<PAGE>
                                                                EXHIBIT 10.10


            SHAREHOLDERS AGREEMENT OF FRANKLIN HOLDING COMPANY, INC.

                  This Shareholders Agreement (this "Agreement"), dated as of
the 1st day of June, 2001, is entered into by and among MERCER MUTUAL INSURANCE
COMPANY, a Pennsylvania corporation ("Mercer"), H. THOMAS DAVIS ("Davis"), and
FRANKLIN HOLDING COMPANY, INC., a Delaware corporation (the "Company").

                                   Background

                  Mercer has entered into a stock purchase agreement (the "Stock
Purchase Agreement") with Davis and the Company, dated April 6, 2001 for the
purchase of 102,900 shares of Class A voting common stock, $0.10 par value per
share, of the Company ("Class A Stock") and options to acquire 295,000 shares of
Class B non-voting stock, $0.10 par value per share, of the Company ("Class B
Stock").

                  A condition to the obligations of the parties under the Stock
Purchase Agreement, pursuant to Section 7.1 (d) thereof, is the mutual execution
of this Agreement by Mercer, the Company and Davis, the controlling stockholder
of the Company.

                  Desiring Mercer's purchase of the Class A Stock and the
options to acquire Class B Stock pursuant to the terms of the Stock Purchase
Agreement, Davis is willing to enter into this Agreement.

                  NOW THEREFORE, in consideration of the foregoing recitals and
the mutual covenants hereinafter contained, and intending to be legally bound
thereby, the parties hereto agree as follows:

                               Certain Definitions

                  "Affiliate" with respect to any Person (other than Davis)
means a Person that directly or indirectly through one or more intermediaries
controls, is controlled by or is under common control with the person specified,
as well as, with respect to Davis only, any transferee who received Davis Stock
in an Exempt Transaction.

                  "Class A Stock" has the meaning set forth in the background
hereof.

                  "Class B Stock" has the meaning set forth in the background
hereof.

                                       1

<PAGE>

                  "Company Quarterly Net Income" means the consolidated net
income of the Company for such calendar quarter determined in accordance with
GAAP.

                  "Company Quarterly ROI Factor" means, for any particular
calendar quarter, a fraction (expressed as a decimal) the numerator of which is
the Company Quarterly Net Income for such quarter and the denominator of which
is the sum of (i) $5,050,920, and (ii) the qualified amount of cash or the fair
value of any property hereafter invested in shares of the capital stock of the
Company or contributed to the capital accounts of the Company. For purposes of
this definition, the qualified amount of any investment or contribution shall be
any amount invested or contributed to the Company by Mercer or an Affiliate of
Mercer with the knowledge and consent of Davis, including his consent to the
determination of the fair market value of any property contributed or invested.

                  "Company Aggregate ROI Factor" means, as of the date of
determination, the sum of each Company Quarterly ROI Factor for the period
beginning with the calendar quarter that starts on July 1, 2001, and ending with
the last full calendar quarter immediately preceding the date of determination.

                  "Davis Options" means all options for Class B Stock held by
Davis.

                  "Davis Shares" means all shares of Class A Stock and Class B
Stock and all Davis Options at any time issued to Davis.

                  "Disability" means a mental or physical disability, incapacity
or incompetence of an individual that either (a) renders such individual
permanently disabled so that such individual is prevented from properly
performing the duties previously performed by such individual as certified by a
physician selected by the Company within thirty (30) days of such disability,
incapacity or incompetence, such certification to be determined within ten (10)
days of selection; or (b) has prevented such individual from properly performing
a major portion of the duties performed by such individual prior to such
disability, incapacity or incompetence for a period of six (6) consecutive
months or for shorter periods aggregating nine (9) months or more in any 12
month period; or (c) causes the appointment of a guardian for such individual
which would restrict such individual's ability to act on his own.

                  "Exempt Transaction" means: (i) a transfer by Davis of any
Davis Shares to a family member or to a trust for the benefit of Davis and/or a
family member, or transfers among

                                       2

<PAGE>

such family members or trusts, (ii) a transfer of Davis Shares under Davis' or a
family member's last will and testament or, in the absence of a last will and
testament, as a consequence of the laws of descent, (iii) a transfer of Davis
Shares to an entity owned solely by Davis and/or any of the transferees
described in clause (i) or (ii) above, but only for so long as such entity is so
owned, (iv) a transfer of Davis Shares resulting from a divorce decree, divorce
settlement, or the laws of equitable distribution in divorce, or (v) a transfer
effected by Davis' grant of an encumbrance to any lender providing purchase
money financing to Davis for the purchase of Davis Shares or to the successors
or assigns of such lender.

                  "GAAP" means generally accepted accounting principles, as set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entities as may be approved by a significant segment of
the accounting profession of the United States of America.

                  "Mercer Quarterly Net Income" means the consolidated net
income of Mercer for such calendar quarter before policyholder dividends,
determined in accordance with GAAP.

                  "Mercer Quarterly ROE Factor means, for any particular
calendar quarter, a fraction (expressed as a decimal) the numerator of which is
the Mercer Quarterly Net Income for such quarter and the denominator of which is
the surplus of Mercer at the commencement of such calendar quarter determined in
accordance with GAAP.

                  "Mercer Aggregate ROE Factor" means, as of the date of
determination, the sum of each Mercer Quarterly ROE Factor for the period
beginning with the calendar quarter that starts on July 1, 2001, and ending with
the last full calendar quarter immediately preceding the date of determination.

                  "Person" means any natural person or individual, trustee,
corporation, general or limited partnership, limited liability company or
partnership, joint venture, joint stock company, bank, firm, governmental
entity, trust, association, organization or unincorporated entity of any kind.

                  "Stock Purchase Agreement" has the meaning set forth in the
background hereof.

                  "Transfer" means, collectively, any sale, assignment,
encumbrance, hypothecation, pledge, conveyance in trust, gift, transfer by
bequest, devise or descent, or other

                                       3

<PAGE>

transfer or disposition of any kind, including, but not limited to, transfers to
receivers, levying creditors, trustees or receivers in bankruptcy proceedings
for general assignees for the benefit of creditors, whether voluntary or by
operation of law, indirectly or indirectly.

                               Terms of Agreement

                  1.       Restricted Period. During the period beginning on the
date hereof and ending on the second anniversary hereof (the "Restricted
Period"), neither Davis, nor any of his Affiliates, shall Transfer any Davis
Shares to any Person other than Mercer, other than pursuant to an Exempt
Transaction or except in accordance with the terms of this Agreement. Any
purported Transfer of Davis Shares in violation of the terms of this Agreement
shall be void. In the event of a Transfer pursuant to an Exempt Transaction,
Davis shall provide written notice thereof to Mercer and the Company not later
than the effective date of such Exempt Transaction.

                  2.       Right of First Refusal.

                           (a)      Offer to Purchase. If, at any time after the
Restricted Period, Davis desires to Transfer any Davis Shares to any Person (the
"Proposed Transferee") other than pursuant to an Exempt Transaction, and has
received a bona fide written offer (the "Bona Fide Offer") from such Proposed
Transferee to purchase such Davis Shares, Davis shall submit a written offer
(the "Offer") to sell such Davis Shares (the "Offered Shares") to Mercer on
terms and conditions, including price, not less favorable to Mercer than those
on which Davis proposes to Transfer such Offered Shares to the Proposed
Transferee.

                           (i) The Offer shall disclose the identity of the
Proposed Transferee, the number of Offered Shares proposed to be Transferred,
and the terms and conditions, including price, of the proposed Transfer, and
shall be accompanied by a copy of the Bona Fide Offer. The Offer shall further
state that Mercer may acquire, in accordance with the provisions of this
Agreement, all, but not less than all, of the Offered Shares for the price and
upon the other terms and conditions, including deferred payment (if applicable),
of the proposed Transfer to the Proposed Transferee set forth therein.

                           (ii) If the purchase price to be paid by the Proposed
Transferee is to be payable in property other than in cash, Mercer shall have
the right to pay the purchase price in the form of cash in an amount equal to
the fair market value (as determined in good faith by

                                       4

<PAGE>

[____________]) of such non-cash property. In the event of any dispute between
Davis and Mercer regarding the determination of the fair market value of
non-cash property, at the request of either of them, the Company shall engage a
consulting or investment banking firm selected by the Board of Directors of the
Company and approved by Davis and Mercer to prepare an independent appraisal of
the fair market value of such property, which appraisal shall be binding. The
expense of any appraisal by such a consulting or investment banking firm shall
be borne by the Company.

                           (b)      Exercise of Purchase Right by Company. If
Mercer desires to purchase all of the Offered Shares, Mercer shall deliver a
written notice of its election to purchase such Offered Shares to Davis, which
shall be delivered in person or mailed to Davis within 30 days of the date of
receipt by Mercer of the Offer. Such notice, when taken in conjunction with the
Offer, shall be deemed to constitute a valid, legally binding and enforceable
agreement for the sale and purchase of such Offered Shares to Mercer on the
terms of the Offer as set forth in Section 2 (a) hereof. The closing of the sale
of Offered Shares to Mercer pursuant to this Section 2 (b) shall be made at the
offices of the Company on such date as may be agreed by Mercer and Davis but no
later than the 60th day following the date the Offer is received by Davis (or if
such 60th day is not a business day, then on the next succeeding business day).
Such sale shall be effected by Davis' delivery to Mercer of a certificate or
certificates evidencing the Offered Shares, duly endorsed for Transfer to
Mercer, against payment to Davis of the purchase price by Mercer. The exercise
or non-exercise by Mercer of its rights pursuant to this Section 2 shall be
without prejudice to its rights under this Section 2 with respect to any future
sales of Offered Shares.

                           (c)      Transfer of Offered Shares to Proposed
Transferee. If Mercer does not purchase all of the Offered Shares, the Offered
Shares may be Transferred by Davis at any time within 150 days after the date
the Offer was made to Davis. Any such Transfer shall be to the Proposed
Transferee, at not less than the price and upon other terms and conditions, if
any, not more favorable to the Proposed Transferee than those specified in the
Offer subject to the provisions of this Section 2 (c). Davis shall provide
written notice of such sale (the "Notice") to the Company and Mercer not later
than the date of sale. Any Offered Shares not Transferred within the 150 day
period shall again be subject to the requirements of a prior offer pursuant to
this Section 2. If Offered Shares are Transferred pursuant to this Section 2 to
any purchaser who

                                       5

<PAGE>

is not a party to this Agreement, the Offered Shares so Transferred shall no
longer be subject to any of the restrictions imposed by this Agreement.

                  3.       Exchange Rights. In the event of a conversion of
Mercer from the mutual form of organization to the stock form of organization,
including the simultaneous acquisition of Mercer by a publicly traded company
(the Publicly Traded Acquirer), or any similar transaction (collectively, a
"Conversion"), Davis shall have the right to exchange any and all of the Davis
Shares for such number of shares ( the "Exchange Shares") of registered voting
common stock of Mercer or the Publicly Traded Acquirer (the "Share Exchange") as
determined in accordance with this Section 3(a), by notifying Mercer of his
intent on or before the later of the 30th day after the receipt by Davis of :
(i) a final prospectus forming a part of a registration statement declared
effective under the Securities Act of 1933, as amended, or (ii) any supplement
to such prospectus. In exchange for the Davis Shares, Davis shall receive, and
Mercer shall, or Mercer shall cause the Publicly Traded Acquirer to, issue to
Davis such number of Exchange Shares that equals the product of (i) the number
of Davis Shares and (ii) the Share Value per share (as defined in Section 6
hereof) divided by the initial price to the public of the common stock of Mercer
or Publicly Traded Acquirer as the case may be. If Davis fails to provide timely
notice of his intent or indicates in such notice that Davis does not intend to
exercise his right to the Share Exchange, Mercer shall have the right to compel
the Share Exchange, by providing written notice thereof to Davis not later than
60 days prior to the closing of the Conversion. In such event, Davis shall
cooperate in the Share Exchange by executing such documents and taking such
other actions, in a timely manner, as may be required to complete the Share
Exchange simultaneously with the closing of the Conversion.

                  4.       Davis' Put Right. Davis or his personal
representative, as applicable, shall have the right to require Mercer to
purchase, and Mercer shall be obligated to purchase, the Davis Shares ("Put") at
the Share Value per share, (a) at any time on or after September 3, 2007, or (b)
prior to such date, in the event of (i) his death or Disability, (ii) the
expiration of the employment agreement between Mercer and Davis (unless
immediately renewed and continued) or the termination (except as a result of his
resignation without good reason or termination for cause) of his employment with
Mercer or (iii) the acquisition, merger, consolidation, or reorganization of
Mercer in a transaction not described in Section 3 with any public or private
company or with a mutual company if, after such event, the individuals who,
immediately before

                                       6

<PAGE>

such acquisition, merger, consolidation, or reorganization, were members of the
Mercer Board of Directors, do not continue to constitute at least a majority of
the board of directors of the surviving entity. To exercise such Put right,
Davis or his personal representative, as applicable, shall give written notice
thereof to Mercer. In the case of an event described in clause (b) of this
Section, such notice shall describe such event with specificity and be given not
more than 90 days after the event giving rise to the Put right. The closing of
such transaction shall occur at a place and at a time mutually agreeable to the
Parties but in no event shall the time of closing be later that 60 days after
the date of notice. If the Parties cannot agree on the place for closing, such
place shall be the principal place of business of the Company at such time.

                  5.       Mercer's Call Right. Mercer shall have the right to
purchase, and Davis or his personal representative, as applicable, shall be
obligated to sell, any Davis Shares ("Call") at the Share Value per share, (a)
at any time on or after September 3, 2007, or (b) in the event Davis resigns his
employment with Mercer during the three (3) year period beginning as of the date
hereof without good reason. To exercise such Call right, Mercer shall give
written notice thereof to Davis or his personal representative. In the case of
an event described in clause (b) of this Section, such notice shall describe
such event with specificity and be given not more than 30 days after the event
giving rise to the Call right. The closing of such transaction shall occur at a
place and at a time mutually agreeable to the Parties but in no event shall the
time of closing be later that 60 days after the date of notice. If the Parties
cannot agree on the place for closing, such place shall be the principal place
of business of the Company at such time.

                  6.       Determination of Value. In determining either (a) the
consideration payable to Davis in the event of a Put or a Call, or (b) the
number of Exchange Shares to be exchanged in connection with the Conversion, or
(c) the amount of cash, securities or combination thereof to be received by
Davis in connection with the Merger, as applicable, the total amount of
consideration to be received by Davis shall be equal, in the aggregate, to the
value of the Davis Shares (the "Share Value") sold or exchanged, as applicable.
The Share Value per share of the Davis Shares, as of any date, shall equal the
greatest of:

                           (a)      the product of (x) $10.00 and (y) the sum of
(i) 1.00 and (ii) the Company Aggregate ROI Factor,

                                       7

<PAGE>

                           (b)      the product of (x) $10.00 times (y) the sum
of (i) 1.00 and (ii) the Mercer Aggregate ROE Factor, or

                           (c)      $10.00.

         The Share Value shall be determined (A) in the case of the Merger, as
of the effective date thereof, (B) in the case of the Share Exchange, as of the
effective date of the Conversion, and (C) in the case of a Put or Call, as of
the date of the event giving rise to such Put or Call, as applicable. By way of
example only, Exhibit 1, attached hereto and made a part hereof, sets forth the
method for calculating the Share Value per share of Davis Shares.

                  7.       Special Provisions Concerning Davis Options. In the
event that any unexercised Davis Options are subject to a Share Exchange, Share
Conversion, Put or Call, Davis may exercise such Davis Options to purchase
shares of Class B Stock not later than immediately prior to, or concurrently
with, the closing of such event; provided that any Davis Options not so
exercised shall nevertheless be deemed to have been exercised on a net basis as
of the time immediately prior to the closing of such event. By way of example
only, if Davis holds options for 295,000 shares of stock with an option exercise
price of $10.00 per share, and the Share Value of the stock is $15.00 per share,
then Davis shall be entitled, on a net basis, to the issuance of 147,500 shares
of stock without payment by Davis (i.e. [295,000 X ($15.00-$10.00)/$10.00] =
147,500 shares). Such "net" shares shall then be subject to the Share Exchange,
Share Conversion, Put or Call, as applicable. Subject to customary antidilution
provisions that will be set forth in an amended option agreement, in no event
shall Davis be entitled to the issuance of shares on a "net basis" that is in
excess of the number of shares that may be acquired pursuant to outstanding
Davis Options.

                  8.       Injunction; Specific Performance. Because of the
unique character of the securities of the Company and the important business
purposes underlying this Agreement, each Party acknowledges that he or it will
be irreparably damaged in the event this Agreement is not specifically enforced.
If any dispute arises concerning the Transfer of any securities of the Company,
an injunction may be issued restraining that sale or disposition until the
controversy has been resolved. If any controversy arises concerning a right or
obligation to purchase or sell any securities of the Company, that right or
obligation may be enforced in a court of equity by a

                                       8

<PAGE>

decree of specific performance. However, that remedy shall be cumulative and not
exclusive, enforceable singly, alternatively, successively or concurrently.

                  9.       Election of Mercer and Davis Directors. Concurrently
with the execution of this Agreement and the closing of the transactions
contemplated by the Stock Purchase Agreement, the existing directors of the
Company and its Subsidiary will tender their resignations and Davis and Mercer
hereby agree to elect a Board of Directors of the Company and its Subsidiary
that shall consist of the existing directors of Mercer, Davis and one additional
director designated by Davis. In addition, concurrently with the closing of the
transactions contemplated by the Stock Purchase Agreement, Mercer hereby agrees
to elect Davis a director of Mercer and each of its subsidiaries. For so long as
Davis and Mercer each continue to own any Class A Shares, they hereby agree to
elect: (i) Davis and his designee to the Board of Directors of the Company and
its Subsidiary, (ii) Davis to the Board of Directors of Mercer and each of its
subsidiaries, and (iii) the nominees designated by Mercer for election to the
Board of Directors of the Company and its Subsidiary. After closing under the
Stock Purchase Agreement and for so long as Davis and Mercer each continue to
own any Class A Shares, Davis hereby agrees not to take any action to expand the
size of the Board of Directors of the Company without the concurrence of Mercer.

                  10.      Termination of Agreement. All of the provisions of
this Agreement, shall terminate on the date the Company is required to file
reports with respect to any class of its common stock with the Securities and
Exchange Commission pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, except with respect to any notices issued prior to that
date under the provisions of this Agreement.

                  11.      Shares to Bear Legend. All certificates evidencing
Davis Shares (whether now outstanding or hereafter issued) shall bear the
following conspicuous legend:

                  "This stock certificate and the shares represented hereby are
         held subject to the terms, covenants and conditions of an agreement
         dated June 1, 2001, by and among the Company and certain of its
         stockholders, as it may be amended or restated from time to time, and
         may not be transferred or disposed of except in accordance with the
         terms and conditions thereof. A copy of such agreement is on file and
         may be inspected at the offices of the Company. These securities have
         not been registered under the Securities

                                       9

<PAGE>

         Act of 1933, as amended, or any state securities law, including the
         Pennsylvania Securities Act of 1972. These securities may not be
         transferred in the absence of an effective registration statement or an
         opinion from counsel to the Company that registration is not required."

                  12.      Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective legal
representatives, heirs, legatees, successors and assigns.

                  13.      Amendments. The provision of this Agreement,
including the provisions of this sentence, may be amended, modified or
supplemented only by a written instrument executed by (i) holders of at least a
majority of Davis Shares, and (ii) Mercer.

                  14.      Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the Commonwealth of Pennsylvania.

                  15.      Interpretation. The headings of the sections
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not affect the meaning or
interpretation of this Agreement.

                  16.      Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally
or by commercial delivery services, or mailed by registered or certified mail
(return receipt requested) or sent via facsimile (with confirmation of receipt)
to the parties at the following address (or at such other address for a party as
shall be specified by like notice):

                           if to Mercer, to:

                           Mercer Mutual Insurance Company
                           Route 31 North
                           Pennington, New Jersey
                           Attention: Andrew R. Speaker, President and Chief
                                      Executive Officer
                           Facsimile No.: 609-737-8719
                           Telephone No.: 609-737-0426

                                       10

<PAGE>

                           with a copy to:

                           Stevens & Lee
                           1275 Drummers Lane
                           P.O. Box 236
                           Wayne, Pennsylvania 19087-0236
                           Attention: Jeffrey P. Waldron
                           Facsimile No.: 610-687-1384
                           Telephone No.: 610-293-4961

                           to the Company, to:

                           Franklin Holding Company, Inc.
                           214 East Church Street
                           Lock Haven, Pennsylvania 17745
                           Facsimile No.: 717-570-6655
                           Telephone No.: 717-570-3234

                           with a copy to:

                           Rosenn, Jenkins & Greenwald, LLP
                           15 South Franklin Street
                           Wilkes-Barre, Pennsylvania 18711
                           Attention: Bruce C. Rosenthal, Esquire
                           Facsimile No.: 570-826-5640
                           Telephone No.: 570-826-5643

                           if to Davis, to:

                           H. Thomas Davis
                           Franklin Insurance Company
                           214 East Church Street
                           Suite 100
                           Lock Haven, Pennsylvania 17743

                           with a copy to:

                           Rosenn, Jenkins & Greenwald, LLP
                           15 South Franklin Street
                           Wilkes-Barre, Pennsylvania 18711
                           Attention: Bruce C. Rosenthal, Esquire
                           Facsimile No.: 570-826-5640
                           Telephone No.: 570-826-5643

                  17.      Counterparts. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the same
agreement and shall become

                                       11

<PAGE>

effective when one or more counterparts have been signed by each of the parties
and delivered to the other Parties, it being understood that all Parties need
not sign the same counterpart.

                  18.      Waiver and Consent. No action taken pursuant to this
Agreement, including, without limitation, any investment by or on behalf of any
party, shall be deemed to constitute a waiver by the party taking such action of
compliance with any representations, warranties, covenants or agreements
contained herein. The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any preceding or
succeeding breach and no failure by any party to exercise any right or privilege
hereunder shall be deemed a waiver of such party's rights or privileges
hereunder or shall be deemed a waiver of such party's rights to exercise the
same at any subsequent time or times hereunder. Each party hereto, in addition
to being entitled to exercise all rights provided herein, in the charter or
granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. Each party hereto agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Agreement and hereby agrees
to waive that defense in any action for specific performance that a remedy at
law would be adequate.

                                       12

<PAGE>

                  19.      Inspection. Copies of this Agreement will be
available for inspection or copying by any party at the offices of the Company
through the Secretary of the Company.

                  IN WITNESS WHEREOF, the parties have executed the Agreement as
of the date first above written.

                                    MERCER MUTUAL INSURANCE COMPANY

                                    By:/s/ Andrew R. Speaker
                                       _________________________________________
                                       Andrew R. Speaker, President and Chief
                                       Executive Officer

WITNESS:
                                    /s/ H. Thomas Davis
___________________________         ____________________________________________
                                    H. THOMAS DAVIS, individually

                                    FRANKLIN HOLDING COMPANY, INC.

                                    By:/s/ H. Thomas Davis
                                       _________________________________________
                                       H. Thomas Davis, President and Chief
                                       Executive Officer

                                       13

<PAGE>

                                    EXHIBIT 1

                           Calculation of Share Value

Assume the following Company Quarterly Net Income, a valuation of the Company of
$5,050,920 (210,000 shares x $24.052) and no further investment by Mercer in the
Company.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
                                                                        Company
Quarter Ending    Company Quarterly Net    Company Quarterly ROI      Aggregate ROI
                          Income                   Factor                Factor
-----------------------------------------------------------------------------------
<S>               <C>                      <C>                        <C>
   9/30/01            $   (505,092)              (0.10)                  (0.10)
-----------------------------------------------------------------------------------
   12/31/01           $    252,546                0.05                   (0.05)
-----------------------------------------------------------------------------------
   03/31/02           $    (50,509)              (0.01)                  (0.06)
-----------------------------------------------------------------------------------
   6/30/02            $  1,010,184                0.20                   (0.14)
-----------------------------------------------------------------------------------
   9/30/02            $    505,092                0.10                   (0.24)
-----------------------------------------------------------------------------------
</TABLE>

Mercer Aggregate ROE Factor is assumed in the examples below but not
illustrated as above

Example 1

<TABLE>
<S>                                                         <C>
Date of Event - December 29, 2001

Company Aggregate ROI Factor = (.10)  $10.00 x (1-.10)      $ 9.00
Mercer Aggregate ROE Factor = 0.15    $10.00 x (1+.15)      $11.50
Minimum Share Value                                         $10.00
Share Value (greatest of)                                   $11.50
</TABLE>

Example 2

<TABLE>
<S>                                                         <C>
Date of Event - October 15, 2002

Company Aggregate ROI Factor = 0.24  $10.00 x (1+.24)       $12.40
Mercer Aggregate ROE Factor = 0.15   $10.00 x (1+.15)       $11.50
Minimum Share Value                                         $10.00
Share Value (greatest of)                                   $12.40
</TABLE>

                                       14

<PAGE>
                     [LETTERHEAD OF MERCER INSURANCE GROUP]

July 7, 2003

Mr. H. Thomas Davis, Jr.
143 Davis Lane
Lock Haven, PA 17745

Dear Tom:

Reference is made to Section 6 of the Shareholders Agreement of Franklin Holding
Company, Inc. ("Franklin") dated June 1, 2001, by and among you, Franklin and
Mercer Mutual Insurance Company. The first sentence of the last paragraph of
Section 6 is hereby amended to read as follows:

      The Share Value shall be determined (A) in the case of the Merger, as of
      the effective date thereof, (B) in the case of the Share Exchange, as of
      the date of the most recent audited or interim balance sheet of Mercer
      included in the registration statement filed with and declared effective
      by the Securities and Exchange Commission in connection with the
      Conversion, and (C) in the case of a Put or Call, as of the date of the
      event giving rise to such Put or Call, as applicable.

If the foregoing is acceptable to you, please execute the enclosed copy of this
letter in the space provided below.

                                     MERCER MUTUAL INSURANCE COMPANY

                                     By: /s/ Andrew R. Speaker
                                         ---------------------------------------
                                             Andrew R. Speaker, President and
                                             Chief Executive Officer


ACCEPTED AND AGREED

/s/  H. Thomas Davis, Jr.
---------------------------
H. Thomas Davis, Jr.