[Form Using Compensation Committee as Trustee]
MERCER INSURANCE GROUP, INC.
Management Recognition
Plan and Trust Agreement
SUMMARY
I. PLAN PURPOSE
This management recognition plan (the "Plan") and its
related trust (the "Trust") is adopted by Xxxxxx Insurance Group,
Inc. (the "Company"). The purpose of the Plan is to retain
employees of the Company with experience and ability in key
positions by providing them with a proprietary interest in the
Company through grants of shares of the common stock, no par
value (the "Common stock"), of the Company. Awards of Common
Stock will be made in recognition of service to the Company and
its subsidiaries as encouragement to continue such contributions
in the future, as well as to more closely align the interests of
the Company's directors and officers with those of the Company's
shareholders by causing all to directly benefit from increases in
shareholder value.
II. PLAN SHARE AWARDS
X. Xxxxxxxxx Number: The total number of Plan Shares that
may be issued pursuant to the Plan will be equal to the number of
shares of Common Stock that are purchased by the Trust, not to
exceed 4% of the shares of Common Stock issued by the Company in
connection with the conversion of Mercer Mutual Insurance Company
("Mercer") from mutual to stock form. The Trust will acquire
Common Stock with funds contributed to it by the Company.
B. Individual Awards: All directors and executive
officers of the Company, Mercer and Xxxxxx Insurance Company of
New Jersey, Inc. are eligible to receive awards. The
Compensation Committee of the Board of Directors of the Company
will determine which eligible persons will be granted Plan Share
Awards and the number of shares covered by each Plan Share Award.
Such determinations will be based upon the position and
responsibilities of the eligible person, the value of their
services, and any other fact the Compensation Committee deems
relevant.
Plan Share Awards will not be made until the Company's
shareholders have approved the Plan.
C. Conditions Upon Earning of Plan Shares Subject to
Awards: Plan Shares covered by Plan Share Awards are earned
(i.e., become vested) at the rate determined by the
Compensation Committee and as provided herein.
Awards are nontransferable and nonassignable.
Recipients of Plan Share Awards may direct the voting of all
vested shares of Plan Shares. Recipients of Plan Share Awards
will receive dividends paid on all Plan Shares subject to such
Plan Share Awards from the date such Plan Shares Awards are
granted.
D. Distribution of Earned Plan Shares: Earned Plan Shares
are distributed to recipients as soon as practicable following
the date on which they are earned. The Plan Trustee may withhold
cash distributions as needed for tax purposes and, if necessary,
can require distributees to provide funds required to satisfy tax
obligations as a condition to distributing Plan Shares.
E. Forfeitures: Plan Shares forfeited in accordance with
Sections 7.01(b) or 7.01(c) will be returned to the pool of Plan
Shares with respect to which additional Plan Share Awards may be
granted.
III. Plan Administration
A. Plan Administration: The Plan will be administered by
the Compensation Committee of the Company's Board of Directors
and a Plan Trustee appointed by the Board. The Board may
designate as Plan Trustee one or more persons or an entity,
subject to replacement by the Board at any time. Expenses of
administering the Plan and the Trust will be borne by the
Company. The Company shall indemnify the Plan Trustee and Board
members as to activities with respect to the Plan.
B. ERISA: The Plan is not "qualified" within the meaning
of the Internal Revenue Code, and is not subject to ERISA's
requirements and restrictions.
C. Duration: The Plan will become effective upon
execution and will continue until the earliest of (1) 21 years
from such Effective Date, (2) the time at which the Board
terminates the Plan, or (3) the time at which all of the Trust
assets have been expended. The Board may amend or terminate the
Plan at any time.
ARTICLE I
ESTABLISHMENT OF THE PLAN AND TRUST
1.01 The Company hereby establishes the Plan, to be known
as the "Xxxxxx Insurance Group, Inc. Management Recognition
Plan," and the Trust upon the terms and conditions hereinafter
stated in this Agreement.
1.02 The Plan Trustee hereby accepts this Trust and agrees
to hold legal title to the Trust assets existing on the date of
this Agreement and all additions and accretions thereto on the
terms and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
2.01 The purpose of the Plan is to retain personnel of
experience and ability in key positions and to provide incentive
for them to make significant contributions to the Company and its
subsidiaries in the future by providing such key employees with a
proprietary interest in the Company.
ARTICLE III
DEFINITIONS
The following words and phrases when used in this Agreement
with an initial capital letter, unless the context clearly
indicates otherwise, shall have the meanings set forth below.
Wherever appropriate, the masculine pronoun shall include the
feminine pronoun and the singular shall include the plural. All
terms used herein and not defined shall have the meanings given
such terms in the Joint Plan of Conversion.
3.01 "Agreement" means this Management Recognition Plan and
Trust Agreement between the Company and the Plan Trustee.
3.02 "Beneficiary" means the person or persons designated
by a Recipient to receive any benefits payable under the Plan in
the event of such Recipient's death. Such person or persons
shall be designated in writing on forms provided for this purpose
by the Board and may be changed from time to time by similar
written notice to the Board. In the absence of a written
designation, the Beneficiary shall be the recipient's surviving
spouse, if any, or if none, his estate.
3.03 "Board" means, for purposes of administering the Plan,
the Board of Directors of the Company.
3.04 "Cause" means:
(i) willful violation of any law, rule or
regulation (other than traffic violations or similar
offenses that would not in the Board's good faith reasonable
determination effect the ability to perform and discharge
one's duties to the Company or a subsidiary);
(ii) breach of fiduciary duty involving personal
profit or an act of personal dishonesty in connection with
the performance of one's duties; or
(iii) willful failure to follow the lawful
instructions of the Board of Directors after receipt of
written notice of such instructions, other than a failure
resulting from the incapacity because of physical or mental
illness.
3.05 "Common Stock" means shares of the Company's common
stock, no par value.
3.06 "Company" means Xxxxxx Insurance Group, Inc.
3.07 "Disability" means any physical or mental impairment
which qualifies an employee for disability benefits under the
applicable long-term disability plan maintained by the Company or
a subsidiary or, if no such plan applies to the employee, which
would qualify such employee for disability benefits under the
long-term disability plan maintained by the Company, if such
employee were covered by that Plan.
3.08 "Effective Date" means ___________________, 1998.
3.09 "Eligible Person" means any director or executive
officer of the Company or either of the Insurance Companies.
3.10 "Insurance Companies" means Mercer and Xxxxxx
Insurance Company of New Jersey, Inc., collectively.
3.11 "Mercer" means Mercer Mutual Insurance Company.
3.12 "Plan of Conversion" means the Plan of Conversion
adopted on October 17, 1997 by the Company and Mercer, as amended
and restated as of April 15, 1998.
3.13 "Plan Shares" means shares of Common Stock held in the
Trust and issued or issuable to a Recipient pursuant to the Plan.
3.14 "Plan Share Award" means a right granted under this
Agreement to earn Plan Shares.
3.15 "Plan Share Reserve" means the shares of Common Stock
held by the Trustee as determined pursuant to Sections 5.03 and
5.04.
3.16 "Plan Trustee" means the person(s) or entity nominated
and approved by the Board pursuant to Section 4.01 and 4.02 to
hold legal title to the Plan assets for the purposes set forth
herein.
3.17 "Recipient" means an Eligible Person who receives a
Plan Share Award under the Plan.
3.18 "Retirement" means a termination of employment which
constitutes a "retirement" under any applicable qualified pension
benefit plan maintained by the Company or any subsidiary which
employs the Recipient, or, if no such Plan is
maintained, pursuant to the retirement policy of the Company.
3.19 "Trust" means the trust established pursuant to this
Agreement.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 Role and Powers of the Board. The Plan shall be
administered and interpreted by the Compensation Committee of the
Board. The interpretation and construction by the Compensation
Committee of any provisions of this Agreement or of any Plan
Share Award granted hereunder shall be final and binding.
Subject to the express provisions and limitations of this
Agreement, the Compensation Committee may adopt such rules,
regulations and procedures as it deems appropriate for the Plan's
affairs. The Board shall appoint one or more persons or an
entity to act as Plan Trustee in accordance with this Agreement
and the terms of Article VIII hereof. The Board may reverse or
override any action taken or decision made with respect to the
Plan; provided, however, except as provided in Sections 7.01(b)
or 7.01(c) hereof, that the Board may not revoke any Plan Share
Award already made.
4.02 Limitation on Liability. Neither any member of the
Board nor any Plan Trustee shall be liable for any determination
made in good faith with respect to the Plan or any Plan Shares or
Plan Share Awards granted under the Plan. If a member of the
Board or any Plan Trustee is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative, by reason of anything done or not done by him in
such capacity under or with respect to the Plan, the Company
shall indemnify such member or Plan Trustee against expenses
(including, but not limited to, attorneys' fees and
disbursements), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such
action, suit or proceeding if (1) he acted in good faith and in a
manner he reasonably believed to be in the best interests of the
Company (in the case of a member of the Board) or in the best
interests of the beneficiaries of the Trust (in the case of the
Plan Trustee), and (2) with respect to any criminal action or
proceeding, he had no reasonable cause to believe his conduct was
unlawful.
ARTICLE V
CONTRIBUTIONS; PLAN SHARE RESERVE
5.01 Amount and Timing of Contributions. The Board shall
determine the amounts (or the method of computing the amounts) to
be contributed by the Company to the Trust. Such amounts shall
be paid to the Plan Trustee at the time of contribution. No
contributions by Eligible Persons shall be permitted.
5.02 Initial Investment. Any amounts held by the Trust
prior to the purchase of Common Stock shall be invested by the
Plan Trustee in such interest-bearing account or accounts as the
Plan Trustee shall determine to be appropriate.
5.03 Investment of Trust Assets; Conversion; Creation of
Plan Share Reserve. Except as otherwise permitted under this
Agreement, the Plan Trustee shall invest all of the Trust's
assets exclusively in Common Stock of the Company. The Common
Stock initially acquired by the Trust, together with any shares
thereafter acquired by the Trust, shall constitute the "Plan
Share Reserve." Any cash earnings received with respect to
Common Stock held in the Trust subject to the Plan Share Awards
shall be distributed to the individual Recipient.
5.04 Effect of Allocations, Returns and Forfeitures Upon
Plan Share Reserves. Upon the allocation of Plan Share Awards
under Section 6.02, the Plan Share Reserve shall be reduced by
the number of Plan Shares subject to the Plan Share Awards so
allocated. Any Plan Shares subject to a Plan Share Award which
may no longer be earned because of a forfeiture by the Recipient
pursuant to Sections 7.01(b) or 7.01(c) shall be added to the
Plan Share Reserve.
ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 Allocations. The Compensation Committee will
determine which Eligible Persons will be granted Plan Share
Awards and the number of Plan Shares covered by each Plan Share
Award, provided, however, that the number of Plan Shares covered
by such Plan Share Awards may not exceed the number of Plan
Shares in the Plan Share Reserve immediately prior to the grant
of such Plan Share Awards, and provided, further, that in no
event shall any Plan Share Award be made which will violate the
Company's Articles of Incorporation or Bylaws or any applicable
law. In the event Plan Shares are forfeited for any reason, the
Compensation Committee may, from time to time, determine which
Eligible Persons will be granted Plan Share Awards from forfeited
Plan Shares.
In selecting those Eligible Persons to whom Plan Share
Awards will be granted and the number of Plan Shares covered by
such Plan Share Awards, the Compensation Committee shall consider
the position and responsibilities of the Eligible
Persons, the value of their services to the Company and/or the
Insurance Companies and any other fact the Compensation Committee
may deem relevant.
6.02 Form of Allocation. Promptly after making a Plan
Share Award, the Compensation Committee shall notify the
Recipient in writing of the grant of the Plan Share Award, the
number of Plan Shares covered by the Plan Share Award, and the
terms upon which the Plan Shares subject to the Plan Share Award
may be earned. The date on which the Compensation Committee so
notifies the Recipient shall be considered the date of grant of
the Plan Share Awards. The Compensation Committee shall maintain
records as to all grants of Plan Share Awards under the Plan.
6.03 Allocations Not Required. Notwithstanding anything to
the contrary in Sections 6.01 and 6.02, no Eligible Person shall
have any right or entitlement to receive a Plan Share Award
hereunder, the grant of Plan Share Awards being at the total
discretion of the Compensation Committee.
ARTICLE VII
EARNING AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 Earning Plan Shares; Forfeitures.
(a) General Rules. Unless the Compensation Committee
shall specifically state otherwise at the time a Plan Share Award
is granted, Plan Shares subject to a Plan Share Award shall be
earned by a Recipient at the rate of twenty percent (20%) of the
aggregate number of Plan Shares covered by the Plan Share Award
at the end of each full twelve month period following the date of
the grant.
(b) Forfeiture Upon Termination of Employment. Except
as set forth in Section 7.01(c) below, the termination of
employment by a Recipient for reasons other than retirement at or
after age 65, in the case of an executive officer of the Company
or either of the Insurance Companies, or 70, in the case of a
director of the Company or either of the Insurance Companies,
death, or disability shall constitute revocation of the
Recipient's unearned Plan Share Award. If the termination of a
Recipient's employment is caused by death or disability, all
unearned Plan Share Awards shall be deemed fully vested.
(c) Revocation for Misconduct. Notwithstanding
anything hereinafter to the contrary, the Compensation Committee
of the Board may, by resolution, immediately revoke, rescind and
terminate any Plan Share Award, or portion thereof, previously
awarded under this Plan, to the extent Plan Shares have not been
delivered thereunder to the Recipient, whether or not yet earned,
in the case of a Recipient who is discharged from the employ of
the Company or either of the Insurance Companies for Cause, or
who is discovered after termination of employment to have engaged
in conduct that would have justified termination for
Cause, and in the case of a member of the Board, who is removed
from the Board for Cause.
7.02 Payment of Dividends. Cash dividends on earned and
unearned Plan Shares shall be allocated and distributed to a
Recipient when declared and paid by the Company with respect to
all shares.
7.03 Distribution of Plan Shares.
(a) Timing of Distributions. Plan Shares shall be
distributed to the Recipient or his Beneficiary, as the case may
be, as soon as practicable after they have been earned. At the
election of the Recipient, but subject to approval of the
Compensation Committee of the Board, unearned Plan Shares subject
to a Plan Share Award that would otherwise be held by the Trust
may be distributed to the Recipient in the form of restricted
stock subject to forfeiture. A Recipient who receives restricted
stock may vote such shares, will receive any dividends paid
thereon, and will be able to exchange restricted shares for
unrestricted shares as vesting occurs.
(b) Form of Distribution. All Plan Shares, together
with any shares representing stock dividends, shall be
distributed in the form of Common Stock. One share of Common
Stock shall be given for each Plan Share earned and payable.
(c) Withholding. The Plan Trustee may withhold from
any payment or distribution made under this Plan sufficient
amounts of cash or shares of Common Stock to cover any applicable
withholding and employment taxes, and if the amount of such
payment is insufficient, the Plan Trustee may require the
Recipient or Beneficiary to pay to the Plan Trustee the amount
required to be withheld as a condition of delivering the Plan
Shares. The Plan Trustee shall pay over to the Company or either
of the Insurance Companies which employs or employed such
Recipient any such amount withheld from or paid by the Recipient
or Beneficiary.
7.04 Voting of Plan Shares. After a Plan Share Award has
been granted, the Recipient shall be entitled to vote the Plan
Shares which are covered by the Plan Share Award and which have
been earned, subject to rules and procedures adopted by the
Compensation Committee of the Board for this purpose. All shares
of Common Stock held by the Trust as to which Recipients are not
entitled to direct, or have not directed, the voting, shall be
voted by the Plan Trustee in the same manner and proportion as
the trustee of the Company's Employee Stock Ownership Plan trust
votes the Common Stock held therein, except as otherwise provided
in Section 7.03(a) or unless, in the reasonable opinion of the
Trustee's legal counsel, the Trustee's fiduciary duty requires
otherwise.
ARTICLE VIII
TRUST
8.01 Trust. The Plan Trustee shall receive, hold,
administer, invest and make distributions and disbursements from
the Trust in accordance with the provisions of this Agreement and
the applicable directions, rules, regulations, procedures and
policies established by the Compensation Committee pursuant to
this Agreement.
8.02 Management of Trust. It is the intent of this
Agreement that, subject to the provisions of this Agreement, the
Plan Trustee shall have complete authority and discretion with
respect to the management, control and investment of the Trust,
and that the Plan Trustee shall invest all assets of the Trust in
Common Stock to the fullest extent practicable, and except to the
extent that the Plan Trustee determines that the holding of
monies in cash or cash equivalents is necessary to meet the
obligations of the Trust. In performing its duties, the Plan
Trustee shall have the power to do all things and execute such
instruments as may be deemed necessary or proper, including the
following powers:
(a) To invest up to one hundred percent (100%) of all
Trust assets in Common Stock without regard to any law now or
hereafter in force limiting investments by trustees or other
fiduciaries. The investment authorized herein constitutes the
only investment of the Trust, and in making such investment, the
Plan Trustee is authorized to purchase Common Stock from the
Company or from any other source, and such Common Stock so
purchased may be outstanding, newly issued, or treasury shares.
(b) To invest any Trust assets not otherwise invested
in accordance with (a) above in such deposit accounts,
certificates of deposit, obligations of the United States
government or its agencies or such other investments as shall be
considered the equivalent of cash, or to invest in mutual funds
which invest in such securities.
(c) To sell, exchange or otherwise dispose of any
property at any time held or acquired by the Trust.
(d) To cause stocks, bonds or other securities to be
registered in the name of a nominee, without the addition of
words indicating that such security is an asset of the Trust (but
accurate records shall be maintained showing that such security
is an asset of the Trust).
(e) To hold cash without interest in such amounts as
may be in the opinion of the Trustee reasonable for the proper
operation of the Plan and the Trust.
(f) To employ brokers, agents, consultants and
accountants.
(g) To hire counsel to render advice with respect to
the Plan Trustee's rights, duties and obligations hereunder, and
such other legal services or representation as the Plan Trustee
may deem desirable.
(h) To hold funds and securities representing the
amounts to be distributed to a Recipient or his Beneficiary as a
consequence of a dispute as to the disposition thereof, whether
in a segregated account or held in common with other assets of
the Trust.
Notwithstanding anything herein contained to the
contrary, the Plan Trustee shall not be required to make any
inventory, appraisal or settlement or report to any court, or to
secure any order of court for the exercise of any power herein
contained, or give bond.
8.03 Records and Accounts. The Trustee shall maintain
accurate and detailed records and accounts of all transactions of
the Trust, which shall be available at all reasonable times for
inspection by any legally entitled person or entity to the extent
required by applicable law, or any other person determined by the
Board.
8.04 Earnings. All earnings, gains and losses with respect
to Trust assets shall be allocated in accordance with a
reasonable procedure adopted by the Compensation Committee of the
Board.
8.05 Expenses. All costs and expenses incurred in the
operation and administration of this Plan shall be borne by the
Trust to the extent not paid by the Company.
8.06 Notice of Insolvency. By its approval and execution
of this Agreement, the Company represents and agrees that the
Compensation Committee of its Board and its President and Chief
Executive Officer, as from time to time acting, shall have the
fiduciary duty and responsibility, on behalf of the Company's
creditors, to give the Trustee prompt written notice of the
Company's insolvency or bankruptcy and the Trustee shall be
entitled to rely thereon to the exclusion of all directions or
claims to pay benefits thereafter made.
8.07 Definition of Insolvency. The Company shall be deemed
to be insolvent or bankrupt upon the occurrence of any of the
following:
(i) The Company is unable to pay its debts as
they fall due; or
(ii) The Company shall make an assignment for the
benefit of creditors, file a petition in bankruptcy, petition or
apply to any tribunal for the appointment of a custodian,
receiver, liquidator, sequestrator, or any trustee for it or a
substantial part of its assets, or shall commence any case under
any bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution, or liquidation law or statute
of any jurisdiction (federal or state), whether now or hereafter
in effect; or if there shall have been filed any such petition or
application, or any such case shall have been commenced against
it, in which an order for relief is entered or which remains
undismissed; or the Company by any act or omission shall indicate
its consent to, approval of or acquiescence in any such petition,
application or case or order for relief or the appointment of a
custodian, receiver or any trustee for it or any substantial part
of any of its property, or shall suffer any such custodianship,
receivership, or trusteeship to continue undischarged.
ARTICLE IX
MISCELLANEOUS
9.01 Adjustments for Capital Changes. The aggregate number
of Plan Shares available for issuance pursuant to Plan Share
Awards and the number of Plan Shares to which any Plan Share
Award relates shall be proportionately adjusted for any increase
or decrease in the total number of outstanding shares of Common
Stock issued subsequent to the Effective Date resulting from any
split, subdivision or consolidation of shares or other capital
adjustment, or other increase or decrease in such Common Stock
effected without receipt or payment of consideration, by the
Company.
9.02 Amendment and Termination of Plan. The Board may, by
resolution, at any time amend or terminate the Agreement. Upon
termination, the Company may direct the Plan Trustee to return to
the Company any shares of Common Stock held in the Plan Share
Reserve and any other unallocated assets of the Trust.
Termination or amendment of the Trust shall not affect a
Recipient's right to earn Plan Shares pursuant to previously
granted Plan Share Awards or to the distribution of Common Stock
relating thereto, including earnings thereon. Termination of the
Plan shall not become effective as to previously awarded Plan
Share Awards that remain outstanding on the proposed termination
date unless the Board elects to distribute all unearned Plan
Shares subject to such Plan Share Awards immediately upon such
termination.
9.03 Nontransferable. Plan Share Awards and rights to Plan
Shares shall not be transferable by a Recipient or Beneficiary,
and during the lifetime of the Recipient, Plan Shares may only be
earned by and paid to the Recipient who was notified in writing
of the Plan Share Award by the Compensation Committee of the
Board pursuant to Section 6.02.
9.04 Employment Rights. Neither the Plan nor any grant of
a Plan Share Award or Plan Shares hereunder nor any action taken
by the Plan Trustee or the Compensation Committee of the Board in
connection with the Plan shall create any right on the part of
any Eligible Person to continue in the employ of the Company or
either of the Insurance Companies or to continue to sit
on the respective Board of Directors thereof.
9.05 Voting and Dividend Rights. No Recipient shall have
any voting or dividend rights or other rights of a shareholder in
respect of any Plan Shares covered by a Plan Share Award, except
as expressly provided in Sections 7.02 and 7.04 above.
9.06 Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the Commonwealth of
Pennsylvania without regard to its conflicts of law rules.
9.07 Effective Date. The date of its execution by the
Company and the Plan Trustee.
9.08 Term of Plan. This Plan shall remain in effect until
the earlier of (1) 21 years from the Effective Date,
(2) termination by the Board, or (3) the distribution of all
assets of the Trust. Termination or amendment of the Plan shall
not affect any Plan Share Awards previously granted, and such
Plan Share Awards shall remain valid and in effect until they
have been earned and paid, or by their terms expire or are
forfeited.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by its duly authorized officers, effective as of the
_____ day of __________________, 1998.
XXXXXX INSURANCE GROUP, INC.
By:
Name: Xxxxxxx X. Xxxx
Title: President and Chief
Executive Officer
Attest:
Name: Xxxxxx X. Speaker
Title: Executive Vice
President and
Treasurer
IN WITNESS WHEREOF, the undersigned, XXXXXX X. XXXXXXX, XX.,
XXXXXXX X. XXXXX, and XXXXXXX X. XXX XXX, as members of the
Compensation Committee of the Board of Directors of XXXXXX
INSURANCE GROUP, INC., hereby execute this Agreement as Plan
Trustee, undertaking to perform the obligations and duties of the
Plan Trustee hereunder and consenting to the foregoing
Management Recognition Plan and Trust Agreement.
Signed: __________________________________
Xxxxxx X. Xxxxxxx, Xx.
__________________________________
Xxxxxxx X. Xxxxx
__________________________________
Xxxxxxx X. Xxx Xxx
