common Stock for which no proxy is received will not be voted.
24. May the Plan be suspended, modified or terminated?
The Company may suspend, modify or terminate the Plan at any time, in
whole, in part or in respect of Participants in one or more jurisdictions,
without the approval of Participants. Notice of such suspension, modification or
termination will be sent to all affected Participants, who will in all events
have the right to withdraw from participation. Upon any termination of the Plan
by the Company, each affected Participant will receive a certificate for all of
the whole shares of Common Stock credited to the Participant's account and a
check for the cash value of any fractional shares of Common Stock credited to
the Participant's account. Such fractional shares will be valued at the then
current market value, less any brokerage commissions, any service fee and any
other costs of sale.
In the event the Company terminates the Plan for the purpose of
establishing another dividend reinvestment plan, Participants will be
automatically enrolled in such other plan and shares credited to the
Participant's Plan accounts will be credited automatically to such other plan,
unless notice to the contrary is received by First Chicago Trust.
-13-
<PAGE>
The Company also reserves the right to terminate any Participant's
participation in the Plan at any time for any reason upon written notice to the
Participant at the address appearing on First Chicago Trust's records.
25. How is the Plan to be interpreted?
Any question of interpretation arising under the Plan will be
determined by the Company, and any such determination will be final.
26. Who bears the risk of market price fluctuations in the Common Stock?
A Participant's investment in shares under the Plan will be no
different from investment in directly held shares. The Participant will bear the
risk of loss and realize the benefits of any gain from market price changes with
respect to all such shares held by him or her in the Plan.
27. What is the liability of the Company and First Chicago Trust under the
Plan?
Neither the Company nor First Chicago Trust will be liable for any act
done in good faith or for the good faith omission to act in connection with the
Plan, including, without limitation, any claim of liability arising out of
failure to terminate a Participant's account upon such Partici pant's death
prior to receipt of notice in writing of such death, or with respect to the
prices at which shares of Common Stock are purchased or sold for the
Participant's account and the times when such purchases and sales are made, or
with respect to any loss or fluctuation in the market value after the purchase
or sale of such shares.
Participants should recognize that the Company cannot assure them of a
profit or protect them against a loss on the shares purchased by them under the
Plan.
USE OF PROCEEDS
The proceeds to the Company from sales of Common Stock pursuant to the
Plan will be used for general corporate purposes, including investment in and
advances to the Company's subsidiaries.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1996
and 1995, and the related consolidated statements of income, stockholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1996, incorporated by reference in this Prospectus, have been
audited and reported on by KPMG Peat Marwick LLP, independent certified public
accountants. Such consolidated financial statements have been incorporated by
reference herein upon the authority of said firm as experts in accounting and
auditing.
-14-
<PAGE>
LEGAL OPINION
The validity of the issuance of the shares of Common Stock offered
hereby will be passed upon for the Company by Duane, Morris & Heckscher LLP,
Philadelphia, Pennsylvania. As of September 24, 1997, persons who are partners
or of counsel to Duane, Morris & Heckscher LLP beneficially owned 10,522 shares
of the Company's outstanding Common Stock, of which 2,222 shares represent
shares purchasable under currently exercisable stock options. In addition,
Frederick W. Dreher, a partner of Duane, Morris & Heckscher LLP, is a director
of the Mutual Company, which is a holder of approximately 59% of the Company's
Common Stock.
-15-
<PAGE>
No person has been authorized to give any information or to make any
representation not contained in this Prospectus, and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Company. Neither delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company since the date hereof. This Prospectus
does not constitute an offer to sell, or a solicitation of an offer to buy, any
of the securities offered hereby in any jurisdiction to any person to whom it
is unlawful to make such offering in such jurisdiction.
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain portions of which have been omitted pursuant to
the rules and regulations of the Securities and Exchange Commission, and to
which portions reference is hereby made for further information with respect to
the Company and the securities offered hereby. The Registration Statement may be
inspected without charge by anyone at the office of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, and copies of all or any part of it may be
obtained from the Commission at its principal office, 450 Fifth Street, N.W.,
Washington, D.C. 20549, upon the payment of fees prescribed by it.
[LOGO]
DONEGAL GROUP INC.
DIVIDEND REINVESTMENT PLAN
1,000,000
Shares of
Common Stock
----------
PROSPECTUS
----------
Dated: September 26, 1997
-16-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The expenses relating to the registration of the shares of Common Stock
being offered hereby will be borne by the Company. Such expenses are estimated
as follows:
Item Amount
- - ---- -------
Registration Fee.................................................. $ 6,061.00
Legal Fees and Expenses........................................... 5,000.00*
Accounting Fees and Expenses...................................... 1,000.00*
Printing and Duplicating.......................................... 2,200.00*
Miscellaneous Expenses............................................ 539.00*
Total........................................... $14,800.00
*Estimated
Item 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware
empowers a Delaware corporation to indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that such person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
such person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon plea of nolo
contendere or its equivalent, does not, of itself, create a presumption that the
person did not act in good faith and in a manner which such person reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that such person's conduct was unlawful.
In the case of an action or suit by or in the right of the corporation
to procure a judgment in its favor, Section 145 empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by reason of the fact
that such person is or was acting in any of the capacities set forth above
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection
II-1
<PAGE>
with the defense or settlement of such action or suit if such person acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation, except that indemnification is
not permitted in respect of any claim, issue or matter as to which such person
is adjudged to be liable to the corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
determines upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court deems proper.
Section 145 further provides that a Delaware corporation is required to
indemnify a director, officer, employee or agent against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
with any action, suit or proceeding or in defense of any claim, issue or matter
therein as to which such person has been successful on the merits or otherwise;
that indemnification provided for by Section 145 shall not be deemed exclusive
of any other rights to which the indemnified party may be entitled; that
indemnification provided for by Section 145 shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of such
person's heirs, executors and administrators; and empowers the corporation to
purchase and maintain insurance on behalf of a director or officer against any
liability asserted against such person and incurred by such person in any such
capacity or arising out of such person's status as such whether or not the
corporation would have the power to indemnify such person against such liability
under Section 145. A Delaware corporation may provide indemnification only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because such
person has met the applicable standard of conduct. Such determination is to be
made (i) by the board of directors by a majority vote of a quorum consisting of
directors who were not party to such action, suit or proceeding, or (ii) if such
a quorum is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion or (iii)
by the stockholders.
Article Five of the Company's By-laws provides for indemnification of
directors and officers of the Company to the fullest extent permitted by the
General Corporation Law of the State of Delaware, as presently or hereafter in
effect. The By-laws of the Mutual Company also provide that the Mutual Company
shall indemnify to the full extent authorized by law any director or officer of
the Mutual Company who is made, or threatened to be made, a party to any action
or proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that he is or was serving as a director, officer or employee
of the Company at the request of the Mutual Company.
The Company provides liability insurance for directors and officers for
certain losses arising from claims or charges made against them while acting in
their capacities as directors or officers of the Company up to an aggregate of
$5,000,000 inclusive of defense costs, expenses and charges.
Additionally, as permitted by the General Corporation Law of the State
of Delaware, Article Six of the Company's Certificate of Incorporation provides
that no director of the Company
II-2
<PAGE>
shall incur personal liability to the Company or its stockholders for monetary
damages for breach of such person's fiduciary duty as a director; provided,
however, that the provision does not eliminate or limit the liability of a
director for (i) any breach of the director's duty of loyalty to the Company or
its stockholders; (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) the unlawful payment
of dividends or unlawful purchase or redemption of stock under Section 174 of
the General Corporation Law of the State of Delaware; or (iv) any transaction
from which the director derived an improper personal benefit.
Item 16. Exhibits.
The Exhibits filed herewith are set forth on the Index to Exhibits
filed as a part of this Registration Statement.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(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 the registration statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (a)(i) and (a)(ii) of this section
do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed with or furnished to the Commission by the registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act
of 1934 that are incorporated by reference in the registration
statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, 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.
II-3
<PAGE>
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(d) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorpo rated 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.
II-4
<PAGE>
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 September 25, 1997.
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 consti tutes and appoints Donald H. Nikolaus and Ralph G. Spontak,
and each or either of them, as such person's true and lawful attorneys-in-fact
and agents, with full power of substitution, for such person, and in such
person's name, place and stead, in any and all capacities to sign any or all
amendments or post-effective amendments to this Registration Statement, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as such person might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them or their substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ C. Edwin Ireland Chairman of the Board and a Director September 25, 1997
- - ------------------------------------
C. Edwin Ireland
/s/ Donald H. Nikolaus President, Chief Executive Officer September 25, 1997
- - ------------------------------------ and a Director
Donald H. Nikolaus (principal executive officer)
/s/ Ralph G. Spontak Senior Vice President, Chief Financial September 25, 1997
- - ------------------------------------ Officer and Secretary
Ralph G. Spontak (principal financial and
accounting officer)
II-5
<PAGE>
Signature Title Date
--------- ----- ----
/s/ Patricia A. Gilmartin Director September 25, 1997
- - -------------------------
Patricia A. Gilmartin
/s/ Philip H. Glatfelter, II Director September 25, 1997
- - ----------------------------
Philip H. Glatfelter, II
- - ---------------------------- Director September , 1997
R. Richard Sherbahn
- - ---------------------------- Director September , 1997
Thomas J. Finley, Jr.
/s/ Robert S. Bolinger Director September 25, 1997
- - ----------------------
Robert S. Bolinger
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits Reference
- - ------ ----------------------- ---------
<S> <C> <C>
4.1 Form of Registrant's Common Stock Certificate *
4.2 Certificate of Incorporation of Registrant *
4.3 Amended and Restated By-laws of Registrant **
5 Opinion of Duane, Morris & Heckscher LLP as Filed herewith
to legality of securities to be registered hereby
23.1 Consent of KPMG Peat Marwick LLP Filed herewith
23.2 Consent of Duane, Morris & Heckscher LLP Included in its opinion
filed as Exhibit 5
24 Powers of Attorney Set forth in the signa-
ture pages hereto
99 Donegal Group Inc. Enrollment Authorization Filed herewith
Form
</TABLE>
* Such Exhibit is hereby incorporated by reference to exhibits in
Registrant's Form S-1
Registration Statement No. 33-8533 declared effective October 29, 1986.
** Such Exhibit is hereby incorporated by reference to exhibits in
Registrant's Form S-2
Registration Statement No. 33-67346 declared effective September 29,
1993.
II-7
<PAGE>
EXHIBIT 5
<PAGE>
DUANE, MORRIS & HECKSCHER LLP
ATTORNEYS AT LAW
ONE LIBERTY PLACE
PHILADELPHIA, PA 19103-7396
(215) 979-1000
FAX
(215) 979-1020
122 E. 42nd STREET, SUITE 3300 1667 K STREET N.W., SUITE 700
NEW YORK, NY 10168 WASHINGTON, D.C. 20006-1608
305 NORTH FRONT STREET, 5th FLOOR 1201 MARKET STREET, SUITE 1500
HARRISBURG, PA 17108-1003 WILMINGTON,DE 19801-0195
735 CHESTERBROOK BOULEVARD 314 S. STATE STREET
WAYNE, PA 19087-5638 DOVER, DE 19901
968 Postal Road, Suite 200 51 HADDONFIELD ROAD, SUITE 340
ALLENTOWN, PA 18109-0400 CHERRY HILL, NJ 08002-4810
777 SOUTH FLAGLER DRIVE, SUITE 800W ONE GATEWAY CENTER, SUITE 1210
WEST PALM BEACH, FL 33401 NEWARK, NJ 07102
September 25, 1997
The Board of Directors of
Donegal Group Inc.
1195 River Road
Marietta, PA 17547
Gentlemen:
We have acted as counsel to Donegal Group Inc. (the,"Company") in
connection with the preparation and filing with the Securities
and Exchange, Commission under the Securities Act of 1933, as amended, of a
registration statement on Form S-3 (the "Registration Statement") relating to
the offer and sale by the Company of up to 1,000,000 sharesT(the "Shares") of
Common Stock, $1.00 par value, of the Company, pursuant to the
Company'sEDividend Reinvestment Plan (the "Plan").
As counsel to the Company, we have supervised all corporate proceedings
in connection with the preparation and filing of the Registration Statement. We
have also examined the Company's Certificate of Incorporation
and By-laws, as amended to date, the corporate minutes and other proceedings and
the records relating to the authorization, sale and issuance of the Shares, and
such other documents and matters of law as we have deemed necessary or
appropriate in order to render this opinion.
Based upon the foregoing, it is our opinion that each of the Shares,
when issued in accordance with the terms and conditions of the Plan, will be
duly authorized, legally and validly issued and outstanding, fully paid and
nonassessable.
We hereby consent to the use of this opinion in the Registration
Statement, and we further consent to the reference to our name in the Prospectus
under the caption "Legal Opinion."
Sincerely,
/s/ DUANE, MORRIS & HECKSCHER LLP
KMS/JWK/myv
EXHIBIT 23.1
<PAGE>
Exhibit 23.1
Independent Auditors' Consent
The Board of Directors
Donegal Group Inc.
We consent to the use of our reports incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the registration statement.
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG Peat Marwick LLP
Harrisburg, Pennsylvania
September 25, 1997
EXHIBIT 99
<PAGE>
<TABLE>
<CAPTION>
ENROLLMENT AUTHORIZATION FORM
DIVIDEND REINVESTMENT PLAN
<S> <C>
Donegal Group Inc. Please enroll my account as follows:
Place an "X" in the box using black or blue ink (|X|).
[Issuer no.][Stockholder no.] |_| FULL DIVIDEND REINVESTMENT
Reinvest all dividends for this account.
[Full name and address of
registererd stockholder] DO NOT RETURN THIS FORM IF YOU WISH TO
CONTINUE TO RECEIVE CASH DIVIDENDS.
Receipt of this form by First
Chicago Trust Company of New York
will enroll your account in the
Dividend Reinvestment Plan.
I understand that I may change or
revoke this authorization at any
time by notifying First Chicago,
in writing, of my desire to
change or terminate my
participation.
(see reverse)
Signature(s) of
Registered Owner(s)
--------------------------------------
Date
--------------------------------------
All joint owners must sign Date
</TABLE>
<PAGE>
ENROLLMENT AUTHORIZATION FORM
I hereby appoint First Chicago Trust Company of New York as my agent under the
terms and conditions of the Dividend Reinvestment Plan as described in the
notice which accompanied this Enrollment Authorization Form.
INSTRUCTIONS
(1) Please place an "X" in the box to select the Full Dividend
Reinvestment option. (Note: If you do not check the box and your properly signed
form is returned to First Chicago, your account will be enrolled in the Dividend
Reinvestment Plan.)
(2) Be sure to sign and date this form and mail it in the envelope
provided or to First Chicago Trust Company of New York, P.O. Box 2598, Jersey
City, NJ 07303-2598.
DO NOT RETURN THIS FORM UNLESS YOU INTEND
TO PARTICIPATE SINCE THIS FORM AUTHORIZES
THE ENROLLMENT OF YOUR ACCOUNT IN THE PLAN.
