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                                                                    EXHIBIT 10.7

                MERCER MUTUAL INSURANCE COMPANY BENEFIT AGREEMENT

         THIS AGREEMENT, made and entered into effect this 11th day of December,
1989, to be effective January 1, 1990, as amended on April 1, 1997, by and
between the Mercer Mutual Insurance Company, a Corporation organized and
existing under the laws of the State of New Jersey, hereinafter called the
Corporation, and the Board of Directors of the Corporation:

                                   WITNESSETH:

         WHEREAS, it is the consensus of the Board of Directors that the
Affected Members' Service to the Corporation in the past has been of exceptional
merit and has constituted an invaluable contribution to the general welfare of
the Corporation and in bringing it to its present status of operating
efficiency, and its present position in its field of activity; and,

         WHEREAS, the experience and knowledge of the Affected Members of the
affairs of the Corporation, is so valuable that assurance of their continued
services being essential for the future growth and profits of the Corporation,
and it is in the best interests of the Corporation to arrange terms of continued
service for the Affected Members so as to reasonably assure their remaining with
the Corporation during their lifetime or until the age of retirement; and,

         WHEREAS, it is the desire of the Corporation that their services be
retained as herein provided; and,

         WHEREAS, the Affected Members are willing to continue their service to
the Corporation provided the Corporation agrees to pay to them or their
beneficiaries certain benefits in accordance with the terms and conditions
hereinafter set forth;

         NOW, THEREFORE, in consideration of services performed in the past and
to be performed in the future, as well as of the mutual promises and covenants
herein contained, it as agreed as follows:

                                   ARTICLE ONE

          1.1 EMPLOYMENT. The Corporation agrees to engage the Affected Members
as appointees of the Board of Directors as the Corporation will determine by
Election or appointment. The Affected Members will continue service to the
Corporation in such capacity and with such duties and responsibilities and with
such compensation as may be determined from time to time by the Board of
Directors of the Corporation. The benefits provided by this Agreement are
granted by the Corporation as a fringe benefit to the Affected Members and are
not part of any salary reduction plan or an arrangement deferring a bonus or a
salary increase. The Affected Members have no option to take any current payment
or bonus in lieu of these benefits.
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                                   ARTICLE TWO

         DEFINITIONS

         2.1 "Affected Members" means those individuals who are designated as
being a Member of the Board of Directors of the Corporation and a participant
under this Agreement as evidenced by the Schedule A attached, and as the
Schedule may be amended from time to time.

         2.2 "Compensation" means the monthly Director's Retainer fee as
designated by the Board of Directors.

         2.3 "Early Retirement Date" means the first day of the month coinciding
with or next following the attainment of age 65 and the completion of at least
10 Years of Service. Members of the Board of Directors who were elected or
appointed prior to January 1, 1990, may retire at anytime.

         2.4 "Normal Form of Benefit" means an annuity expressed as a ten year
certain annuity (no life thereafter). In addition, the Affected Members shall
also be permitted to elect a lump sum option on the value of the annuity at his
Retirement Date.

         2.5 "Normal Retirement Date" means the first day of the month
coinciding with or next following the attainment of age 75 and the completion of
at least 10 Years of Service. Members of the Board of Directors who were elected
or appointed prior to January 1, 1990, may retire at any time.

                                  ARTICLE THREE

         3.1 RETIREMENT BENEFIT. If the Affected Members shall continue in the
service of the Corporation until attaining the age of seventy-five (75) and 10
Years of Service, they may retire from service as of the first day of the month
next following attainment of age 75 and 10 Years of Service or upon such later
date as may be mutually agreed upon by the Affected Members and the Corporation.
The Corporation agrees that upon such retirement it will pay to the Affected
Member a pension equal to the monthly Director's Retainer Fee which is in effect
at the time of such Affected Member's Retirement Date, and such benefit shall
not be indexed beyond that date. As of April 1, 1997, said Retainer Fee is
$1,200. Notwithstanding the foregoing, said Director's Retainer Fee may be
indexed after the effective date of this Agreement and prior to the Affected
Member's Retirement Date. Each Affected Member who is appointed or elected to
the Board of Directors prior to January 1, 1990, shall be eligible to receive
the benefit set forth in the paragraph above regardless of age or service
requirements.

         3.2 DEATH BENEFIT. The Corporation agrees that if the Affected Member
shall retire and then die before he has received 120 monthly payments, it will
pay a death benefit to his designated beneficiary or surviving spouse. The death
benefit will be equal to the amount calculated pursuant to Section 3.1, to be
paid to the surviving spouse or designated beneficiary, with no more than 120
payments being made to the Affected Member and his designated
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beneficiary or surviving spouse. In addition, the surviving spouse or designated
Beneficiary shall also have the option to elect a lump sum distribution on the
value of the annuity based on the total of the monthly payments left after the
Affected Member dies. If the Affected Member dies before he retires, his
surviving spouse or designated beneficiary shall receive a death benefit equal
to the accumulated funds contributed under this Agreement to provide such
Affected Member with a retirement benefit pursuant to Section 3.1.

                                  ARTICLE FOUR

         4.1 ALIENABILITY. Neither the Affected Members, their widows, nor any
other beneficiary under this Agreement shall have the power or right to
transfer, assign, anticipate, hypothecate, mortgage, commute, modify, or
otherwise encumber in advance any of the benefits payable hereunder, nor shall
any of said benefits be subject to seizure for the payment of debts, judgments,
alimony or separate maintenance, owed by the Affected Members or their
beneficiaries or any of them, or be transferable by operation of law in the
event of bankruptcy, insolvency, or otherwise. In the event the Affected Members
or any beneficiaries attempt assignment, commutation, hypothecation, transfer,
or disposal of the benefit hereunder the Corporation's liabilities shall
forthwith cease and terminate.

                                  ARTICLE FIVE

         5.1 PARTICIPATION IN OTHER PLANS. Nothing contained in this Agreement
shall be construed to alter, abridge, or in any manner affect the rights and
privileges of Affected Members to participate in and be covered by any Pension,
Profit Sharing, Group Insurance, Deferred Compensation, Bonus or similar
employee plans which the Corporation may now or hereafter sponsor for their
benefit.

                                   ARTICLE SIX

         6.1 FUNDING. The Corporation reserves the right at its sole and
exclusive discretion either to fund the obligations of the Corporation
undertaken by this Agreement or to refrain from funding the same, and to
determine the extent, nature, and method of such funding. At no time shall the
Affected Members be deemed to have any right, title or interest in or to any
specified asset or assets of the Corporation.

         6.2 This Article shall not be construed as giving the Affected Members
or their beneficiaries any greater rights than those of any other unsecured
creditor of the Corporation.

                                  ARTICLE SEVEN

         7.1 REORGANIZATION. If the Corporation shall merge or consolidate into
or with another corporation, or reorganize, or sell substantially all of its
assets to another corporation, firm, or person, such succeeding or continuing
corporation, firm, or person may agree to assume and discharge the obligations
of the Corporation under this Agreement. Upon the occurrence of
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such event, the term "Corporation" as used in this Agreement shall be deemed to
refer to such successor or survivor Corporation. However, if such successor or
survivor Corporation does not agree to assume the obligations of the Corporation
under this Agreement, all benefits under this Agreement shall become immediately
vested and the funded amount will be payable to the Affected Members in a lump
sum on the effective date of the reorganization.

                                  ARTICLE EIGHT

         8.1 NOT A CONTRACT OF EMPLOYMENT. This Agreement shall not be deemed to
constitute a contract of service between parties hereto, nor shall any provision
hereof restrict the right of the Corporation to discharge the Affected Members,
or restrict the right of the Affected Members to terminate their service.

                                  ARTICLE NINE

         9.1 CLAIMS PROCEDURE. In the event that benefits under this Plan
Agreement are not paid to the Affected Members (or their beneficiaries in the
case of the Affected Members' death), and such person feels entitled to receive
them, a claim shall be made in writing to the Plan Administrator. Such claims
shall be reviewed by the Plan Administrator and the Corporation. If the claim is
denied, in full or in part, the Plan Administrator shall provide a written
notice within ninety (90) days setting forth the specific reasons for denial,
specific reference to the provisions of this Agreement upon which the denial is
based, and any additional material or information necessary to perfect the
claim, if any. Also, such written notice shall indicate the steps to be taken if
a review of the denial is desired. If a claim is denied and a review is desired,
the Affected Members (or their beneficiaries in the case of the Affected
Members' death), shall notify the Plan Administrator in writing within sixty
(60) days and a claim shall be deemed denied if the Plan Administrator does not
take any action within the aforesaid ninety (90)-day period. In requesting a
review, the Affected Members (or their beneficiaries) may review this Plan
Agreement or any documents relating to it and submit any written issues and
comments he or she may feel appropriate. In its sole discretion, the Plan
Administrator shall then review the claim and provide a written decision within
sixty (60) days. This decision likewise shall state the specific reasons for the
decision and shall include reference to specific provisions of this Plan
Agreement on which the decision is based. For purposes of implementing this
claims procedure (but not for any other purpose), the Board of Directors of
Mercer Mutual Insurance Company are hereby designated as the Named Fiduciary and
Plan Administrator of this Agreement.

                                   ARTICLE TEN

         10.1 ARBITRATION. In the event of any dispute, controversy or
misunderstanding arising between the parties hereto, which may, directly or
indirectly concern or involve any of the terms, covenants or conditions hereof,
the parties agree that such controversy shall be settled by arbitration in the
Borough of Pennington, New Jersey in accordance with the Rules of American
Arbitration Association. One arbitrator shall be named by each party involved in
the dispute and then an additional arbitrator shall be named by the arbitrators
so chosen. Judgment
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upon the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. The costs of the arbitration shall be borne by the party
or parties designated by the arbitrators.

         IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
duly executed by its designated representative, and its Corporate seal affixed,
duly attested by its Secretary, Marion J. Crum this 14th day December, 1989.

         FOR MERCER MUTUAL INSURANCE COMPANY

         /s/ WILLIAM C. HART
         --------------------
         Name

         President

         --------------------
         Title

         ATTEST: /s/ MARION J. CRUM
                 -------------------
                     Secretary

                 DEBRA A. HARTINGALE
                 -------------------
                      Witness
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                                   SCHEDULE A

         Attachment to Mercer Mutual Insurance Company Benefit Agreement

                                Affected Members

<TABLE>
<CAPTION>
NAME                     DATE OF BIRTH     YEAR FIRST ELECTED OR APPOINTED
----                     -------------     -------------------------------
<S>                      <C>               <C>
Roland D. Boehm            12/09/37                   1980
James J. Freda*            04/08/21                   1985
William C. Hart            03/15/33                   1970
George T. Hornyak, Jr.     01/26/50                   1985
Richard U. Niedt           08/24/31                   1979
Eric W. Turner, Jr.*       09/24/21                   1968
Richard G. Van Noy         05/23/41                   1979
William V.R. Fogler        08/13/44                   1999
Samuel J. Malizia          05/27/54                   2003
</TABLE>

* Notes a director emeritus who is receiving payments under the Benefit
Agreement