Penn Millers Holding Corporation SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AS AMENDED AND RESTATED

1.1

“ Actuarial Equivalent ” shall mean a benefit or benefits, or a payment or payments, which are of equal value to the benefits for which they are to be substituted. Equivalence of value is determined from actuarial calculations based on certain actuarial assumptions as to mortality and interest, which assumptions are set forth in the definition of “Actuarial Equivalence” in the Pension Plan.

1.2

“ Average Compensation ” shall mean the average of a Participant’s Compensation for the five (5) full calendar years of employment, out of the last ten (10) full calendar years of employment prior to the Determination Date that yields the highest average.

1.3

“ Beneficiary ” shall mean the individual designated in accordance with Article 10 that is entitled to receive benefits under this Plan upon the death of a Participant.

1.4

“ Beneficiary Designation Form ” shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee to designate one or more Beneficiaries.

1.5

“ Board ” shall mean the board of directors of the Company.

1.6

“ Cause ” shall mean any event or circumstance which would entitle the Company to terminate a Participant’s employment for Cause as such term is defined in the Participant’s Executive Agreement, if any.

1.7

“ Change in Control ” shall have the meaning set forth in the applicable Executive Agreement, to the extent permissible under Section 409A of the Code.

1.8

“ Claimant ” shall have the meaning set forth in Section 9.1.

1.9

“ Code ” shall mean the Internal Revenue Code of 1986, as amended from time to time.

1.10

“ Committee ” shall mean the Committee described in Article 8.

1.11

“ Company ” shall mean Penn Millers Holding Corporation, a Pennsylvania corporation, and any successor to all or substantially all of the Company’s assets or business.

1.12

“ Compensation ” shall mean, with respect to any calendar year, the base salary paid by the Employer to the Employee for services actually rendered while an Employee that constitute “wages” as defined in Section 3401(a) of the Code, without regard to any rules under Section 3401(a) of the Code that limit the remuneration included in wages based on the nature or location of the employment or services performed, but excluding an bonuses, incentive compensation, vacation or paid time off payouts, stipends, expense reimbursements, fringe benefits, perquisites and other irregular payments. Notwithstanding the foregoing to the contrary, Compensation shall include elective contributions of wages and salary made by an Employer on behalf of an Employee that are not includable in income under Section 125, Section 132(f)(4), Section 401(k), Section 402(g)(3), Section 402(h), Section 457(b), or Section 403(b) of the Code, and shall exclude fringe benefits that are not included in gross income. Compensation shall be computed without regard to any limit imposed by Code Section 401(a)(17), and shall recognize any wages and salary deferred under any voluntary nonqualified deferred compensation plan and shall treat such wages and salary as if they were not deferred.

1.13

“ Death Benefit ” shall mean the benefits due, if any, to the Participant’s Beneficiary pursuant to Article 3 upon the Participant’s death.

1.14

“ Deferred Retirement Benefit ” shall mean the benefit set forth in Section 3.2.

1.15

“ Determination Date ” shall mean, for purposes of calculating the SERP Benefit, the date on which the Participant dies or experiences a Disability, Early Retirement or Normal Retirement, as the case may be.

1.16

“ Disability ” shall mean Separation from Service with all Employers on or after the date on which the Vested Participant is awarded disability benefits by the Social Security Administration.

1.17

“ Early Retirement ” shall mean Separation from Service with all Employers on or after the date on which the Participant has both become Vested and attained age sixty (60), but prior to the date on which the Participant attains Normal Retirement Age, for any reason other than death or Disability.

1.18

“ Early Retirement Benefit ” shall mean the Participant’s Early Retirement Benefit set forth in Section 3.3.

1.19

“ Early Retirement Reduction Factor ” shall mean one hundred percent (100%) minus the sum of five ninths (5/9) of one percentage point (1%) for each of the first sixty (60) months by which the benefit commencement date precedes the first day of the month coincident with or next following the Participant’s sixty-fifth (65) birthday, and (ii) five eighteenths (5/18) of one percentage point (1%) for each additional month by which the benefit commencement date precedes the first day of the month coincident with or next following the Participant’s sixty-fifth (65) birthday.

1.20

“ Election Form ” shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee to make an election under the Plan.

1.21

“ Employee ” shall mean any individual employed by an Employer.

1.22

“ Employer(s) ” shall mean the Company and/or any of its subsidiaries (now in existence or hereafter formed or acquired) that have been selected by the Board to participate in the Plan and have adopted the Plan as a sponsor.

1.23

“ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time.

1.24

“ Estimated Social Security Benefit ” shall mean the maximum benefit available as of the Participant’s Social Security Normal Retirement Age under the Federal Social Security Act, based on all assumptions selected by the Committee, in its sole discretion. In the event the Participant’s Determination Date is a date other than his or her Social Security Normal Retirement Age, the Committee shall adjust the above-described calculation in the manner it deems appropriate, in its sole discretion, whether or not a monthly benefit is payable to the Participant by the Social Security Administration on such Determination Date. The Committee shall, in all events, apply all assumptions made pursuant to this Section 1.24 consistently to similarly situated Participants in the Plan.

1.25

“ Executive Agreement ” shall mean the Executive Employment Agreement by and between the Participant and the Employer, as amended from time to time.

1.26

“ 401(k) Employer Contributions ” shall mean that portion of the Participant’s balance in the 401(k) Plan which consists of the “company match contributions” and “profit sharing contributions” thereunder plus any investment gains or losses attributable to such contributions, valued as of the Determination Date.

1.27

“ 401(k) Plan ” shall mean the Penn Millers Insurance Company 401(k) Plan, as amended from time to time, or any successor plan thereto.

1.28

“ Good Reason ” shall have the meaning set forth in the applicable Executive Agreement.

1.29

“ Normal Retirement ” shall mean Separation from Service with all Employers on or after the attainment of age sixty-five (65), for any reason other than death or Disability.

1.30

“ Normal Retirement Age ” shall mean the Participant’s attainment of age sixty-five (65).

1.31

“ Normal Retirement Benefit ” shall mean the benefit set forth in Section 3.1.

1.32

“ Participant ” shall mean any Employee (i) who is selected to participate in the Plan, (ii) who elects to participate in the Plan, (iii) who signs a Plan Agreement and a Beneficiary Designation Form, (iv) whose signed Plan Agreement Form and Beneficiary Designation Form are accepted by the Committee, (v) who commences participation in the Plan, and (vi) whose Plan Agreement has not terminated.

1.33

“ Pension Plan ” shall mean the Penn Millers Holding Corporation Pension Plan, as amended and restated effective January 1, 1999, and as amended from time to time.

1.34

“ Pension Plan Benefit ” shall mean the Participant’s “accrued benefit” under the Pension Plan, valued as of the Determination Date.

1.35

“ Plan ” shall mean the Company’s Supplemental Executive Retirement Plan, which shall be evidenced by this instrument and by each Plan Agreement, as amended from time to time.

1.36

“ Plan Agreement ” shall mean a written agreement, as may be amended from time to time, which is entered into by and between an Employer and a Participant. Each Plan Agreement executed by a Participant shall provide for the entire benefit to which such Participant is entitled under the Plan; should there be more than one Plan Agreement, the Plan Agreement bearing the latest date of acceptance by the Employer shall supersede all previous Plan Agreements in their entirety and shall govern such entitlement. The terms of any Plan Agreement may be different for any Participant, and any Plan Agreement may provide additional benefits not set forth in the Plan or limit the benefits otherwise provided under the Plan; provided, however, that any such additional benefits or benefit limitations must be agreed to by both the Employer and the Participant.

1.37

“ Plan Year ” shall, for the first Plan Year, begin on July 1, 2002, and end on December 31, 2002. For each Plan Year thereafter, the Plan Year shall begin on January 1 of each year and continue through December 31.

1.38

“ Reduced SERP Benefit ” shall mean an amount, expressed as a single life annuity, that is computed based on the following:

(b)

The single life annuity benefit which is the Actuarial Equivalent of the Participant’s 401(k) Employer Contributions; less

(c)

The single life annuity benefit that would be payable immediately to the Participant under the Pension Plan; less

(d)

The Participant’s Estimated Social Security Benefit.

(a)

The Participant’s Average Compensation multiplied by sixty-five percent (65%); less

(b)

The single life annuity benefit which is the Actuarial Equivalent of the Participant’s 401(k) Employer Contributions; less

(c)

The single life annuity benefit that would be payable to the Participant under the Pension Plan; less

(d)

The Participant’s Estimated Social Security Benefit.

1.46

“ Vested ” with regard to a Participant, shall mean such Participant has completed ten (10) years of Service for an Employer.

2.1

Participant Selection . Participation in the Plan shall be limited to a select group of management and highly compensated Employees of the Employers, as recommended by the Committee and as approved by the Board in its sole discretion. From that group, the Committee shall select, in its sole discretion, Employees to participate in the Plan.

2.2

Enrollment Requirements . As a condition to participation, each selected Employee shall complete, execute and return to the Committee a Plan Agreement and a Beneficiary Designation Form, all within the time period specified by the Committee. In addition, the Committee shall establish from time to time such other enrollment requirements as it determines in its sole discretion are necessary.

2.3

Commencement of Participation . Provided an Employee selected to participate in the Plan has met all enrollment requirements set forth in this Plan and required by the Committee, including returning all required documents to the Committee within the specified time period, that Employee shall commence participation in the Plan on the date specified by the Committee. If a selected Employee fails to meet all such requirements within the period required, in accordance with Section 2.2, that Employee shall not be eligible to participate in the Plan until the completion of those requirements.

3.1

Normal Retirement Benefit . A Vested Participant who Retires at Normal Retirement Age shall receive, as his or her Normal Retirement Benefit, a SERP Benefit which shall commence on the first day of the month coincident with or next following the date he or she Retires.

3.2

Deferred Retirement Benefit . A Vested Participant who Retires after he or she attains Normal Retirement Age shall receive, as his or her Deferred Retirement Benefit, a SERP Benefit which shall commence on the first day of the month coincident with or next following the date he or she Retires.

3.3

Early Retirement Benefit . A Participant who experiences an Early Retirement shall receive, as his or her Early Retirement Benefit under this Section 3.3, a Reduced SERP Benefit which shall commence on the first day of the month coincident with or next following the date of the Participant’s Early Retirement.

3.4

Disability Retirement Benefit . A Vested Participant who experiences a Disability shall receive, as his or her Disability Retirement Benefit, a lump sum Reduced SERP Benefit

(accrued as of the date of such Disability) which shall be payable as of the first day of the month coincident with or next following the date the Participant experiences the Disability.

3.5

Death Prior to the Commencement of Benefits . If a Vested Participant dies prior to the commencement of benefits, then his or her Beneficiary shall receive, as a Death Benefit, a lump sum Reduced SERP Benefit, accrued as of the date of death. The lump sum payment shall be made to the Participant’s Beneficiary on the first day of the month coincident with or next following the date of the Participant’s death.

3.6

Death After the Commencement of Benefits . Upon the death of a Participant after his or her benefits commence under Sections 3.1 through 3.4, as applicable, the remainder of the Participant’s benefits shall be paid in a lump sum to such Participant’s Beneficiary.

3.7

Separation from Service following Change in Control . If a Vested Participant who has attained age sixty (60) Separates from Service due to (i) involuntary termination without Cause by the Company following a Change in Control, or (ii) termination by the Participant for Good Reason following a Change in Control, then the Participant shall receive a lump sum Reduced SERP Benefit, accrued as of the date of such Participant’s Separation from Service, which shall be payable as of the first day of the month coincident with or next following the date of such Participant’s Separation from Service.

3.8

Limitation on Benefits . Notwithstanding the foregoing provisions of this Article 3, in no event shall a Participant or his or her Beneficiary receive more than one form of benefit under this Article 3.

3.9

Withholding and Payroll Taxes . The Participant’s Employer shall withhold from any and all benefits paid under this Article 3, all federal, state and local income, employment and other taxes required to be withheld by such Participant’s Employer in connection with the benefits hereunder, in amounts to be determined in the sole discretion of the Employer.

3.10

No Payments Due to Separation from Service Prior to Age 60 . Notwithstanding anything in the Plan to the contrary, except in the case of death or Disability (but only to the extent specifically provided in the Plan) prior to age 60, in no e