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                                                                   EXHIBIT 10.13



                                ESCROW AGREEMENT

      THIS ESCROW AGREEMENT (this "Agreement") is made and entered into as of
July __, 2003, by and among Mercer Insurance Group, Inc., a Pennsylvania
corporation (the "Company"), Sandler O'Neill & Partners L.P. ("Sandler") and
Wilmington Trust Company ("Wilmington Trust" or the "Escrow Agent").

                                    RECITALS

      A.    WHEREAS, the Company, which is the proposed holding company for
Mercer Mutual Insurance Company (the "Insurance Company"), proposes to sell,
with the assistance of Sandler O'Neill & Partners L.P. ("Sandler"), up to
6,261,111 shares of its common stock (the "Shares") pursuant to a subscription
offering, a community offering and possibly a syndicated community offering
(collectively, the "Offerings"). The Offering are being conducted in connection
with the conversion of the Insurance Company from mutual to stock form and the
simultaneous acquisition of the capital stock of the Insurance Company by the
Company pursuant to a Plan of Conversion (the "Plan") adopted by the Board of
Directors of each of the Insurance Company and the Company on December 13, 2002,
as amended and restated on March 19, 2003, April 15, 2003 and June 18, 2003 (the
"Conversion").

      B.    WHEREAS, the Company intends to offer the Shares pursuant to a
Registration Statement on Form S-1 filed with the Securities and Exchange
Commission on May 1, 2003 (the "Registration Statement").

      C.    WHEREAS, the Company desires to establish an escrow account in which
funds received from persons subscribing for or purchasing Shares in the
Offerings including, without limitation, members of the Company, the Company's
Employee Stock Ownership Plan, and directors, officers and employees of the
Company, will be deposited pending completion of the Offerings. Wilmington Trust
agrees to serve as the Escrow Agent to hold funds from, or on behalf of,
subscribers or purchasers in accordance with the terms and conditions of this
Agreement. The Company and Sandler agree to assist the Escrow Agent in
administering the Escrow Account (defined below) and distributing funds held in
the Escrow Account.

      D.    WHEREAS, the Offerings will be completed if, among other things, the
Company receives subscriptions or purchase orders for between 4,165,000 and
6,261,111 Shares.

      E.    WHEREAS, All monies held in the Escrow Account are referred to as
the "Escrow Amount."

      NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable, consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending legally to be bound, agree as
follows:

I.    DESIGNATION AS ESCROW AGENT.

      Subject to the terms and conditions hereof, the Company hereby appoints
Wilmington Trust as Escrow Agent and Wilmington Trust hereby accepts such
appointment.


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II.   ESTABLISHMENT OF ESCROW ACCOUNT.

      On or prior to the date of the commencement of the Offerings, the parties
shall establish an escrow account with the Escrow Agent, which escrow account
shall be entitled "Mercer Insurance Group, Inc. Stock Purchase Account" (the
"Escrow Account"). The Company will instruct subscribers or purchasers to make
checks or money orders for subscriptions or purchases payable to "Mercer
Insurance Group, Inc." Escrow Agent agrees to hold all funds received by it in
escrow for the subscriber or purchaser desiring to purchase Shares in the
Offerings. It is understood that all checks or money orders received by the
Escrow Agent are subject to clearance time, and the funds represented thereby
cannot be drawn upon or invested until such time as the same constitute good and
collected funds. It is also understood that should any checks be returned to the
Escrow Agent as uncollectible, the Escrow Agent is authorized and instructed to
charge expenses incurred by the Escrow Agent on such uncollected checks to the
Company, and the Company hereby agrees to pay to the Escrow Agent all such
expenses. The Escrow Agent shall redeposit such checks(s) for collection only
upon the verbal or written instruction of the Company; however, in no instance
shall the checks(s) be presented for collection more than two (2) times. Should
the check(s) be uncollectible after the second presentation, the Escrow Agent
shall promptly notify the Company and hold said check(s) until the subscriber or
purchaser has replaced the same with a cashier's check or money order or such
other form of draft that the Company and the Escrow Agent approve, at which time
the Escrow Agent shall as soon as reasonably practicable return said
uncollectible check(s) to the subscriber or purchaser. In the event the
subscriber or purchaser does not promptly replace said check(s) with a cashier's
check or money order or such other form of draft acceptable to the Escrow Agent
and the Company, the Escrow Agent, at the instruction of the Company, shall
return the check(s) to such subscriber or purchaser. Except pursuant to the
Company's instructions, any checks or money orders received that are made
payable to a party other than "Mercer Insurance Group, Inc." shall be returned
by the Escrow Agent to the subscriber or purchaser submitting such checks or
money orders. In such cases, the Escrow Agent shall promptly notify the Company
of such return.

III.  ADMINISTRATION OF FUNDS HELD IN ESCROW.

      Sandler shall receive all stock order forms and checks or money orders
from subscribers or purchasers and shall keep such appropriate books and records
as are required to perform its functions described herein. Sandler will deliver
promptly checks or money orders to the Escrow Agent via Federal Express each
business day (a "business day" being any day on which commercial banks are open
for general business in Wilmington, Delaware) during the Offerings for deposit
into the Escrow Account together with a copy of the subscriber's or purchaser's
stock order form which sets forth, among other things, the subscriber's or
purchaser's name, address, social security number, telephone number, number of
Shares purchased and the amount paid therefor. The Escrow Agent is hereby
authorized and instructed to forward each check or money order for collection,
deposit the check or money order in the Escrow Account and after allowing for
collection of the proceeds of each check or money order in accordance with
Federal Reserve Board regulations, invest the Escrow Amount in accordance with
the terms hereof. Sandler will maintain all subscriber records until the
completion or termination of the Offerings.

      The Escrow Agent shall receive all subscription payments for Shares and
shall hold all such payments in the Escrow Account, together with all
investments thereof and all interest


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accumulated thereon and proceeds therefrom, in escrow upon the terms and
conditions set forth in this Agreement and shall not disburse funds from the
Escrow Account except as provided by the terms of this Agreement. Escrow Agent
shall invest the Escrowed Assets pursuant to written instructions from the
Company, and in the absence of such instructions, the Escrow Agent agrees to
only invest the Escrowed Assets in investments permissible under Rule 15c2-4 of
the Securities and Exchange Act of 1934, as amended, and the interpretations
thereof set forth in the NASD Notice to Members 84-7, as reissued or amended. In
its instructions to the Escrow Agent, the Company may only specify investment
in: (1) bank accounts, (2) bank money-market accounts, (3) short-term
certificates of deposit issued by a bank, or (4) short-term securities issued or
guaranteed by the U.S. Government. Subject to the terms of this Agreement, any
income, earnings, proceeds or other gain received on any amounts invested
hereunder shall be deposited into the Escrow Account, will be added to and
increase the Escrow Amount and may be subsequently reinvested in accordance with
the terms hereof, and any losses on any amounts invested hereunder shall
decrease the Escrow Amount.

IV.   REJECTION OF PURCHASE ORDERS.

      The Registration Statement provides that the purchase of Shares in the
community and any syndicated community offering is subject to the Company's
approval. The Company agrees to notify the Escrow Agent of which purchase orders
are being rejected by delivering to the Escrow Agent written instructions
pertaining thereto. If a purchase order is rejected, any funds held in the
Escrow Account in connection with such purchase order shall, upon receipt of the
written confirmation from the Company set forth in, and otherwise in accordance
with, Section VII, be promptly returned to the purchaser, without interest, and
without deduction, penalties or expense to the purchaser. Unless a certificate
rejecting a purchase order is delivered to the Escrow Agent pursuant to this
Section IV, all purchase orders received in the community or syndicated
community offerings shall be deemed to have been accepted by the Company.

V.    RELEASE OF ESCROW AMOUNT.

      If on the date of closing of the Offerings (as more fully described in the
Registration Statement) the Escrow Agent has received from the Company and
Sandler a certificate stating that the Company has received subscriptions or
purchase orders for at least 4,165,000 Shares and that the Offerings have
closed, then the Escrow Agent:

            (a) is authorized and instructed to pay to the Company the Escrow
Amount held by the Escrow Agent in the Escrow Account;

            (b) shall, upon receipt of the written confirmation from Sandler or
the Company set forth in, and otherwise in accordance with, Section VII,
distribute to purchasers in the community and syndicated community offerings out
of the Escrow Amount deposited amounts with respect to purchase orders which the
Company has rejected in accordance with Section IV;

            (c) be entitled to retain amounts from the Escrow Amount owing to it
pursuant to Section XI; and

            (d) pay to Sandler or any selected dealer out of the Escrow Amount
an amount equal to Sandler's or such selected dealer's fees described in the
Registration


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Statement (upon receipt of instructions from the Company as to such persons and
amounts to be paid).

VI.   CANCELLATION OF OFFERINGS.

      If the Company and Sandler give the Escrow Agent written notice that the
Offerings have been canceled, the Escrow Agent shall, upon receipt of the
written confirmation from Sandler and/or the Company set forth in, and otherwise
in accordance with, Section VII, promptly refund to each subscriber or purchaser
the amount received from the subscriber or purchaser, without deduction, penalty
or expense to the subscriber or purchaser, and Escrow Agent shall notify the
Company and Sandler, in writing, of its distribution of such funds. The amounts
returned to each subscriber or purchaser shall be free and clear of any and all
claims of the Escrow Agent, the Company or Sandler, or any creditors of any of
them. In such event, notwithstanding any other provision of this Agreement to
the contrary, the Company shall alone be responsible for and pay any amounts
owing to the Escrow Agent pursuant to Section XI.

VII.  DELIVERY OF PAYMENTS OR REFUNDS.

      Upon receiving written confirmation from the Company and/or Sandler of the
amount due to any subscriber or purchaser, the Escrow Agent shall prepare the
necessary checks or money orders. All payments or refunds to be made by the
Escrow Agent to a subscriber or purchaser pursuant to Sections IV, V or VI shall
be forwarded, by first-class mail, to the last known address of the subscriber
or purchaser, as communicated in writing to the Escrow Agent by the Company, or
the subscriber or purchaser. All payments to be made by the Escrow Agent to
pursuant to Section V shall be forwarded to the Company at 10 North Highway 31,
P.O. Box 278, Pennington, New Jersey 08534, Attention: Andrew R. Speaker, or
issued to such account as the Company shall direct, in writing.

VIII. THE COMPANY NOT ENTITLED TO ESCROW AMOUNT IN ESCROW UNTIL RELEASED.

      Until a portion of the Escrow Amount is distributed to it pursuant to
Section V, the Company acknowledges that (i) it is not entitled to any portion
of the Escrow Amount and (ii) no amounts deposited in the Escrow Account shall
become the property of the Company or be subject to the liabilities of the
Company.

IX.   INTEREST.

      Interest, as used in Sections IV, V, VI, VII, and IX of this Agreement,
shall mean investment income, if any, earned on the Escrow Amount, as invested
in accordance with the terms hereof. Interest accrued on the Escrow Amount shall
be paid out to the Company in the amounts calculated promptly after such
interest is credited to the Escrow Account.

X.    ESCROW AMOUNT MAY NOT SECURE LOAN.

      Until released in accordance herewith, the Escrow Amount shall at no time
be used directly or indirectly as security for a loan or any other obligation of
the Company and, except as otherwise expressly provided in Section XI hereof,
shall be subject to no right, charge, security interest, lien, setoff or claim
of any kind in favor of the Escrow Agent or any person claiming through the
Escrow Agent.


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XI.   AUTHORITY OF ESCROW AGENT AND LIMITATION OF LIABILITY.

      (a) In acting hereunder, Escrow Agent shall have only such duties as are
specified herein and no implied duties shall be read into this Agreement, and
Escrow Agent shall not be liable for any act done, or omitted to be done, by it
in the absence of its gross negligence or willful misconduct.

      (b) Escrow Agent may act in reliance upon any writing, instrument, notice
or instruction or signature which it, in good faith, believes to be genuine, and
may assume the validity and accuracy of any statement or assertion contained in
such a writing, instrument, notice or instruction and may assume that any person
purporting to give any writing, instrument, notice, advice or instruction in
connection with the provisions hereof has been duly authorized so to do.

      (c) Escrow Agent shall not be required to use its own funds in the
performance of any of its obligations or duties or the exercise of any of its
rights or powers, and shall not be required to take any action which, in Escrow
Agent's sole and absolute judgment, could involve it in expense or liability
unless furnished with security and indemnity which it deems, in its sole and
absolute discretion, to be satisfactory.

      (d) The Company agrees to pay to Escrow Agent compensation for its
services hereunder in accordance with the schedule of fees set forth on Exhibit
A attached hereto. In the event Escrow Agent renders any extraordinary services
in connection with the Escrow Account, Escrow Agent shall be entitled to
additional compensation therefore provided both the Company and Sandler have
requested the services and Escrow Agent has informed the Company, in writing, of
the additional charge. Escrow Agent shall have a first lien against the
Company's rights in and to the funds in the Escrow Account to secure the
obligations of the Company hereunder. The terms of this paragraph shall survive
termination of this Agreement.

      (e) The Company hereby agrees to indemnify Escrow Agent and hold it
harmless from any and against all liabilities, losses, actions, suits or
proceedings at law or in equity, and any other expenses, fees or charges of any
character or nature, including, without limitation, attorney's fees and
expenses, which Escrow Agent may incur or with which it may be threatened by
reason of its acting as Escrow Agent under this Agreement or arising out of the
existence of the Escrow Account, except to the extent the same shall be caused
by Escrow Agent's gross negligence or willful misconduct. Escrow Agent shall
have a first lien against the Company's rights in and to the funds in the Escrow
Account to secure the obligations of the Company hereunder. The terms of this
paragraph shall survive termination of this Agreement.

      (f) Whenever Escrow Agent is unable to decide between alternative courses
of action permitted or required by the terms of this Agreement, is unsure as to
the application, intent, interpretation or meaning of any provision of this
Agreement, or otherwise determines instruction to be necessary or desirable,
Escrow Agent shall promptly give notice (in such form as shall be reasonable
under the circumstances) to the Company requesting instruction as to the course
of action to be adopted, and, to the extent Escrow Agent acts in good faith in
accordance with any such instruction received, Escrow Agent shall not be liable
on account of such action to any person. In the event Escrow Agent receives
conflicting instructions under this paragraph or any other provision of this
Agreement, Escrow Agent shall be fully protected in refraining from acting until
such conflict is resolved to the reasonable satisfaction of Escrow Agent.


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      (g) Escrow Agent may resign as Escrow Agent by giving notice in writing of
such resignation to the Company, which notice shall specify a date upon which
such resignation shall take effect. The Company shall, within sixty (60)
business days after receiving the foregoing notice from Escrow Agent, designate
a substitute escrow agent (the "Substitute Escrow Agent"), which Substitute
Escrow Agent shall, upon its designation and notice of such designation to
Escrow Agent, succeed to all of the rights, duties and obligations of Escrow
Agent hereunder. The Escrow Agent's resignation shall not be effective until the
Substitute Escrow Agent has been designated. In the event the Company shall not
have delivered to Escrow Agent a written designation of Substitute Escrow Agent
within the aforementioned sixty (60) day period, together with the consent to
such designation by the Substitute Escrow Agent, the Escrow Agent may apply to a
court of competent jurisdiction to appoint a Substitute Escrow Agent, and the
costs of obtaining such appointment shall be reimbursable from the Company and
from the Escrow Amount. Upon the Escrow Agent's effective resignation, the
Escrow Agent shall be discharged from any and all further duties and obligations
under this Agreement

XII.  NOTICES.

      Except as otherwise provided herein, any notice, instruction, instrument
or other document to be delivered hereunder shall be in writing and shall be
effective upon receipt at the addresses set forth on the signature page hereof
or at such other address specified in writing by the addressee, or upon actual
receipt via facsimile or telecopier transmission at the number set forth on the
signature page hereof or at such other number specified in writing by the
addressee.

XIII. AMENDMENT.

      This Agreement may not be amended, modified, supplemented or otherwise
altered except by an instrument in writing signed by the parties hereto.

XIV.  TERMINATION.

      This Agreement will terminate upon the disbursement of all funds in the
Escrow Account, as provided above, by the Escrow Agent.

XV.   GOVERNING LAW.

      This Agreement shall be governed by and construed in accordance with
Delaware law in all respects (without regard to principles of conflict of laws).

XVI.  COUNTERPARTS.

      This Agreement may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original, and such counterparts
together shall constitute and be one and the same instrument.




                   [This space is intentionally left blank.]


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      IN WITNESS WHEREOF, the parties hereto have caused their names to be
hereto subscribed by their respective officer as of the day and year first above
written.

MERCER INSURANCE GROUP,INC.                 WILMINGTON TRUST COMPANY, as
                                            Escrow Agent

By:______________________________           By:______________________________
Title:                                      Title:

Address:                                    Address:
10 North Highway 31                         1100 North Market Street
P.O. Box 278                                Wilmington, Delaware 19890-1625
Pennington, NJ 08534


Fax No.:  (609) 737-8719                    Fax No.:  (302) 636-4149
Tel. No.: (609) 737-0426                    Tel. No.: (302) 636-6450
E-mail:                                     E-mail: mpulgini@wilmingtontrust.com
Attention: ______________________           Attention: Margaret Pulgini -
                                                       Corporate Trust/Custody



SANDLER O'NEILL & PARTNERS, L.P.


By: Sandler O'Neill & Partners, Corp.,
       the sole general partner

By:  _________________________________

Address:
919 Third Avenue
6th Floor
New York, NY 10022
Fax No.:  (212) 466-7711
Tel. No.: (212) 466-7700
E-mail:
Attention: ______________________


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                                    EXHIBIT A






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