Document:

Exhibit 10.2

Exhibit 10.2

FARMERS NATIONAL BANK OF CANFIELD

DEFERRED COMPENSATION AGREEMENT

THIS DEFERRED COMPENSATION AGREEMENT (“Agreement”) is made effective as of this 1st day of
January, 2005, by and between Farmers National Bank of Canfield (the “Company”), an Ohio
corporation and wholly-owned subsidiary of Farmers National Banc Corp., and Frank L. Paden (the
“Executive”), an individual employed by the Company.

WITNESSETH:

WHEREAS, Executive now serves as an officer of the Company;

WHEREAS, Executive is a member of a select group of management or highly compensated
employees and has contributed significantly to the profits of the Company and its continued
expansion; and,

WHEREAS, the Company through this Agreement wishes to encourage Executive to continue in the
service of the Company and to reward Executive for his past and future best efforts.

NOW, THEREFORE, in consideration of the promises, covenants and agreements herein set forth,
and for other good and valuable consideration, receipt of which is hereby mutually acknowledged,
the Company and Executive hereby covenant and agree as follows:

1. All Prior Deferred Compensation Agreements Superseded. Any and all agreements between the
Company and Executive covering the subject matter hereof are hereby terminated, of no further
effect, and superseded by this Agreement.

2. Retirement Date. Executive may retire from the active and daily service of the Company
(“Retirement Date”) upon that November 1st occurring nearest in time to Executive’s sixty-fifth
(65th) birthday or at any date thereafter specified by Executive in writing to the
Company.

3. Retirement Compensation. Commencing with the first business day of the month succeeding the
Retirement Date, the Company will pay to Executive the sum of Nine Hundred Thirty Dollars ($930.00)
each month, payable on the first business day of each calendar month. The Company agrees that it
will continue to make such monthly payments to Executive for seventeen consecutive (17) years;
subject, to the conditions and limitations hereinafter set forth:

	 	a.	 	if Executive has retired but dies before receiving two hundred
four (204) monthly payments in the amount specified above, the balance of such
payments shall be discounted to their net present value at the rate of six
percent (6%) per annum, compounded annually, and paid in a lump sum to
Executive’s surviving spouse, if any. If Executive does not leave a surviving
spouse, the lump sum as calculated
above shall be paid to the executor or personal representative of Executive. In no
event shall the Company, by reason of this Agreement, become liable to any party or
parties for a sum greater than two hundred four (204) payments in the amount
specified above.

 

 

 

	 	b.	 	If Executive retires from the active and daily service of the Company
prior to the November 1st occurring nearest in time to Executive’s sixty-fifth
(65th) birthday due to a disability which prevents Executive from
performing Executive’s duties in a manner satisfactory to the Company, payments
hereunder shall commence, beginning the first business day of the month following
the month in which such retirement occurs. Payments shall be made for the duration
of two hundred four (204) months to Executive, if living. If Executive dies during
the period in which such payments are being made, the balance of such payments
shall be paid as if Executive had died pursuant to subsection a. above. For the
purposes of this subsection b., the amount of the monthly payment shall be
determined as follows: the monthly payment as specified in this section 3 above
shall be reduced by multiplying by a fraction the numerator of which is the number
of years of service completed (a year of service being defined as more than two
thousand hours worked) and the denominator of which is the number of years from
date of hire and Executive’s attaining age 65.

	 	c.	 	If Executive voluntarily terminates employment, or has employment
involuntarily terminated prior to age 65, other than “for cause” as provided
herein, a proportionate monthly amount will be paid, commencing on the first
business day of the month following Executive’s termination of employment. The
amount to be paid to Executive, as specified in section 3, shall be reduced by
one-seventeenth (1/17th) for each year between the November
1st following the date that employment terminates and the November
1St following the Executive’s 65th birthday.

	 	d.	 	If Executive is deemed, in the sole discretion of the Company, to be a
“keyspecified employee” as defined in the rules promulgated under the Internal
Revenue Code of 1954, as amended, and specifically under Reg. 1.409(A)-1(i) as
administered by the Internal Revenue Service, and the separation from service
hereunder occurs other than by reason of death or disability (as defined in such
rules) then the commencement of payments hereunder shall be deferred for a six (6)
month interval, and the payments which would have been made in the first six (6)
months shall be paid in a lump sum (without interest) and paid coincident with the
commencement of regular payments on the first business day of the seventh
(7th) month following such separation.

4. Executive’s Responsibilities After the Retirement Date. Executive agrees that after
the Retirement Date and for so long as Executive continues to receive monthly payments hereunder,
Executive will attend, when invited and reasonably able to do so, all regular meetings of
the officers of the Company and will meet with the officers of the Company more often if requested
to do so by the Company. Executive agrees to consult with the Company without receiving separate
compensation therefor, in an advisory capacity at any and all times if and when requested
to do so by the Company. The parties hereto acknowledge that the responsibilities of Executive
under this section are voluntary on the part of Executive and that the failure of Executive to
either participate in meetings or consult with the Company shall not affect the validity,
enforceability, or vesting of the deferred compensation conferred upon Executive in this Agreement.

 

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5. Covenant Not to Compete. Executive agrees that while receiving monthly payments from the
Company pursuant to this Agreement, Executive will not, within one hundred (100) miles of
Youngstown, Ohio, directly or indirectly engage in competition with the Company (“Competition”).
The determination as to weather or not Competition is taking place shall be in the sole discretion
of the Company’s Board of Directors (the “Board”), who shall decide by majority vote of directors
at a meeting, called for the purpose of considering the issue of the existence of Competition under
the terms of this Agreement, for which a quorum is present (such a determination is referred to as
a “Qualified Meeting”). The determination of the Board shall be final, conclusive and binding upon
Executive, Executive’s spouse, if any, and any party claiming through Executive.

6. Consequences of Executive Breaching Section 5. If, in the opinion of a majority of the
Board of the Company, taking action in a Qualified Meeting, Executive is engaging in Competition,
the Company shall promptly notify Executive in writing at his home address that the Board has
decided that Executive is engaging in Competition with the Company. Executive shall have a period
of fifteen (15) days after receipt of such notice to cease the activity that caused the finding
that Competition exists. If Executive, again in the opinion of the Board acting at a Qualified
Meeting, has not ceased engaging in Competition by the end of such fifteen (15) day period, then,
any of the provisions of this Agreement to the contrary notwithstanding, Executive agrees that no
further payments shall be due or payable by the Company hereunder and that the Company shall have
no further liability to make payment hereunder to Executive or any survivor of Executive, or to
Executive’s personal representative or executor.

7. Non-assignment of Payments. Neither Executive nor Executive’s spouse shall purport to sell,
assign, transfer, or otherwise transfer the right to receive any payments under this Agreement,
which payments and the right thereto are expressly declared to be non-assignable and
non-transferable, and in the event of any attempted assignment or transfer, said assignment or
transfer shall be void and of no effect upon the Company.

8. Termination for Cause. If, prior to the Retirement Date, a majority of the Board, in a
Qualified Meeting, votes to terminate Executive’s employment “for cause”, this Agreement shall be
void and of no effect. The term “for cause” for the purpose of this section shall mean gross
incompetence or that Executive has engaged in any of the following: theft, forgery, embezzlement,
burglary, arson, fraud, misappropriation of funds, libel, or slander.

9. Binding Effect; Prior Agreements Superseded. This Agreement shall be binding upon
the parties hereto, their heirs, executors, administrators and successors. The Company agrees that
it will not merge or consolidate with any other entity unless such entity shall expressly assume
the duties and liabilities of the Company herein set forth. This Agreements supersedes all
previous agreements between the parties on the subject matter hereof.

 

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10. Effect of Suicide. In the event of the suicide of Executive within two years from the date
of this Agreement, this Agreement shall be void and of no effect

11. Counterparts. This Agreement shall be executed in duplicate, each copy of which when
so executed and delivered shall be an original, but both copies shall, together, constitute
one and the same instrument.

12. Governing Law. This Agreement shall be construed according to the laws of the State of
Ohio.

13. Non-exclusivity. Nothing in this Agreement shall affect any right which the Executive may
otherwise have to participate in, or under, any other retirement plan or agreement which the
Company may now or hereafter enter into with or for the benefit of Executive.

14. Amendments; Termination. This Agreement shall be amended by the parties hereto if
necessary, in the opinion of the Company, to conform this Agreement to requirements of the Internal
Revenue Code, including, but not limited to, section 409(A) thereof pertaining to the taxation of
deferred compensation arrangements, in such manner as necessary to avoid recognition of income by
Executive prior to the taxable period in which Executive actually receives payments hereunder. This
Agreement may not be amended by the parties in any respect which would result in recognition of
income by Executive of payments hereunder prior to the accounting period in which such payments are
received by Executive, or received by Executive’s surviving spouse or estate. This Agreement may be
amended in other respects; provided, however, that any such amendment must be in writing and signed
by the parties hereto. If this Agreement is terminated by the Company for any reason no payments
hereunder may be accelerated unless the Company has received an opinion of its counsel,
satisfactory in form and substance in the sole discretion of the Company, to the effect that the
acceleration of payments does not subject this Agreement to the deferred compensation rules
administered by the Internal Revenue Service and referred to above.

 

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IN WITNESS WHEREOF, the Company has caused this Agreement to be signed in its corporate name
by its Executive Vice President, Cashier and CFO impressed with its corporate seal, attested by its
Secretary, all as duly authorized by its directors, and the said Executive has hereunto set his
name, all effective as of this 1st day of January, 2005.

	 	 	 	 	 	 	 	 	 
	Attest:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
		 		 	 
	 	 	 	 	 
	 	 	Frank L. Paden	 	 
	 
	 	 	 	 	 	 	 	 
		 	The Farmers National Bank of Canfield	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 		 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Signed in the presence of:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	
 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	

	 	 	 	Date:	 	 	 	 
	 

	 	 
	 	 	 	 

	 	 

 

5exv10wmm

Exhibit (10)(MM)

SURPLUS NOTE PURCHASE AGREEMENT

Between

DONEGAL MUTUAL INSURANCE COMPANY

and

WEST BEND MUTUAL INSURANCE COMPANY

DATED AS OF JULY 15, 2010

 

 

CONTENTS

	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	RECITALS
	 	 	1	 
	 
	 	 	 	 
	I. SALE AND PURCHASE OF NOTE
	 	 	1	 
	1.1 Sale and Purchase of Note
	 	 	1	 
	1.2 Payment of Purchase Price and Delivery of Note
	 	 	1	 
	1.3 Closing Date
	 	 	2	 
	 
	 	 	 	 
	II. REPRESENTATIONS AND WARRANTIES OF WBM
	 	 	2	 
	2.1 Organization and Standing
	 	 	2	 
	2.2 Authorization
	 	 	2	 
	2.3 Title to the Note
	 	 	3	 
	2.4 No Omissions
	 	 	3	 
	2.5 Finders
	 	 	3	 
	2.6 Representations and Warranties to Be True on the Closing Date
	 	 	3	 
	 
	 	 	 	 
	III. REPRESENTATIONS AND WARRANTIES OF DMIC
	 	 	4	 
	3.1 Organization and Standing
	 	 	4	 
	3.2 Authorization
	 	 	4	 
	3.3 Consents and Approvals of Government Agencies
	 	 	4	 
	3.4 Transferability
	 	 	4	 
	3.5 No Omissions
	 	 	5	 
	3.6 Finders
	 	 	5	 
	3.7 Representations and Warranties to be True on the Closing Date
	 	 	5	 
	 
	 	 	 	 
	IV. CERTAIN COVENANTS
	 	 	5	 
	4.1 Preserve Accuracy of Representations and Warranties
	 	 	5	 
	4.2 Required Filings
	 	 	6	 
	 
	 	 	 	 
	V. CONDITIONS
	 	 	6	 
	5.1 Conditions to Each Party’s Obligations
	 	 	6	 
	5.2 Conditions to Obligations of DMIC
	 	 	6	 
	5.3 Conditions to Obligations of WBM
	 	 	7	 
	 
	 	 	 	 
	VI. TERMINATION
	 	 	7	 
	6.1 Termination
	 	 	7	 
	6.2 Effect of Termination
	 	 	8	 
	 
	 	 	 	 
	VII. AMENDMENT, WAIVER AND INDEMNIFICATION
	 	 	8	 
	7.1 Amendment
	 	 	8	 
	7.2 Extension; Waiver
	 	 	8	 
	7.3 Survival of Obligations
	 	 	9	 

(i) 

 

	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	VIII. MISCELLANEOUS
	 	 	9	 
	8.1 Notices
	 	 	9	 
	8.2 Expenses
	 	 	10	 
	8.3 Governing Law
	 	 	10	 
	8.4 Partial Invalidity
	 	 	10	 
	8.5 Execution in Counterparts
	 	 	10	 
	8.6 Titles and Headings
	 	 	10	 
	8.7 Entire Agreement
	 	 	10	 
	8.8 Specific Performance
	 	 	10	 
	 
	 	 	 	 
	SIGNATURES
	 	 	11	 
	 
	 	 	 	 
	APPENDICES:
	 	 	 	 
	 
	 	 	 	 
	APPENDIX A  —  Form of Surplus Note
	 	 	A-1	 

(ii) 

 

SURPLUS NOTE PURCHASE AGREEMENT

     THIS SURPLUS NOTE PURCHASE AGREEMENT (this “Agreement”) made as of this 15th day of
July, 2010 between DONEGAL MUTUAL INSURANCE COMPANY, a Pennsylvania mutual fire insurance company
(“DMIC”) and WEST BEND MUTUAL INSURANCE COMPANY, a Wisconsin mutual insurance company (“WBM”).

WITNESSETH:

     WHEREAS, in connection with, and subject to the closing of, the transactions the Merger
Agreement (as defined in Section 5.1(d)) contemplates, WBM proposes to sell a surplus note (the
“Note”) issued by Michigan Insurance Company, a Michigan stock insurance company (“MICO”) in the
form of Appendix A to this Agreement, the repayment of which would be subordinated to the claims of
policyholders of MICO and otherwise be in compliance with applicable provisions of the Michigan
Insurance Code and the regulations of the Commissioner of Insurance of the State of Michigan, in
the principal amount of Five Million Dollars ($5,000,000);

     WHEREAS, DMIC proposes to purchase the Note;

     WHEREAS, the Board of Directors of DMIC has approved this Agreement and the purchase of the
Note by resolutions duly adopted; and

     WHEREAS, the Boards of Directors of WBM and MICO have approved this Agreement and the sale of
the Note by resolutions duly adopted;

     NOW, THEREFORE, in consideration of the mutual covenants set forth in this Agreement and
intending to be legally bound hereby, DMIC and WBM agree as follows:

ARTICLE I

SALE AND PURCHASE OF NOTE

     1.1 Sale and Purchase of Note. Upon the terms, conditions, representations and
warranties set forth in this Agreement, WBM hereby agrees to sell the Note to DMIC and DMIC hereby
agrees to purchase the Note from WBM.

     1.2 Payment of Purchase Price and Delivery of Note. The purchase price of the Note
shall be Five Million Dollars ($5,000,000) an amount equal to the sum of the unpaid principal
amount of the Note plus accrued but unpaid interest on the Note on the closing

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date (the “Closing Date”) for the sale and purchase of the Note. The entire purchase price of
the Note is to be paid in cash by DMIC to WBM on the Closing Date against delivery of the Note.

     1.3 Closing Date.

          (a) Subject to the fulfillment of the conditions precedent specified in Article V, the
transactions contemplated by this Agreement shall be consummated (the “Closing”) at 10:00 a.m. on
the date on which the parties to the Merger Agreement consummate the transactions the Merger
Agreement contemplates. Unless otherwise mutually agreed by DMIC and WBM, the Closing shall be
held at the offices of Duane Morris LLP, 190 South LaSalle Street, Chicago, IL 60603-3433.

          (b) At the Closing, WBM shall deliver to DMIC (i) copies of each resolution adopted by the
Board of Directors of WBM approving and adopting this Agreement and the sale of the Note, certified
by the Secretary of WBM that each such resolution is then in full force and effect and without
amendment; (ii) any Officers’ Certificates specified in Section 5.2 duly executed by WBM and (iii)
the Note duly executed by WBM.

          (c) At the Closing, DMIC shall deliver to WBM (i) copies of each resolution adopted by the
Board of Directors of DMIC approving and adopting this Agreement and the purchase of the Note and
(ii) any Officers’ Certificates specified in Section 5.3 duly executed by DMIC.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF WBM

     As an inducement to DMIC to enter into this Agreement and to consummate the transactions
contemplated in this Agreement, WBM represents and warrants to DMIC and agrees as follows:

     2.1 Organization and Standing.

          (a) WBM is a corporation duly organized and validly existing under the laws of the State of
Wisconsin.

          (b) WBM has the corporate power and authority and other authorizations necessary or required
in order for it to own the Note and to carry on its business as now conducted.

     2.2 Authorization. WBM has the requisite corporate power and authority to execute and
deliver this Agreement and sell the Note and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and delivery of the

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Note, have been duly approved and authorized by the Board of Directors of WBM. No other
corporate proceedings on the part of WBM are necessary to authorize this Agreement and the sale of
the Note other than the approval of the sale of the Note to DMIC by the Commissioner of Insurance
of the State of Michigan. This Agreement, when executed and delivered by WBM and assuming the due
execution thereof by the other parties thereto, will constitute the valid, legal and binding
agreements of WBM enforceable in accordance with its terms, except that (i) such enforcement may be
subject to bankruptcy, rehabilitation, liquidation, conservation, dissolution, insolvency,
reorganization, moratorium or other similar Laws now or hereafter in effect relating to creditors’
rights generally and (ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of the court before
which any Proceeding therefor may be brought. Neither the execution nor the delivery of this
Agreement or the Note nor the consummation of the transactions this Agreement contemplates, nor
compliance with nor fulfillment of the terms and provisions hereof or thereof, will (x) conflict
with or result in a breach of the terms, conditions or provisions of or constitute a default under
the Articles of Incorporation or the Bylaws of WBM, or any instrument, agreement, mortgage,
judgment, Order, award, decree or other restriction to which WBM is a party; (y) give any party to
or with rights under any such instrument, agreement, mortgage, judgment, Order, award, decree or
other restriction the right to terminate, modify or otherwise change the rights or obligations of
WBM under such instrument, agreement, mortgage, judgment, Order, award, decree or other restriction
or (iii) require the approval, consent or authorization of or any filing with or notification to
any federal, state or local court or Governmental Authority, except the approval of the
Commissioner of Insurance of the State of Michigan.

     2.3 Title to the Note. WBM has good and marketable title to the Note

     2.4 No Omissions. None of the representations or warranties of WBM contained in this
Agreement and, to the knowledge of WBM, none of the other information or documents furnished to
DMIC or its representatives by WBM in connection with this Agreement is false or misleading in any
material respect or omits to state a fact herein or therein necessary to make the statements herein
or therein not misleading in any material respect.

     2.5 Finders. WBM has not paid or become obligated to pay any fee or commission to any
broker, finder or intermediary with the exception of Keefe, Bruyette & Woods, Inc. WBM shall be
responsible for the payment of all fees and expenses payable for or on account of the transactions
provided for in this Agreement based on actions taken or agreements entered into by WBM.

     2.6 Representations and Warranties to Be True on the Closing Date. All of the
representations and warranties set forth in this Article II shall be true and correct on the
Closing Date.

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ARTICLE III

REPRESENTATIONS AND WARRANTIES OF DMIC

     DMIC represents and warrants to WBM as follows:

     3.1 Organization and Standing. DMIC is a mutual fire casualty insurance company duly
organized, validly existing and in good standing under the Laws of the Commonwealth of Pennsylvania
and has the requisite corporate power and authority to conduct its business as it is currently
being conducted.

     3.2 Authorization. DMIC has the requisite corporate power and authority to execute
and deliver this Agreement and to purchase the Note. The execution and delivery of this Agreement
and the purchase of the Note have been duly approved and authorized by the Board of Directors of
DMIC. No other corporate proceedings on the part of DMIC are necessary to authorize this Agreement
and the purchase of the Note. This Agreement when executed and delivered by DMIC and assuming the
due execution thereof by WBM, will constitute the valid, legal and binding obligations of DMIC
enforceable against DMIC in accordance with its terms, except that (i) such enforcement may be
subject to bankruptcy, rehabilitation, liquidation, conservation, dissolution, insolvency,
reorganization, moratorium or other similar Laws now or hereafter in effect relating to creditors’
rights generally and (ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of the court before
which any Proceeding therefor may be brought.

     3.3 Consents and Approvals of Government Agencies. Other than approval of the
purchase of the Note by the Insurance Commissioner of the State of Michigan, no consent, approval,
Order or authorization of, or registration, application, declaration or filing with any Person is
required with respect to DMIC in connection with the execution and delivery of this Agreement and
the purchases of the Note, nor compliance with nor fulfillment of the terms and provisions hereof
and thereof, will (i) conflict with or result in a breach of the terms, conditions or provisions of
or constitute a default under the Amended Articles of Incorporation or the Amended and Restated
By-laws of DMIC, or any instrument, agreement, mortgage, judgment, Order, award, decree or other
restriction to which DMIC is party; (ii) give any party to or with rights under any such
instrument, agreement, mortgage, judgment, Order, award, decree or other restriction or (iii)
require the approval, consent or authorization of or any filing with or notification to any
federal, state or local court, Governmental Authority.

     3.4 Transferability. The Note will be acquired by DMIC for its own account and not
with a view to, and not in connection with, a public distribution or resale thereof and will not be
transferred except in a transaction registered or exempt from registration under the

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Securities Act of 1933 as amended. It is understood that DMIC’s investments are at all times
within its control and direction.

     3.5 No Omissions. None of the representations or warranties of DMIC contained in this
Agreement, and none of the other information or documents furnished to WBM or its representatives
by DMIC in connection with this Agreement is false or misleading in any material respect or omits
to state a fact herein or therein necessary to make the statements herein or therein not misleading
in any material respect. To the Knowledge of DMIC, there is no fact that adversely affects, or in
the future is reasonably likely to affect adversely, the business or Assets of DMIC that has not
been disclosed in writing to WBM.

     3.6 Finders. DMIC has not paid or become obligated to pay any fee or commission to
any broker, finder or intermediary on account of the transactions provided for in this Agreement,
except for Sanders. DMIC shall be responsible for the payment of all fees and expenses payable for
or on account of the transactions provided for in this Agreement and other such fees based on
actions taken or agreements entered into by DMIC.

     3.7 Representations and Warranties to Be True on the Closing Date. All of the
representations and warranties set forth in this Article IV shall be true and correct on the
Closing Date.

ARTICLE IV

CERTAIN COVENANTS

     The parties covenant and agree to take the following action between the date hereof and the
Closing Date:

     4.1 Preserve Accuracy of Representations and Warranties.

          (a) WBM shall refrain from taking any action that would render any representation or warranty
contained in Article II of this Agreement inaccurate as of the Closing Date. WBM will promptly
notify DMIC of any lawsuits, claims, proceedings or investigations that, to the Knowledge of WBM,
may be threatened, brought, asserted or commenced against WBM, its officers or its directors (i)
involving in any way the transactions this Agreement contemplates.

          (b) DMIC shall refrain from taking any action that would render any representation or warranty
contained in Article III of this Agreement inaccurate as of the Closing Date. DMIC will promptly
notify WBM of any lawsuits, claims, proceedings or investigations that, to the Knowledge of DMIC,
may be threatened, brought, asserted or commenced against DMIC, its officers or its directors (i)
involving in any way the transactions this Agreement contemplates.

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     4.2 Required Filings. As promptly as practical after the date of this Agreement, WBM
and DMIC shall promptly commence and make all required filings with the appropriate Governmental
Authority required by Law to be made by any of them in order to consummate the transactions this
Agreement contemplates. Between the date of this Agreement and the Closing Date, each party shall
cooperate with the other party with respect to all required filings that a party elects to make or
is required by Law to make in connection with the transactions this Agreement contemplates.

ARTICLE V

CONDITIONS

     5.1 Conditions to Each Party’s Obligations. The respective obligations of each party
to effect the purchase and sale of the Note under this Agreement shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:

          (a) All required filings and approvals required to be obtained prior to the Closing Date
solely for this Agreement and the purchase and sale of the Note have been obtained and not
rescinded or adversely modified.

          (b) No Order entered or Law promulgated or enacted by any Governmental Authority shall be in
effect that would prevent the consummation of the purchase or sale of the Note or the other
transactions this Agreement contemplates and no proceeding brought by a Governmental Authority
shall have been commenced and be pending that seeks to restrain, prevent or materially delay or
restructure the transactions this Agreement contemplates or that otherwise questions the validity
or legality of any such transaction; and

          (c) There shall be no pending or threatened litigation initiated by a private party seeking to
restrain, prevent, rescind or change the terms of this Agreement or the purchase and sale of the
Note or to obtain damages in connection with this Agreement or the consummation of the purchase and
sale of the Note.

          (d) Closing under the Agreement and Plan of Merger (the “Merger Agreement”) dated as of July
15, 2010 among WBM, MICO, Donegal Group Inc. and DGI Acquisition Corp. shall occur simultaneously
with the closing of the transactions this Agreement contemplates. Capitalized terms used in this
Agreement without definition shall have the respective meanings assigned to them in the Merger
Agreement.

     5.2 Conditions to Obligations of DMIC. The obligations of DMIC to purchase and pay
for the Note on or prior to the Closing Date, shall be subject to the following conditions:

          (a) WBM shall have performed or complied in all material respects with all agreements required
to be performed and complied with by it under this Agreement, including the delivery of the Note at
or prior to the Closing Date.

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          (b) Each of the representations and warranties of WBM contained in this Agreement that is
qualified by materiality shall be true and correct on the Closing Date as though made on the
Closing Date and each of the representations and warranties of WBM that is not so qualified shall
be true and correct in all material respects on the Closing Date as though made on the Closing
Date, other than representations and warranties that address matters only as of a certain date,
which shall be true and correct in all material respects as of such certain date, and there shall
have been delivered to DMIC an Officer’s Certificate or Certificates to that effect, dated as of
the Closing Date, and signed on behalf of WBM;

     5.3 Conditions to Obligations of WBM. The obligation of WBM to sell the Note and to
perform its other obligations under this Agreement to be performed on the Closing Date shall, at
the option of WBM, be subject to the fulfillment on or prior to the Closing Date, of the following
conditions:

          (a) DMIC shall have performed or complied in all material respects with all obligations and
agreements required to be performed and complied with by it under this Agreement, including the
payment of the purchase price of the Note to WBM at or prior to the Closing Date.

          (b) Each of the representations and warranties of DMIC contained in this Agreement that is
qualified by materiality shall be true and correct on the Closing Date as though made on the
Closing Date and each of the representations and warranties of DMIC that is not so qualified shall
be true and correct in all material respects on the Closing Date as though made on the Closing
Date, other than representations and warranties that address matters only as of a certain date and
which shall be true and correct in all material respects as of such certain date, and there shall
have been delivered to WBM an Officer’s Certificate or Certificates to that effect, dated as of the
Closing Date, and signed on behalf of DMIC.

ARTICLE VI

TERMINATION

     6.1 Termination. This Agreement may be terminated and the purchase and sale of the
Note and the other transactions this Agreement contemplates be abandoned at any time prior to the
Closing Date:

          (a) by mutual consent of WBM and DMIC;

          (b) by either WBM or DMIC by one day’s written notice to DMIC or WBM, as the case may be, if
the Closing shall not have been consummated on or before December 31, 2010; provided that the right
to terminate this Agreement under this Section 6.1(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the
failure of the purchase and sale of the Note to have been consummated on or before such date;

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          (c) by either DMIC or WBM by one day’s written notice to WBM or DMIC, as the case may be, if
any of the conditions to such party’s obligations to consummate the transactions contemplated by
this Agreement shall in the reasonable opinion of the notifying party have become impossible to
satisfy; or

          (d) by DMIC if WBM is in breach at any time prior to the Closing Date of any of the
representations and warranties made by WBM as though made on and as of such date; or

          (e) by WBM if DMIC is in breach at any time prior to the Closing Date of any of the
representations and warranties made by DMIC as though made on and as of such date.

     6.2 Effect of Termination. In the event of the termination of this Agreement by
either WBM or DMIC, as provided in Section 6.1, this Agreement shall thereafter become void and
there shall be no Liability on the part of any party hereto against any other party to this
Agreement, or their respective directors, officers, policyholders or agents, except that (i) any
such termination shall be without prejudice to the rights of any party hereto arising out of the
willful breach by any other party of any covenant or agreement contained in this Agreement.

ARTICLE VII

AMENDMENT, WAIVER AND INDEMNIFICATION

     7.1 Amendment. This Agreement may be amended or modified in whole or in part any time
by an agreement in writing executed in the same manner as this Agreement, provided, however, that
no amendment shall be made that changes the terms of this Agreement in any material respect and
that requires the further approval or proceedings of any insurance Governmental Authority without
such approval having first been obtained or such proceedings having been first completed.

     7.2 Extension; Waiver. At any time prior to the Closing Date, either party hereto
may:

          (a) extend the time for the performance of any of the obligations or other acts of the other
party hereto,

          (b) waive any inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, and

          (c) waive compliance with any of the agreements or conditions contained herein.

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Any agreement on the part of a party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party by its President. The failure of
any party hereto to enforce at any time any provision of this Agreement shall not be construed to
be a waiver of such provision, nor in any way to affect the validity of this Agreement or any part
hereof or the right of such party hereafter to enforce each and every such provision. No waiver of
any breach of this Agreement shall be held to constitute a waiver of any other or subsequent
breach.

     7.3 Survival of Obligations. All certifications, representations and warranties made
in this Agreement by WBM and DMIC and their obligations to be performed pursuant to the terms of
this Agreement, shall survive the Closing Date hereunder, notwithstanding any notice of any
inaccuracy, breach or failure to perform not waived in writing and notwithstanding the consummation
of the transactions contemplated herein with knowledge of such inaccuracy, breach or failure. All
representations and warranties contained herein shall terminate upon the repayment in full of the
principal amount of the Note and all accrued but unpaid interest thereon.

ARTICLE VIII

MISCELLANEOUS

     8.1 Notices. All notices or other communications required or permitted hereunder
shall be in writing and shall be given by confirmed facsimile or registered mail, postage prepaid,
addressed as follows:

     if to DMIC, to:

Donegal Mutual Insurance Company

1195 River Road

Marietta, Pennsylvania 17547

Attention: Donald H. Nikolaus, President

Facsimile: 717-426-7009

     if to WBM, to:

West Bend Mutual Insurance Company

1900 South 18th Avenue

West Bend, WI 53095

Attention: James J. Pauly, Esq.

Facsimile: 262-338-5058

or to such other address or facsimile number as the Person to whom notice is given may have
previously furnished to the other party in writing in accordance herewith.

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     8.2 Expenses. Except as otherwise provided herein, each party hereto shall pay its
own expenses including, without limitation, legal and accounting fees and expenses incident to its
negotiation and preparation of this Agreement and to its performance and compliance with the
provisions contained herein.

     8.3 Governing Law. This Agreement and the Note shall be governed by and construed in
accordance with the laws of the State of Michigan without regard to its rules on conflicts of law.

     8.4 Partial Invalidity. In case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision of this Agreement,
but this Agreement shall be construed as if such invalid, illegal or unenforceable provision or
provisions had never been contained herein unless the deletion of such provision or provisions
would result in such a material change as to cause completion of the transactions contemplated
herein to be unreasonable or materially and adversely frustrate the objectives of the parties as
expressed in this Agreement.

     8.5 Execution in Counterparts. This Agreement may be executed in two counterparts,
both of which shall be considered one and the same agreement, and shall become a binding agreement
when one or more counterparts have been signed by each of the parties and delivered (by facsimile,
PDF or otherwise) to the other party.

     8.6 Titles and Headings. Titles and headings to Articles and Sections herein are
inserted for convenience of reference only and are not intended to be a part of or to affect the
meaning or interpretation of this Agreement.

     8.7 Entire Agreement. This Agreement, together with the Note, contains the entire
understanding of the parties hereto with regard to the subject matter contained in this Agreement.

     8.8 Specific Performance. Each of the parties hereto acknowledges and agrees that the
other party hereto would be irreparably damaged in the event any of the provisions of this
Agreement were not performed in accordance with their specific terms or were otherwise breached.
Accordingly, each of the parties hereto agrees that they each shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically
this Agreement and the terms and provisions hereof in any action instituted in any court of the
United States or any state thereof having subject matter jurisdiction, in addition to any other
remedy to which WBM or DMIC may be entitled, at law or in equity.

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     IN WITNESS WHEREOF, each party hereto has caused this Agreement to be executed on its behalf
as of the date first above written.

	 	 	 	 	 
	 	DONEGAL MUTUAL INSURANCE COMPANY

 	 
	 	By:  	/s/ Donald H. Nikolaus
 	 
	 	 	Donald H. Nikolaus, President 	 
	 	 	 	 
	 
	 	WEST BEND MUTUAL INSURANCE COMPANY

 	 
	 	By:  	/s/ Kevin A. Steiner
 	 
	 	 	Kevin A. Steiner, President 	 
	 	 	 	 
	 

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