exv10w2



 






EXHIBIT 10.2




EMPLOYMENT AGREEMENT




     AGREEMENT made as of the 31st day of October, 2004, by and among BICUS SERVICES CORPORATION, a
Pennsylvania corporation, MERCER INSURANCE COMPANY, a Pennsylvania corporation, and DAVID B.
MERCLEAN.



     Bicus Services Corporation, a wholly-owned subsidiary of Mercer Insurance Company, desires to
employ Mr. Merclean, and Mr. Merclean is willing to serve Bicus Services Corporation on the terms
and conditions herein provided.



     In order to effect the foregoing, the parties hereto desire to enter into an employment
agreement on the terms and conditions set forth below. Accordingly, in consideration of the
premises and the respective covenants and agreements of the parties contained herein, and intending
to be legally bound hereby, the parties hereto agree as follows:



     1. Definitions. Each capitalized word and term used herein shall have the meaning
ascribed to it in the glossary appended hereto, unless the context in which such word or term is
used otherwise clearly requires. Such glossary is incorporated herein by reference and made a part
hereof.



     2. Employment. The Company hereby agrees to employ the Executive, and the Executive
hereby agrees to serve the Company, on the terms and conditions set forth herein.



     3. Term of Agreement. The Executive’s employment under this Agreement shall commence
on the date this Agreement and, except as otherwise provided herein, shall continue until March 31,
2007; provided, however, that commencing on March 31, 2005 and each March 31 thereafter, the term
of this Agreement shall automatically be extended for one additional year beyond the term otherwise
established unless, prior to such March 31st date, the Company shall not have given a Notice of
Extension.



     4. Position and Duties. The Executive shall serve as Senior Vice President and Chief
Financial Officer of the Company, and he shall have such responsibilities, duties and authority as
may, from time to time, be generally associated with such positions. In addition, the Executive
shall serve in such capacity, with respect to each Subsidiary or Affiliate, as the Board of
Directors of each such Subsidiary or Affiliate shall designate from time to time. During the term
of this Agreement, he shall devote substantially all of his working time and efforts to the
business and affairs of the Company, the Subsidiaries and the Affiliate; provided, however, that
nothing herein shall be construed as precluding him from devoting a reasonable amount of time to
civic, charitable, trade association, and similar activities, at least to the extent he is
presently devoting time.



     5. Compensation and Related Matters.




     Base Compensation. During the period of the Executive’s employment hereunder, the
Company shall pay to him annual base compensation of $200,000.



     Thereafter, the Board of Directors of the Company shall periodically review the Executive’s
employment performance, in accordance with policies generally in effect from time to time, for
possible merit or cost-of-living increases in such base compensation. Except for a



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reduction which is proportionate to a company-wide reduction in executive pay, the annual base
compensation paid to the Executive in any period shall not be less than the annual base
compensation paid to him in any prior period. The frequency and manner of payment of such base
compensation shall be in accordance with the Company’s executive payroll practices from time to
time in effect. Nothing herein shall be construed as precluding the Executive from entering into
any salary reduction or deferral plan or arrangement during the term of this Agreement; provided,
however, that his base compensation shall be determined without regard to any such salary reduction
or deferral for purposes of calculating the amount of any compensation and benefits to which he or
his surviving spouse may be entitled under Paragraph 6, 7, 10, or 11 following his termination of
employment. The amounts set forth in the first sentence of this subparagraph shall be pro rated to
the extent such period is less than a year.




          (a) Incentive Compensation. During the period of the Executive’s employment hereunder,
he shall be entitled to participate in all incentive plans, stock option plans, stock appreciation
rights plans, and similar arrangements maintained by the Company or its Affiliates for executive
officers on a basis and at award levels consistent and commensurate with his position and duties
hereunder.



          (b) Employee Benefit Plans and Other Plans or Arrangements. The Executive shall be
entitled to participate in all Employee Benefit Plans of the Company and its Affiliates on the same
basis as other executive officers of the Company. In addition, he shall be entitled to participate
in and enjoy any other plans and arrangements which provide for sick leave, vacation, sabbatical,
or personal days, company-provided automobile, club memberships and dues, education payment or
reimbursement, business-related seminars, and similar fringe benefits provided to or for the
executive officers of the Company and its Affiliates from time to time, but at least to the extent
he is presently entitled to participate in and enjoy such plans and arrangements.



          (c) Expenses. During the period of the Executive’s employment hereunder, he shall be
entitled to receive prompt reimbursement for all reasonable and customary expenses, including
transportation expenses, incurred by him in performing services hereunder in accordance with the
general policies and procedures established by the Company.



     6. Termination By Reason of Disability.




          (a) In General. In the event the Executive becomes unable to perform his duties on a
full-time basis by reason of the occurrence of his Disability and, within 30 days after a Notice of
Termination is given, he shall not have returned to the full-time performance of such duties, his
employment may be terminated by the Company.



          (b) Compensation and Benefits. In the event of the termination of the Executive’s
employment under Subparagraph (a), the Company shall pay or provide the compensation and benefits
set forth below:




               (1) The Executive shall be paid an amount per annum equal to the greater of (i) his
highest base compensation received during one of the two calendar years immediately
preceding the calendar year in which the Date of Termination occurs, or (ii) his base
compensation in effect immediately prior to the Date of Termination (or prior to any
reduction which entitled him to terminate his employment for Good Reason) for



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one year beginning with such Date of Termination. The frequency and manner of payment
of such amounts shall be in accordance with the Company’s executive payroll practices from
time to time in effect.




               (2) The Executive shall be paid an amount equal to the higher of the aggregate
bonus(es), if any, paid to him with respect to one of the two years immediately preceding
the year in which the Date of Termination occurs. Such amount shall be paid to him in cash
on the first anniversary date of the Date of Termination.




               (3) The Executive shall be paid an amount equal to the highest annual contribution made
on his behalf (other than his own salary reduction contributions) to each tax-qualified and
non-qualified Defined Contribution Plan of the Company or its Affiliates with respect to the
year in which the Date of Termination occurs or one of the two years immediately preceding
such year. The amount separately determined for each such plan shall be aggregated and
shall be paid to him in cash on the first anniversary date of the Date of Termination.




               (4) The Executive shall accrue benefits equal to the excess of (i) the aggregate
retirement benefits he would have received under the terms of each tax-qualified and
non-qualified Defined Benefit Plan of the Company or its Affiliates as in effect immediately
prior to the Date of Termination had he (A) continued to be employed for one more year, and
(B) received (on a pro rated basis, as appropriate) the greater of (I) the highest
compensation taken into account under each such plan with respect to one of the two years
immediately preceding the year in which the Date of Termination occurs, or (II) his
annualized base compensation in effect immediately prior to the Date of Termination (or
prior to any reduction which entitled him to terminate his employment for Good Reason), over
(ii) the retirement benefits he actually receives under such plans. The frequency, manner
and extent of payment of such benefits shall be consistent with the terms of the plans to
which they relate and any elections made thereunder.




               (5) The Executive and his eligible dependents shall be entitled to continue to
participate at the same aggregate benefit levels, for one year and at no out-of-pocket or
tax cost to him, in the Welfare Benefit Plans in which he was a participant immediately
prior to the Date of Termination, to the extent permitted under the terms of such plans and
applicable law. To the extent the Company or its Affiliates are unable to provide for
continued participation in a Welfare Benefit Plan, it shall provide an equivalent benefit
directly at no out-of-pocket or tax cost to him. For purposes of the preceding two
sentences, the Company shall be deemed to have provided a benefit at no tax cost to him if
it pays an additional amount to him or on his behalf, with respect to those benefits which
would otherwise be nontaxable to him, calculated in a manner consistent with the provisions
of Paragraph 12.



          (c) Adjustment to Certain Subparagraph (b) Compensation and Benefits. Notwithstanding
the provisions of Subparagraph (b)(5), the Company or its Affiliates’ obligation to pay or fund any
disability insurance premiums on behalf of the Executive shall be suspended while his Disability
continues, provided the cessation of payment or funding does not result in the termination of
disability benefits. Any amounts otherwise due under Subparagraph (b) shall



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be reduced (but not
below zero) by the dollar amount of disability
benefits received by him pursuant to plans or policies funded, directly at its cost, by the
Company or its Affiliates.




          (d) Earlier Cessation of Certain Welfare Benefits. Notwithstanding the provisions of
Subparagraph (b)(5), neither the Company nor an Affiliate shall be required to provide, at its
cost, the welfare benefits covered therein after the later of (i) the attainment by the Executive
and his spouse (if any) of age 65, or (ii) the date specified in the relevant plan document for
benefit termination (assuming that he was employed until age 65 or the normal retirement date, if
any, specified in such document).



          (e) Death During Remaining Term of Agreement.




               (1) In the event the Executive dies during the remaining term of this Agreement
following his termination for Disability and he is survived by a spouse, the compensation
and benefits remaining to be paid and provided under Subparagraph (b) shall be unaffected by
his death and shall be paid and provided to her or on her behalf; provided, however, that
the extent of her rights to the accrued benefits described in Subparagraph (b)(4) shall be
determined by reference to the relevant plan provisions and any elections made under such
plans; and provided further, that neither the Company nor an Affiliate shall be required to
provide continued benefits with respect to her deceased husband; and provided further, that
in no event shall the Company or an Affiliate be required to provide, at its cost, the other
welfare benefits described in Subparagraph (b)(5) to such spouse and her eligible dependents
after the earlier of (i) her death, or (ii) the later of (A) her attainment of age 65, or
(B) the date specified in the relevant plan document for benefit termination (assuming that
the Executive was employed until age 65 or the normal retirement date, if any, specified in
such document).




               (2) In the event the Executive dies during the remaining term of this Agreement
following his termination for Disability and he is not survived by a spouse, (i) the Company
or an Affiliate shall thereafter make the remaining payments described in Subparagraphs
(b)(1) through (b)(3) directly to his estate, (ii) the extent of the rights of any person to
the accrued benefits described in Subparagraph (b)(4) shall be determined by reference to
the relevant plan provisions and any elections made under such plans, and (iii) the Company
and its Affiliates’ obligation to provide continued benefits under Subparagraph (b)(5) shall
terminate.



          (f) Compensation and Benefits Upon Expiration of Remaining Term of Agreement. Upon the
expiration of the remaining term of this Agreement following the Executive’s termination for
Disability, and provided his Disability then continues, he shall be entitled to receive the
compensation and benefits provided under the terms of the Company or an Affiliates’ long-term
disability plan in effect on the Date of Termination or, if greater, at the expiration of such
remaining term. Such compensation and benefits shall continue until the earlier of (i) his death,
or (ii) the later of (A) his attainment of age 65, or (B) the date specified in the plan document
for benefit termination. To the extent the Company or an Affiliate is unable to provide such
compensation and benefits under its long-term disability plan, it shall provide equivalent
compensation and benefits directly at no out-of-pocket or tax cost to him. For purposes of the
preceding sentence, the Company or the Affiliate shall be deemed to have provided compensation and
benefits at no tax cost to him if it pays an additional amount to him



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or on his behalf, with respect to the compensation and benefits which would otherwise be
nontaxable to him, calculated in a manner consistent with the provisions of Paragraph 12.




     7. Termination By Reason of Death.




          (a) Compensation and Benefits to Surviving Spouse. In the event the Executive dies
while he is employed under this Agreement and is survived by a spouse, the Company or an Affiliate
shall pay or provide the compensation and benefits set forth below:




               (1) The surviving spouse shall be paid an amount equal to the greater of (i) the
Executive’s highest base compensation received during one of the two calendar years
immediately preceding the calendar year in which the Date of Termination occurs, or (ii) his
base compensation in effect immediately prior to the Date of Termination (or prior to any
reduction which entitled him to terminate his employment for Good Reason) for a period of
one year, beginning with such Date of Termination. The frequency and manner of payment of
such amounts shall be in accordance with the Company’s executive payroll practices from time
to time in effect.




               (2) The surviving spouse shall be paid an amount equal to the highest payment made to
Executive under each incentive bonus plan of the Company with respect to one of the two
years immediately preceding the year in which the Date of Termination occurs. Such amount
shall be paid in cash to her within 30 days after the Date of Termination.




               (3) The surviving spouse shall be paid an amount equal to the sum of the highest annual
contribution made on the Executive’s behalf (other than his own salary reduction
contributions) to each tax-qualified and non-qualified Defined Contribution Plan of the
Company or an Affiliate with respect to the year in which the Date of Termination occurs or
one of the two years immediately preceding such year. Such amount shall be paid in cash to
her within 30 days after the Date of Termination or within 30 days after such amount can
first be determined, whichever is later.




               (4) Subject to the following sentence, the surviving spouse shall be paid benefits
determined by reference to the excess of (i) the aggregate retirement benefits the Executive
would have accrued under the terms of each tax-qualified and non-qualified Defined Benefit
Plan as in effect immediately prior to the Date of Termination, had he (A) continued to be
employed for a period of one year following the Date of Termination, and (B) received (on a
pro rated basis, as appropriate) the greater of (I) the highest compensation taken into
account under each such plan with respect to one of the two years immediately preceding the
year in which the Date of Termination occurs, or (II) his annualized base compensation in
effect immediately prior to the Date of Termination (or prior to any reduction which
entitled him to terminate his employment for Good Reason), over (ii) the retirement benefits
actually determined under such plans. The frequency, manner, and extent of payment of such
benefits shall be consistent with the terms of the plans to which they relate and any
elections made thereunder.




               (5) The surviving spouse and her eligible dependents shall be entitled to continue to
participate at the same aggregate benefit levels, for a period of one year following the
Date of Termination and at no out-of-pocket or tax cost to her, in the



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Welfare Benefit Plans in which the Executive was a participant immediately prior to the
Date of Termination, to the extent permitted under the terms of such plans and applicable
law; provided, however, that neither the Company nor its Affiliates shall be required to
provide continued benefits with respect to her deceased husband; and provided further, that
neither the Company nor its Affiliates shall thereafter be required to provide, at its cost,
the other welfare benefits covered by such plans to such spouse and her eligible dependents
after the earlier of (i) her death, or (ii) the later of (A) her attainment of age 65, or
(B) the date specified in the relevant plan document for benefit termination (assuming the
Executive was employed until age 65 or the normal retirement date, if any, specified in such
document). To the extent the Company or an Affiliate is unable to provide for continued
participation in a Welfare Benefit Plan as required, it shall provide an equivalent benefit
directly at no out-of-pocket or tax cost to her. For purposes of the preceding two
sentences, the Company or the Affiliate shall be deemed to have provided a benefit at no tax
cost to her if it pays an additional amount to her or on her behalf, with respect to those
benefits which would otherwise be nontaxable to her, calculated in a manner consistent with
the provisions of Paragraph 12.



          (b) Compensation and Benefits to Estate, Etc. In the event the Executive dies while he
is employed under this Agreement and is not survived by a spouse, (i) the Company or an Affiliate
shall make the payments described in Subparagraphs (a)(1) through (a)(3) directly to his estate,
(ii) the extent of the rights of any person to the accrued benefits described in Subparagraph
(a)(4) shall be determined by reference to the relevant plan provisions and any elections made
under such plans, and (iii) the Company and its Affiliates’ obligation to provide benefits under
Subparagraph (a)(5) shall terminate.



     8. Termination By the Company for Cause.



          (a) In General. In the event the Company intends to terminate the Executive’s
employment for Cause, it shall deliver a Notice of Termination to him which specifies a Date of
Termination not less than 30 days following the date of such notice, unless a shorter period of
notice is required by the principal regulator of any Affiliate of the Company.



          (b) Compensation. Within 30 days after the Executive’s termination under Subparagraph
(a), the Company shall pay him, in one lump sum, his accrued but unpaid base compensation and
vacation compensation earned through the Date of Termination.



     9. Termination By the Executive Without Good Reason.



          (a) In General. In the event the Executive intends to terminate his employment without
Good Reason, he shall deliver a Notice of Termination to the Company which specifies a Date of
Termination not less than (i) 90 days following the date of such notice, if a Change in Control
shall not have occurred, or (ii) 30 days following the date of such notice, if a Change in Control
shall have occurred.



          (b) Compensation. Within 30 days after the Executive’s termination under Subparagraph
(a), the Company shall pay him, in one lump sum, his accrued but unpaid base compensation and
vacation compensation earned through the Date of Termination.



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     10. Termination By the Company Without Disability or Cause.



          (a) In General. In the event the Company intends to terminate the Executive’s
employment for any reason other than Disability or Cause, it shall deliver a Notice of Termination
to him which specifies a Date of Termination not less than 90 days following the date of such
notice.



          (b) Compensation and Benefits During Remaining Term of Agreement. In the event of the
termination of the Executive’s employment under Subparagraph (a), the Company or an Affiliate shall
pay or provide the compensation and benefits described in Paragraph 6(b) for one year beginning
with the Date of Termination.



          (c) Adjustment to Certain Subparagraph (b) Compensation and Benefits. In the event the
Executive suffers a Disability during the one year following the Date of Termination, the Company
or an Affiliate’s obligation to pay or fund any disability insurance premiums on his behalf shall
be suspended while his Disability continues, provided the cessation of payment or funding does not
result in the termination of disability benefits. Any amounts described in Paragraph 6(b) and
otherwise payable under Subparagraph (b) shall be reduced (but not below zero) by the dollar amount
of disability benefits received by him pursuant to plans or policies funded, directly at its cost,
by the Company or an Affiliate.



          (d) Earlier Cessation of Certain Welfare Benefits. Notwithstanding the provisions of
Subparagraph (b), neither the Company nor an Affiliate shall be required to provide, at its cost,
the welfare benefits covered by Paragraph 6(b)(5) after the later of (i) the attainment by the
Executive and his spouse (if any) of age 65, or (ii) the date specified in the relevant plan
document for benefit termination (assuming that he was employed until age 65 or the normal
retirement date, if any, specified in such document).



          (e) Death During Remaining Term of Agreement.




               (1) In the event the Executive dies during the year following his termination without
Disability or Cause by the Company and he is survived by a spouse, the compensation and
benefits required to be paid and provided under Subparagraph (b) shall be unaffected by his
death and shall be paid and provided to her or on her behalf; provided, however, that the
extent of her rights to the accrued benefits described in Paragraph 6(b)(4) shall be
determined by reference to the relevant plan provisions and any elections made under such
plans; and provided further, that neither the Company nor an Affiliate shall be required to
provide continued benefits with respect to her deceased husband; and provided further, that
in no event shall the Company nor an Affiliate be required to provide, at its cost, the
other welfare benefits described in Paragraph 6(b)(5) to such spouse and her eligible
dependents after the earlier of (i) her death, or (ii) the later of (A) her attainment of
age 65, or (B) the date specified in the relevant plan document for benefit termination
(assuming that the Executive was employed until age 65 or the normal retirement date, if
any, specified in such document).




               (2) In the event the Executive dies during the year following his termination without
Disability or Cause and he is not survived by a spouse, (i) the Company shall thereafter
make the remaining payments described in Paragraphs 6(b)(1) through 6(b)(3) directly to his
estate, (ii) the extent of the rights of any person to the



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accrued benefits described in Paragraph 6(b)(4) shall be determined by reference to the
relevant plan provisions and any elections made under such plans, and (iii) the Company and
any Affiliate’s obligation to provide the continued benefits described in Paragraph 6(b)(5)
shall terminate.



     11. Termination By the Executive for Good Reason.



          (a) In General. In the event the Executive intends to terminate his employment for
Good Reason, he shall deliver a Notice of Termination to the Company which specifies a Date of
Termination not less than 30 days following the date of such notice.



          (b) Compensation and Benefits During Remaining Term of Agreement. In the event of the
termination of the Executive’s employment under Subparagraph (a), the Company shall pay or provide
the compensation and benefits described in Paragraph 6(b) for one year beginning with the Date of
Termination.



          (c) Adjustment to Certain Subparagraph (b) Compensation and Benefits. In the event the
Executive suffers a Disability during the year following the Date of Termination, the Company or
any Affiliate’s obligation to pay or fund any disability insurance premiums on his behalf shall be
suspended while his Disability continues, provided the cessation of payment or funding does not
result in the termination of disability benefits. Any amounts described in Paragraph 6(b) and
otherwise payable under Subparagraph (b) shall be reduced (but not below zero) by the dollar amount
of disability benefits received by him pursuant to plans or policies funded, directly at its cost,
to the Company or any Affiliate.



          (d) Earlier Cessation of Certain Welfare Benefits. Notwithstanding the provisions of
Subparagraph (b), neither the Company nor an Affiliate shall be required to provide, at its cost,
the welfare benefits covered by Paragraph 6(b)(5) after the later of (i) the attainment by the
Executive and his spouse (if any) of age 65, or (ii) the date specified in the relevant plan
document for benefit termination (assuming that he was employed until age 65 or the normal
retirement date, if any, specified in such document).



          (e) Death During Remaining Term of Agreement.




               (1) In the event the Executive dies during the year following his termination for Good
Reason and he is survived by a spouse, the compensation and benefits required to be paid and
provided under Subparagraph (b) shall be unaffected by his death and shall be paid and
provided to her or on her behalf; provided, however, that the extent of her rights to the
accrued benefits described in Paragraph 6(b)(4) shall be determined by reference to the
relevant plan provisions and any elections made under such plans; and provided further, that
neither the Company nor any Affiliate shall be required to provide continued benefits with
respect to her deceased husband; and provided further, that in no event shall the Company or
any Affiliate be required to provide, at its cost, the other welfare benefits described in
Paragraph 6(b)(5) to such spouse and her eligible dependents after the earlier of (i) her
death, or (ii) the later of (A) her attainment of age 65, or (B) the date specified in the
relevant plan document for benefit termination (assuming that the Executive was employed
until age 65 or the normal retirement date, if any, specified in such document).



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               (2) In the event the Executive dies during the year following his termination for Good
Reason and he is not survived by a spouse, (i) either the Company or any Affiliate shall
thereafter make the remaining payments described in Paragraphs 6(b)(1) through 6(b)(3)
directly to his estate, (ii) the extent of the rights of any person to the accrued benefits
described in Paragraph 6(b)(4) shall be determined by reference to the relevant plan
provisions and any elections made under such plans, and (iii) the Company or any Affiliate’s
obligation to provide the continued benefits described in Paragraph 6(b)(5) shall terminate.



     12. Provisions Relating to Excise Taxes.



          (a) In General. In the event the Executive becomes liable, for any taxable year, for
the payment of an Excise Tax (because of a change in control) with respect to the compensation and
benefits payable by the Company or an Affiliate under this Agreement or otherwise, the Company
shall make one or more Gross-Up Payments to the Executive or on his behalf. The amount of any
Gross-Up Payment shall be calculated by a certified public accountant or other tax professional
designated jointly by the Executive and the Company. The provisions of this paragraph shall apply
with respect to the Executive’s surviving spouse or estate, where relevant.



          (b) Methodology for Calculation of Gross-Up Payment. For purposes of determining the
amount of any Gross-Up Payment, the Executive shall be deemed to pay income taxes at the highest
federal, state, and local marginal rates of tax for the calendar year in which the Gross-Up Payment
is to be made, net of the maximum reduction in federal income tax which could be obtained from the
deduction of state and local income taxes. In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account at the time the Gross-Up Payment was made,
the Executive shall repay to the Company, at the time that the amount of such reduction in Excise
Tax is finally determined, the portion of the Gross-Up Payment attributable to the reduction (plus
a portion of the Gross-Up Payment attributable to the Excise Tax and the federal, state, and local
income taxes imposed on the portion of the Gross-Up Payment being repaid by the Executive to the
extent such repayment results in a reduction in Excise Tax or federal, state, or local income tax),
plus interest on the amount of such repayment. Such interest shall be calculated by using the rate
in effect under Section 1274(d)(1) of the IRC, on the date the Gross-Up Payment was made, for debt
instruments with a term equal to the period of time which has elapsed from the date the Gross-Up
Payment was made to the date of repayment. In the event that the Excise Tax is subsequently
determined to exceed the amount taken into account at the time the Gross-Up Payment was made
(including by reason of any payment the existence or amount of which could not be determined at the
time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment with respect
to the excess at the time the amount thereof is finally determined, plus interest calculated in a
manner similar to that described in the preceding sentence.



          (c) Time of Payment. Any Gross-Up Payment provided for herein shall be paid not later
than the 30th day following the payment of any compensation or the provision of any benefit which
causes such payment to be made; provided, however, that if the amount of such payment cannot be
finally determined on or before such day, the Company shall pay on such day an estimate of the
minimum amount of such payment and shall pay the
remainder of such payment (together with interest calculated in a manner similar to that
described in



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Subparagraph (b)) as soon as the amount thereof can be determined. In the event that
the amount of an estimated payment exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to the Executive, payable on the 30th day after
demand by the Company (together with interest calculated in a manner similar to that described in
Subparagraph (b)).




          (d) Notwithstanding the provisions of this paragraph to the contrary, the actual amounts
payable hereunder as Gross-Up Payments shall be coordinated with any similar amounts paid to the
Executive under any other contract, plan, or arrangement.



     13. Fees and Expenses of the Executive. After a Change in Control and except as
provided in the following sentence, the Company shall pay, within 30 days following demand by the
Executive, all legal, accounting, actuarial, and related fees and expenses incurred by him in
connection with the enforcement of this Agreement. An arbitration panel or a court of competent
jurisdiction shall be empowered to deny payment to the Executive of such fees and expenses only if
it determines that he instituted a proceeding hereunder, or otherwise acted, in bad faith.



     14. Reduction for Compensation and Benefits Received Under the Company Severance Policy,
Etc. Notwithstanding anything herein to the contrary, in the event the Executive, his
surviving spouse, or any other person becomes entitled to continued compensation and benefits
hereunder by reason of the Executive’s termination of employment and, in addition, compensation or
similar benefits are payable under a severance policy, program or arrangement maintained by the
Company (other than retirement plans), then the compensation or benefits otherwise payable
hereunder shall be reduced by the compensation or benefits provided under such severance policy,
program or arrangement.



     15. Mitigation. The Executive shall not be required to mitigate the amount of any
compensation or benefits which may become payable hereunder by reason of his termination by seeking
other employment or otherwise, nor, except as otherwise provided in the following sentence or
elsewhere herein, shall the amount of any such compensation or benefits be reduced by any
compensation or benefits received by the Executive as the result of his employment by another
employer. Notwithstanding anything in this Agreement to the contrary, the Company or any
Affiliate’s obligation to provide any medical and dental benefits hereunder may be suspended, with
the written concurrence of the Executive or, if applicable, his surviving spouse during any period
of time that such benefits are being provided by reason of his or her employment.



     16. Funding of Compensation and Benefits; Acceleration of Certain Payments.



          (a) Grantor Trust. In the event the Executive’s employment is terminated without Cause
or he terminates his employment for Good Reason and a Change in Control has occurred as of the Date
of Termination or occurs thereafter, the Executive shall have the right to require the Company to
establish a grantor trust (taxable to the Company ) and fund such trust, on an actuarially sound
basis, to provide the compensation and benefits to which he is entitled hereunder, other than those
which may be paid pursuant to the provisions of
Subparagraph (c). The specific terms of such trust shall be as agreed to by the parties in
good faith; provided, however, that the trustee shall be a financial institution independent of the
Company; and provided further, that in no event shall the Company be entitled to withdraw funds
from the trust



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for its benefit, or otherwise voluntarily assign or alienate such funds, until such
time as all compensation and benefits required hereunder are paid and provided. The determination
of the extent of required funding, including any supplemental funding in the event of adverse
investment performance of trust assets, shall be made by an actuary or a certified public
accountant retained by each party. To the extent such professionals cannot agree on the proper
level of funding, they shall select a third such professional whose determination shall be binding
upon the parties. Notwithstanding the foregoing, the Company and its Affiliates shall remain liable
for all compensation and benefits required to be paid or provided hereunder.




          (b) Alternate Security. In lieu of the right given to the Executive under Subparagraph
(a), he shall have the right under such circumstances to require that the Company or its Affiliates
provide (i) an irrevocable standby letter of credit issued by a financial institution other than
the Company or any Subsidiary of the Company with a senior debt credit rating of “A” or better by
Moody’s Investors Service or Standard & Poor’s Corporation, or (ii) other security reasonably
acceptable to him, to secure the payment of such compensation and benefits.



          (c) Accelerated Payment of Present Value of Certain Compensation. In the event the
Executive’s employment is terminated without Cause or he terminates his employment for Good Reason
and a Change in Control has occurred as of the Date of Termination or occurs thereafter, the
Executive shall have the continuing right to demand that the present value of the remaining
payments described in Paragraphs 6(b)(1) through (3), and payable by reason of the provisions of
Paragraph 10 or 11 (as the case may be), be paid to him in one lump sum within 30 days after the
date written demand is given. For purposes of calculating the present value of such payments, a
discount factor shall be applied to each such payment which is equal to the relevant applicable
federal rate in effect on the date written demand is given by him, determined by reference to the
period of time between the date of such notice and the scheduled time such payment would otherwise
be made. In the event any payment described in Paragraphs 6(b)(1) through (3) is not yet
determinable on the date written demand is made, the other payments shall nonetheless be made as
provided above; and the undetermined payment shall be made within 30 days after it becomes
determinable, calculated as provided in the preceding sentence but by treating the date on which
the payment becomes determinable as the date of written notice. Nothing in this subparagraph shall
be construed as affecting the Executive’s right to one or more Gross-Up Payments in accordance with
the provisions of Paragraph 12; and a Gross-Up Payment (if applicable) will be calculated and made
with any payment made under this subparagraph, as well as any other Gross-Up Payments that may be
required hereunder at a subsequent date.



     17. Withholding Taxes. All compensation and benefits provided for herein shall, to the
extent required by law, be subject to federal, state, and local tax withholding.



     18. Confidential Information. The Executive agrees that subsequent to his employment
with the Company, he will not, at any time, communicate or disclose to any unauthorized person,
without the written consent of the Company, any proprietary or other confidential information
concerning the Company or any Subsidiary or any Affiliate of the
Company; provided, however, that the obligations under this paragraph shall not apply to the
extent that such matters (i) are disclosed in circumstances where the Executive is legally
obligated to do so, or (ii) become generally known to and available for use by the public otherwise
than by his wrongful act or omission; and provided further, that he may disclose any



11









 




knowledge of
insurance, financial, legal and economic principles, concepts and ideas which are not solely and
exclusively derived from the business plans and activities of the Company.




     19. Covenants Not to Compete or to Solicit.




          (a) Noncompetition. If the Executive’s employment terminates under Paragraph 8 or 9
prior to a Change in Control, he agrees that for a period of 12 months after the Date of
Termination he will not, without the written consent in writing of the Board of Directors of the
Company, become an officer, employee, agent, partner, director, or a four and nine-tenths percent
or greater shareholder or equity owner of any licensed direct property and casualty insurance
company with its corporate headquarters located within Pennsylvania or New Jersey. If at the time
of the enforcement of this paragraph a court holds that the duration, scope, or area restrictions
stated herein are unreasonable under the circumstances then existing and, thus, unenforceable, the
Company and the Executive agree that the maximum duration, scope, or area reasonable under such
circumstances shall be substituted for the stated duration, scope, or area.



          (b) Nonsolicitation. During his employment and for a period of 12 months following the
Date of Termination, the Executive shall not, whether on his own behalf or on behalf of any other
individual or business entity, solicit, endeavor to entice away from the Company, a Subsidiary or
any Affiliate, or otherwise interfere with the relationship of the Company, a Subsidiary or any
Affiliate with any person who is, or was within the then most recent 12 month period, an employee
or associate thereof; provided, however, that this subparagraph shall not apply following the
occurrence of a Change in Control.



     20. Arbitration. To the extent permitted by applicable law, any controversy or dispute
arising out of or relating to this Agreement, or any alleged breach hereof, shall be settled by
arbitration in Pennington, New Jersey, in accordance with the commercial rules of the American
Arbitration Association then in existence (to the extent such rules are not inconsistent with the
provisions of this Agreement), it being understood and agreed that the arbitration panel shall
consist of three individuals acceptable to the parties hereto. In the event that the parties
cannot agree on three arbitrators within 20 days following receipt by one party of a demand for
arbitration from another party, then the Executive and the Company shall each designate one
arbitrator and the two arbitrators selected shall select the third arbitrator. The arbitration
panel so selected shall convene a hearing no later than 90 days following the selection of the
panel. The arbitration award shall be final and binding upon the parties, and judgment may be
entered thereon in the Commonwealth of Pennsylvania Court of Common Pleas or in any other court of
competent jurisdiction.



     21. Additional Equitable Remedy. The Executive acknowledges and agrees that the
Company’s remedy at law for a breach or a threatened breach of the provisions of Paragraphs 18 and
19 would be inadequate; and, in recognition of this fact and notwithstanding the provisions of
Paragraph 20, in the event of such a breach or threatened breach by him, it is agreed that the
Company shall be entitled to request equitable relief in the form of specific
performance, temporary restraining order, temporary or permanent injunction, or any other
equitable remedy which may then be available. Nothing in this paragraph shall be construed as
prohibiting the Company from pursuing any other remedy available under this Agreement for such a
breach or threatened breach.



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     22. Related Agreements. Except as may otherwise be provided herein, to the extent that
any provision of any other agreement between the Company and the Executive shall limit, qualify,
duplicate, or be inconsistent with any provision of this Agreement, the provision in this Agreement
shall control and such provision of such other agreement shall be deemed to have been superseded,
and to be of no force or effect, as if such other agreement had been formally amended to the extent
necessary to accomplish such purpose.



     23. No Effect on Other Rights. Except as otherwise specifically provided herein,
nothing contained in this Agreement shall be construed as adversely affecting any rights the
Executive may have under any agreement, plan, policy or arrangement to the extent any such right is
not inconsistent with the provisions hereof.



     24. Exclusive Rights and Remedy. Except for any explicit rights and remedies the
Executive may have under any other contract, plan or arrangement with the Company, the compensation
and benefits payable hereunder and the remedy for enforcement thereof shall constitute his
exclusive rights and remedy in the event of his termination of employment.



     25. Director and Officer Liability Insurance; Indemnification. The Company and Mercer
shall provide the Executive (including his heirs, executors, and administrators) with coverage
under a standard directors’ and officers’ liability insurance policy, at the Company and Mercer’s
expense, in amounts consistent with amounts provided by peer corporations to their directors and
officers, and shall indemnify him as both a director and as an officer (and his heirs, executors,
and administrators) to the fullest extent permitted under Pennsylvania law against all expenses and
liabilities reasonably incurred by him in connection with or arising out of any action, suit, or
proceeding in which he may be involved by reason of his having been an officer or director of the
Company or any Subsidiary or Affiliate (whether or not he continues to be such an officer or
director at the time of incurring such expenses or liabilities). Such expenses and liabilities
shall include, but not be limited to, judgments, court costs, and attorneys’ fees, and the costs of
reasonable settlements.



     26. Notices. Any notice required or permitted under this Agreement shall be sufficient
if it is in writing and shall be deemed given (i) at the time of personal delivery to the
addressee, or (ii) at the time sent certified mail, with return receipt requested, addressed as
follows:



	 	 	 
	

	 	If to the Executive—
	 
	 	 
	

	 	                    Mr. David B. Merclean
	

	 	                    8 Demarest Drive
	

	 	                    Mendham, New Jersey 07945
	 
	 	 
	

	 	If to Mercer, or the Company—
	 
	 	 
	

	 	                    10 North Highway 31
	

	 	                    P.O. Box 278
	

	 	                    Pennington, NJ 08534
	 
	 	 
	

	 	                    Attention: President and Chief Executive Officer






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The name or address of any addressee may be changed at any time and from time to time by notice
similarly given.




     27. No Waiver. The failure by any party to this Agreement at any time or times
hereafter to require strict performance by any other party of any of the provisions, terms, or
conditions contained in this Agreement shall not waive, affect, or diminish any right of the first
party at any time or times thereafter to demand strict performance therewith and with any other
provision, term, or condition contained in this Agreement. Any actual waiver of a provision, term,
or condition contained in this Agreement shall not constitute a waiver of any other provision,
term, or condition herein, whether prior or subsequent to such actual waiver and whether of the
same or a different type. The failure of the Company to promptly terminate the Executive’s
employment for Cause or the Executive to promptly terminate his employment for Good Reason shall
not be construed as a waiver of the right of termination, and such right may be exercised at any
time following the occurrence of the event giving rise to such right.



     28. Joint and Several Obligations of Mercer and the Company. Mercer and the Company
shall be jointly and severally liable for all compensation and benefits that may become payable
hereunder to or on behalf of the Executive or, if applicable, his surviving spouse, estate or
beneficiaries.



     29. Survival. Notwithstanding the nominal termination of this Agreement and the
Executive’s employment hereunder, the provisions hereof which specify continuing obligations,
compensation and benefits, and rights (including the otherwise applicable term hereof) shall remain
in effect until such time as all such obligations are discharged, all such compensation and
benefits are received, and no party or beneficiary has any remaining actual or contingent rights
hereunder.



     30. Severability. In the event any provision in this Agreement shall be held illegal
or invalid for any reason, such illegal or invalid provision shall not affect the remaining
provisions hereof, and this Agreement shall be construed, administered and enforced as though such
illegal or invalid provision were not contained herein.



     31. Binding Effect and Benefit. The provisions of this Agreement shall be binding upon
and shall inure to the benefit of the successors and assigns of the Company and the executors,
personal representatives, surviving spouse, heirs, devisees, and legatees of the Executive.



     32. Entire Agreement. This Agreement embodies the entire agreement among the parties
with respect to the subject matter hereof, and it supersedes all prior discussions and oral
understandings of the parties with respect thereto.



     33. No Assignment. This Agreement, and the benefits and obligations hereunder, shall
not be assignable by any party hereto except by operation of law.



     34. No Attachment. Except as otherwise provided by law, no right to receive
compensation or benefits under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation, or to set off,



14









 




execution, attachment, levy, or similar process, and any attempt, voluntary or involuntary, to
effect any such action shall be null and void.




     35. Captions. The captions of the several paragraphs and subparagraphs of this
Agreement have been inserted for convenience of reference only. They constitute no part of this
Agreement and are not to be considered in the construction hereof.



     36. Counterparts. This Agreement may be executed in any number of counterparts, each
of which shall be deemed one and the same instrument which may be sufficiently evidenced by any one
counterpart.



     37. Number. Wherever any words are used herein in the singular form, they shall be
construed as though they were used in the plural form, as the context requires, and vice
versa.



     38. Applicable Law. Except to the extent preempted by federal law, the provisions of
this Agreement shall be construed, administered, and enforced in accordance with the domestic
internal law of the Commonwealth of Pennsylvania.



     39. Prior Agreements. The execution of this Agreement terminates any and all previous
employment agreements among the Company, its Affiliates and Mr. Merclean.



     IN WITNESS WHEREOF, the parties have executed this Agreement, or caused it to be executed, as
of the date first above written.



	 	 	 	 	 
	 	 	 
	 	 	David B. Merclean
	 
	 	 	 	 
	 	 	BICUS SERVICE CORPORATION
	 
	 	 	 	 
	

	 	By:	 	 
	 	 	 	 	 
	 
	 	 	 	 
	

	 	Attest:	 	 
	 	 	 	 	 
	 
	 	 	 	 
	 	 	MERCER INSURANCE COMPANY
	 
	 	 	 	 
	

	 	By:	 	 
	 	 	 	 	 
	 
	 	 	 	 
	

	 	Attest:	 	 
	 	 	 	 	 





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GLOSSARY




     “Affiliate” means with respect to any Person, a Person or entity that, directly or indirectly,
controls, or is controlled by, or is under common control with such Person or entity, including
without limitation, Mercer and Mercer Insurance Group, Inc.



     “Board of Directors” means the board of directors of the relevant corporation.



     “Cause” means (i) a documented repeated and willful failure by the Executive to perform his
duties, but only after written demand and only if termination is effected by action taken by a vote
of (A) prior to a Change in Control, at least a majority of the directors of the Company then in
office, or (B) after a Change in Control, at least 80% of the nonofficer directors of the Company
then in office, (ii) his final conviction of a felony, (iii) conduct by him which constitutes moral
turpitude which is directly and materially injurious to the Company or any Subsidiary or affiliated
company, (iv) willful material violation of corporate policy, or (v) the issuance by the regulator
of the Company or any Subsidiary or Affiliate of an unappealable order to the effect that he be
permanently discharged.



     For purposes of this definition, no act or failure to act on the part of the Executive shall be
considered “willful” unless done or omitted not in good faith and without reasonable belief that
the action or omission was in the best interest of the Company or any of its Subsidiaries or
Affiliate.



     “Change in Control” means the occurrence of any of the following events:




          (a) any Person (except (i) the Company or any Subsidiary or Affiliate of the Company,
or (ii) any Employee Benefit Plan (or any trust forming a part thereof) maintained by the
Company or any Subsidiary or Affiliate) is or becomes the beneficial owner, directly or
indirectly, of the Company or any Affiliate’s securities representing 19.9% or more of the
combined voting power of the Company or any Affiliate’s then outstanding securities, or
50.1% or more of the combined voting power of a Material Subsidiary’s then outstanding
securities, other than pursuant to a transaction described in Clause (c);




          (b) there occurs a sale, exchange, transfer or other disposition of substantially all
of the assets of the Company, Mercer or a Material Subsidiary to another entity, except to
an entity controlled directly or indirectly by the Company or an Affiliate;




          (c) there occurs a merger, consolidation, share exchange, division or other
reorganization of or relating to the Company or Mercer, unless—




               (i) the shareholders of the Company or Mercer immediately before such merger,
consolidation, share exchange, division or reorganization own, directly or
indirectly, immediately thereafter at least two-thirds of the combined voting power
of the outstanding voting securities of the Surviving Company in substantially the
same proportion as their ownership of the voting securities immediately before such
merger, consolidation, share exchange, division or reorganization; and



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               (ii) the individuals who, immediately before such merger, consolidation, share
exchange, division or reorganization, are members of the Incumbent Board continue to
constitute at least two-thirds of the board of directors of the Surviving Company;
provided, however, that if the election, or nomination for election by the Company
or Mercer’s shareholders, of any new director was approved by a vote of at least
two-thirds of the Incumbent Board, such director shall, for the purposes hereof, be
considered a member of the Incumbent Board; and provided further, however, that no
individual shall be considered a member of the Incumbent Board if such individual
initially assumed office as a result of either an actual or threatened Election
Contest or Proxy Contest, including by reason of any agreement intended to avoid or
settle any Election Contest or Proxy Contest; and




               (iii) no Person (except (A) the Company or any Subsidiary or Affiliate of the
Company, (B) any Employee Benefit Plan (or any trust forming a part thereof)
maintained by the Company or any Subsidiary or Affiliate of the Company, or (C) the
Surviving Company or any Subsidiary or Affiliate of the Surviving Company) has
beneficial ownership of 19.9% or more of the combined voting power of the Surviving
Company’s outstanding voting securities immediately following such merger,
consolidation, share exchange, division or reorganization;




          (d) a plan of liquidation or dissolution of the Company or Mercer, other than pursuant
to bankruptcy or insolvency laws, is adopted; or




          (e) during any period of two consecutive years, individuals who, at the beginning of
such period, constituted the Board of Directors of the Company or Mercer cease for any
reason to constitute at least a majority of such Board of Directors, unless the election, or
the nomination for election by the Company or Mercer’s shareholders, of each new director
was approved by a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period; provided, however, that no individual shall be
considered a member of the Board of Directors of the Company or Mercer at the beginning of
such period if such individual initially assumed office as a result of either an actual or
threatened Election Contest or Proxy Contest, including by reason of any agreement intended
to avoid or settle any Election Contest or Proxy Contest.


Notwithstanding the foregoing, a Change in Control shall not be deemed to have occurred if a Person
becomes the beneficial owner, directly or indirectly, of securities representing 19.9% or more of
the combined voting power of the Company or Mercer’s then outstanding securities solely as a result
of an acquisition by the Company or Mercer of its voting securities which, by reducing the number
of shares outstanding, increases the proportionate number of shares beneficially owned by such
Person; provided, however, that if a Person becomes a beneficial owner of 19.9% or more of the
combined voting power of the Company or Mercer’s then outstanding securities by reason of share
repurchases by the Company or Mercer and thereafter becomes the beneficial owner, directly or
indirectly, of any additional voting securities of the Company or Mercer, then a Change in Control
shall be deemed to have occurred with respect to such Person under Clause (a).




2









 








     Notwithstanding anything contained herein to the contrary, if the Executive’s employment is
terminated and he reasonably demonstrates that such termination (i) was at the request of a third
party who has indicated an intention of taking steps reasonably calculated to effect a Change in
Control and who effects a Change in Control, or (ii) otherwise occurred in connection with, or in
anticipation of, a Change in Control which actually occurs, then for all purposes hereof, a Change
in Control shall be deemed to have occurred on the day immediately prior to the date of such
termination of his employment.



     “Company” means Bicus Services Corporation, a Pennsylvania corporation, and any successor
thereto.



     “Date of Termination” means:




          (a) if the Executive’s employment is terminated for Disability, 30 days after the
Notice of Termination is given (provided that he shall not have returned to the performance
of his duties on a full-time basis during such 30-day period);




          (b) if the Executive’s employment terminates by reason of his death, the date of his
death;




          (c) if the Executive’s employment is terminated by the Company for Cause, the date
specified in the Notice of Termination;




          (d) if the Executive’s employment is terminated by him without Good Reason, the date
specified in the Notice of Termination;




          (e) if the Executive’s employment is terminated by the Company for any reason other
than for Disability or Cause, the date specified in the Notice of Termination; or




          (f) if the Executive’s employment is terminated by him for Good Reason, the date
specified in the Notice of Termination;


provided, however that the Date of Termination shall mean the actual date of termination in the
event the parties mutually agree to a date other than that described above.




     “Defined Benefit Plan” has the meaning ascribed to such term in Section 3(35) of ERISA.



     “Defined Contribution Plan” has the meaning ascribed to such term in Section 3(34) of ERISA.



     “Disability” has the meaning ascribed to the term “permanent and total disability” in Section
22(e)(3) of the IRC.



     “Election Contest” means a solicitation with respect to the election or removal of directors
that is subject to the provisions of Rule 14a-11 of the 1934 Act.



     “Employee Benefit Plan” has the meaning ascribed to such term in Section 3(3) of ERISA.



3









 





     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended and as the same
may be amended from time to time.



     “Excise Tax” means the tax imposed by Section 4999 of the IRC (or any similar tax that may
hereafter be imposed by federal, state or local law).



     “Executive” means David B. Merclean, an individual residing in Mendham, New Jersey.



     “Good Reason” means:




          (a) prior to a Change in Control—




               (i) a change in the Executive’s status or position, or any material diminution
in his duties or responsibilities;




               (ii) a reduction in the Executive’s base compensation, other than a reduction
which is proportionate to a company-wide reduction in executive pay;




               (iii) a failure to increase the Executive’s base compensation, consistent with
his performance rating, within 24 months since the last increase, other than similar
treatment on a company-wide basis for executives or a voluntary deferral by him of
an increase;




               (iv) delivery to the Executive of a Notice of Nonextension; or




               (v) any purported termination of the Executive’s employment which is not in
accordance with the terms of this Agreement; and




          (b) after a Change in Control—




               (i) a change in the Executive’s status or position, or any material diminution
in his duties or responsibilities;




               (ii) any increase in the Executive’s duties inconsistent with his position;




               (iii) any reduction in the Executive’s base compensation;




               (iv) a failure to increase the Executive’s base compensation, consistent with
his performance review, within 12 months of the last increase; or a failure to
consider Executive for an increase within 12 months of his last performance review;




               (v) a failure to continue in effect any Employee Benefit Plan in which the
Executive participates, including (whether or not they constitute Employee Benefit
Plans) incentive bonus, stock option, or other qualified or nonqualified plans of
deferred compensation (A) other than as a result of the normal expiration of such a
plan, or (B) unless such plan is merged or consolidated into, or replaced with, a
plan with benefits which are of equal or greater value;



4









 






               (vi) requiring the Executive to be based anywhere other than the county where
his principal office was located immediately prior to the Change in Control;




               (vii) refusal to allow the Executive to attend to matters or engage in
activities in which he was permitted to engage prior to the Change in Control;




               (viii) delivery to the Executive of a Notice of Nonextension;




               (ix) failure to secure the affirmation by a Successor, within three business
days prior to a Change in Control, of this Agreement and its or the Company’s
continuing obligations hereunder (or where there is not at least three business days
advance notice that a Person may become a Successor, within one business day after
having notice that such Person may become or has become a Successor); or




               (x) any purported termination of the Executive’s employment which is not in
accordance with the terms of this Agreement.


Notwithstanding anything herein to the contrary, at the election of the Executive, beginning with
the 181st day following a Change in Control and continuing through the first anniversary of such
Change in Control, he may terminate his employment for any reason or no reason and such termination
will be treated as having occurred for Good Reason.




     “Gross-Up Payment” means an additional payment to be made to or on behalf of the Executive in
an amount such that the net amount retained by him, after deduction of any Excise Tax on the Total
Payments and any federal, state, and local income tax and Excise Tax on such additional payment,
equals the Total Payments.



     “Incumbent Board” means the Board of Directors of the Company or an Affiliate as constituted
at any relevant time.



     “IRC” means the Internal Revenue Code of 1986, as amended and as the same may be amended from
time to time.



     “Material Subsidiary” means a Subsidiary whose net worth, determined under generally accepted
accounting principles, at the fiscal year end immediately prior to any relevant time is at least
25% of the aggregate net worth of the controlled group of corporations of which Mercer is the
common parent.



     “1934 Act” means the Securities Exchange Act of 1934, as amended and as the same may be
amended from time to time.



     “Mercer” means Mercer Insurance Company.



     “Notice of Extension” means a written notice delivered to or by the Executive which advises
that the Agreement will be extended as provided in Paragraph 3.



5









 





     “Notice of Termination” means a written notice that (i) indicates the specific termination
provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive’s employment under the
provision so indicated, and (iii) gives the required advance notice of termination.



     “Person” has the same meaning as such term has for purposes of Sections 13(d) and 14(d) of the
1934 Act.



     “Proxy Contest” means the solicitation of proxies or consents by or on behalf of a Person
other than the Board of Directors of the Company.



     “Subsidiary” means any business entity of which a majority of its voting power or its equity
securities or equity interests is owned, directly or indirectly by Mercer.



     “Successor” means any Person that succeeds to, or has the practical ability to control (either
immediately or with the passage of time), the Company’s business directly, by merger or
consolidation, or indirectly, by purchase of the Company’s voting securities or all or
substantially all of its assets.



     “Surviving Company” means the business entity that is a resulting company following a merger,
consolidation, share exchange, division or other reorganization of or relating to the Company or
any Affiliate.



     “Total Payments” means the compensation and benefits that become payable under the Agreement
or otherwise (and which may be subject to an Excise Tax) by reason of the Executive’s termination
of employment, determined without regard to any Gross-Up Payments that may also be made.



     “Welfare Benefit Plan” has the meaning ascribed to the term “employee welfare benefit plan” in
Section 3(1) of ERISA. For purposes of determining the Executive’s or his dependents’ right to
continued welfare benefits hereunder following his termination of employment, the meaning of such
term shall include any retiree health plan maintained by the Company at any time after the relevant
Date of Termination, notwithstanding the fact that the Executive is not a participant therein prior
to such date.




6