PMA CAPITAL CORPORATION
401(k) EXCESS PLAN

MARCH 2001

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TABLE OF CONTENTS

Page         ARTICLE I - INTRODUCTION 1 1.1 Introduction 1   ARTICLE II -
DEFINITIONS 1 2.1 Administrator 1 2.2 Affiliated Employer 1 2.3 Annual
Distribution Period 1 2.4 Beneficiary 1 2.5 Board of Directors 2 2.6 Change of
Control 2 2.7 Code 2 2.8 Compensation 2 2.9 Deferred Compensation Plan 2 2.10
Determination Date 2 2.11 Effective Date 2 2.12 Eligible Employee 2 2.13
Employee Pre-Tax Contributions 2 2.14 Employee Pre-Tax Credits 2 2.15 Employer
Matching Contributions 3 2.16 Employer Matching Credits 3 2.17 Employment
Termination Date 3 2.18 ERISA 3 2.19 Excess 401(k) Plan Account 3 2.20 Excess
Salary Reduction Agreement 3 2.21 Participant 3 2.22 Participating Company 3
2.23 Payroll Period 3 2.24 Plan 3 2.25 Plan Sponsor 3 2.26 Plan Year 3 2.27
Qualified Plan 3 2.28 Total Disability 3 2.29 Valuation Date 3 2.30 Vanguard
Funds 3   ARTICLE III - PARTICIPATION 4 3.1 Eligibility to Participate 4 3.2
Procedure for and Effect of Admission 4   ARTICLE IV - CREDITS TO EXCESS 401(K)
PLAN ACCOUNTS 4 4.1 Establishment of Plan Accounts 4 4.2 Investment Obligation
of the Plan Sponsor 4 4.3 Employee Pre-Tax Credit 4 4.4 Salary Reduction
Agreement 5 4.5 Employer Matching Credits 5 4.6 Allocation Among Investment
Options 5 4.7 Administration of Investments 5 4.8 Valuation of Excess 401(k)
Plan Accounts 5   ARTICLE V - VESTING 6

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        5.1 Immediate Vesting 6   ARTICLE VI - PAYMENT OF BENEFITS 6 6.1 Benefit
upon Termination of Employment 6 6.2 Payment of Benefits at Retirement 6 6.3
Payment of Benefits Following Death 7 6.4 Earnings where Installment Payments
Are Made 7 6.5 Form of Payment 7 6.6 Change of Control where Installment
Payments Are Made 7 6.7 Reduced Benefit upon Request following a Change of
Control 7 6.8 Total Disability 7   ARTICLE VII - ADMINISTRATION OF THE PLAN 7
7.1 Administrator 7 7.2 Committee Action 7 7.3 Powers and Duties of the
Administrator 8 7.4 Decisions of Administrator 8 7.5 Administrative Expenses 8
7.6 Eligibility to Participate 9 7.7 Insurance and Indemnification for Liability
9 7.8 Agent for Service of Legal Process 9 7.9 Delegation of Responsibility 9
7.10 Claims Procedure 9   ARTICLE VIII - AMENDMENT AND TERMINATION 10 8.1
Amendment or Termination 10   ARTICLE IX - MISCELLANEOUS 11 9.1 Funding 11 9.2
Status of Employment 11 9.3 Payments to Minors and Incompetents 11 9.4
Inalienability of Benefits 11 9.5 Governing Law 12 9.6 Severability 12 9.7
Required Information to Administrator 12 9.8 Income and Payroll Tax Withholding
12 9.9 Application of Plan 12 9.10 No Effect on Other Benefits 12 9.11 Inurement
12 9.12 Notice 13 9.13 Captions 13 9.14 Acceleration of Payments 13 9.15
Reporting and Disclosure Requirements 13 9.16 Gender and Number 13   ARTICLE X -
ADOPTION BY AFFILIATED EMPLOYERS 13 10.1 Adoption of Plan 13 10.2 Withdrawal
from Plan 14 10.3 Application of Withdrawal Provisions 14 10.4 Plan Sponsor
Appointed Agent of Participating Companies 14   APPENDIX A - INVESTMENT OPTIONS
AVAILABLE FOR MEASUREMENT OF
             INVESTMENT EARNINGS OR LOSSES UNDER PLAN 15

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          APPENDIX B - LIST OF PARTICIPATING COMPANIES 16   PLAN EXHIBIT A -
PLAN ADOPTION AGREEMENT 17   PLAN ADOPTION AGREEMENT - PENNSYLVANIA
MANUFACTURERS'
            ASSOCIATION INSURANCE COMPANY 18   PLAN ADOPTION AGREEMENT - PMA
CAPITAL INSURANCE COMPANY
            (FORMERLY PMA REINSURANCE CORPORATION) 19   PLAN ADOPTION AGREEMENT
- CALIBER ONE INDEMNITY COMPANY 20   PLAN ADOPTION AGREEMENT - CALIBER ONE
MANAGEMENT COMPANY, INC. 21   PLAN ADOPTION AGREEMENT - PMA MANAGEMENT CORP 22  
PLAN ADOPTION AGREEMENT - PMA RE MANAGEMENT COMPANY 23

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PMA CAPITAL CORPORATION
401(k) EXCESS PLAN

ARTICLE I —INTRODUCTION

        1.1 Introduction. PMA Capital Corporation (then known as the
Pennsylvania Manufacturers Corporation) (the “Plan Sponsor”) previously
established the PMA Capital Corporation Executive Deferred Compensation Plan
(then known as the PMC Executive Deferred Compensation Plan) (the “Deferred
Compensation Plan”) to provide certain benefits in excess of the benefit
provided under the PMA Capital Corporation 401(k) Plan (then known as The PMC
401(k) Plan) (the “Qualified Plan”). The Plan Sponsor has decided to provide
certain benefits previously provided under the Deferred Compensation Plan in a
separate plan to be known as the PMA Capital Corporation 401(k) Excess Plan (the
“Plan”), as set forth herein, and has restated the Deferred Compensation Plan
to, among other things, reflect the removal from the Deferred Compensation Plan
of those provisions set forth herein.

        The Plan is established for the purpose of providing certain employees
of the Plan Sponsor and certain of its affiliated employers with certain
benefits that would be provided under the Qualified Plan but for the limitations
imposed by Sections 401(k), 401(m), 415 and 401(a)(17) of the Internal Revenue
Code of 1986, as amended. The Plan is intended to be an unfunded arrangement,
maintained primarily for the purpose of providing deferred compensation for a
select group of management and/or highly compensated employees of the Plan
Sponsor and its affiliated employers within the meaning of Sections 201(2) and
401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended.

ARTICLE II —DEFINITIONS

        The following words and phrases shall have the following meanings unless
a different meaning is plainly required by the context:

        2.1 Administrator means the committee (hereinafter referred to as
“Committee”) appointed by the President of the Plan Sponsor to serve as the
Administrator of the Plan. If no such Committee is appointed, the Plan Sponsor
shall be the Administrator of the Plan.

        2.2 Affiliated Employer means a member of a group of employers, of which
the Plan Sponsor is a member and which group constitutes:

 

     (a) A controlled group of corporations (as defined in Section 414(b) of the
Code);

 

     (b) Trades or businesses (whether or not incorporated) which are under
common control (as defined in Section 414(c) of the Code);

 

     (c) Trades or businesses (whether or not incorporated) which constitute an
affiliated service group (as defined in Section 414(m) of the Code); or

 

     (d) Any other entity required to be aggregated with the Plan Sponsor
pursuant to Section 414(o) of the Code and the Treasury regulations thereunder.

        2.3 Annual Distribution Period means the first 60 days of a Plan Year.

        2.4 Beneficiary means the Participant’s designated beneficiary under the
Qualified Plan, unless the Participant designates a different beneficiary (or,
in the event there is no designated beneficiary under the Qualified Plan, (a)
the Participant’s surviving spouse, or (b) if there is no surviving spouse, the
Participant’s beneficiary under the Plan

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Sponsor’s group term life insurance program, or (c) if neither (a) nor (b) is
applicable, the executors and/or administrators of the Participant’s estate).

        2.5 Board of Directors means the Board of Directors of the Plan Sponsor,
as from time to time constituted, or any committee thereof which is authorized
to act on behalf of the Board of Directors.

        2.6 Change of Control means a change of control of the Plan Sponsor of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A promulgated under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), or Item 1(a) of a Current Report on Form 8-K or any
successor rule, whether or not the Plan Sponsor is then subject to such
reporting requirements; provided that, without limitation, such a Change of
Control shall be deemed to have occurred if:

 

     (a) Any “person”(as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or first becomes the “beneficial owner”(as determined for
purposes of Regulation 13D-G under the Exchange Act as currently in effect),
directly or indirectly, in a transaction or series of transactions, of
securities of the Plan Sponsor representing more than 50% of the voting power of
the Plan Sponsor’s voting capital stock (the “Voting Stock”); or

 

     (b) The consummation of a merger, or other business combination after which
the holders of the Voting Stock do not collectively own 50% or more of the
voting capital stock of the entity surviving such merger or other business
combination, or the sale, lease, exchange or other transfer in a transaction or
series of transactions of all or substantially all of the assets of the Plan
Sponsor; or

 

     (c) At any time individuals who were either nominated for election by the
Plan Sponsor’s Board of Directors or were elected by the Plan Sponsor’s Board of
Directors cease for any reason to constitute at least a majority of the Plan
Sponsor’s Board of Directors.

        2.7 Code means the Internal Revenue Code of 1986, as amended. Reference
to a specific Section of the Code shall include such Section, any valid
regulation promulgated thereunder, and any comparable provision of any future
legislation amending, supplementing or superseding such Section.

        2.8 Compensation means a Participant’s Compensation as such term is
defined in the Qualified Plan, without taking into account the Code Section
401(a)(17) limitation and before reduction for employee contributions under this
or any other nonqualified savings plan.

        2.9 Deferred Compensation Plan means the PMA Capital Corporation
Executive Deferred Compensation Plan (formerly known as the PMC Executive
Deferred Compensation Plan).

        2.10 Determination Date means March 31, June 30, September 30 and
December 31 of each Plan Year.

        2.11 Effective Date means January 1, 1999.

        2.12 Eligible Employee means an officer of a Participating Company,
provided such officer is a member of a select group of management and highly
compensated employees within the meaning of Section 201(2) of ERISA.

        2.13 Employee Pre-Tax Contributions means the employee pre-tax
contributions (i.e., Basic Contributions) that a Participant may elect to make
to the Qualified Plan.

        2.14 Employee Pre-Tax Credits means the amounts credited to a
Participant’s Excess 401(k) Plan Account pursuant to Section 4.3.

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        2.15 Employer Matching Contributions means the employer matching
contributions made by the Participating Company on behalf of a Participant to
the Qualified Plan.

        2.16 Employer Matching Credits means the amounts credited to a
Participant’s Excess 401(k) Plan Account pursuant to Section 4.5.

        2.17 Employment Termination Date means the date on which the
Participant’s status as an employee of a Participating Company terminates.

        2.18 ERISA means the Employee Retirement Income Security Act of 1974, as
amended. Reference to a specific Section of ERISA shall include such Section,
any valid regulation promulgated thereunder, and any comparable provision of any
future legislation amending, supplementing or superseding such Section.

        2.19 Excess 401(k) Plan Account means the separate account established
and maintained, solely as a bookkeeping entry, by the Plan Sponsor in the name
of each Participant pursuant to, and in accordance with, Section 4.1.

        2.20 Excess Salary Reduction Agreement means the written salary
reduction agreement entered into by a Participant and the Participating Company
pursuant to this Plan and which is made on a form prescribed by the
Administrator.

        2.21 Participant means an Eligible Employee who is participating in the
Plan in accordance with the provisions of Article III.

        2.22 Participating Company means the Plan Sponsor and each of its
Affiliated Employers which, upon the approval of the Board of Directors, has
agreed to participate in this Plan in accordance with the provisions of Article
X. Each Participating Company is listed on Appendix B.

        2.23 Payroll Period means the regular payroll period used by the
Participating Company for the payment of wages and salaries to employees.

        2.24 Plan means the PMA Capital Corporation 401(k) Excess Plan, as set
forth in this document and as amended from time to time.

        2.25 Plan Sponsor means PMA Capital Corporation (formerly known as
Pennsylvania Manufacturers Corporation), a Pennsylvania corporation.

        2.26 Plan Year means the calendar year.

        2.27 Qualified Plan means the PMA Capital Corporation 401(k) Plan, as
amended from time to time.

        2.28 Total Disability shall mean a medically determinable physical or
mental condition of such severity and probable prolonged duration as to render
the Participant, as determined by the Administrator, upon the advice of a
licensed physician the Administrator may consult, unable to meet the
requirements of his or her customary employment in a satisfactory manner. A
Participant’s Total Disability shall be determined by the Administrator upon the
basis of a medical examination and of such other evidence as the Administrator
deems necessary and desirable. However, a Participant’s eligibility for
disability benefits under Title II of the Federal Social Security Act or under
the Plan Sponsor’s insured long term disability plan shall be conclusive proof
of the Participant’s Total Disability.

        2.29 Valuation Date shall mean each day on which the NYSE is open for
business and such other date(s), if any, as the Administrator shall determine.

        2.30 Vanguard Funds means any of the mutual funds of The Vanguard Group
of Investment Companies listed in Appendix A.

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ARTICLE III —PARTICIPATION

        3.1 Eligibility to Participate. Any Eligible Employee who is
participating in the Qualified Plan shall be eligible to become a Participant in
this Plan.

        3.2 Procedure for and Effect of Admission. An Eligible Employee shall
become a Participant once he/she has completed an Excess Salary Reduction
Agreement and such other forms and provided such data as are reasonably required
by the Administrator. By becoming a Participant, an Eligible Employee shall for
all purposes be deemed conclusively to have assented to the provisions of this
Plan and all amendments hereto.

ARTICLE IV —CREDITS TO EXCESS 401(K) PLAN ACCOUNTS

        4.1 Establishment of Plan Accounts. The Plan Sponsor shall establish and
maintain on its books and records, solely as a bookkeeping entry, an Excess
401(k) Plan Account for each Participant. Each Excess 401(k) Plan Account will
be used to record:

 

     (a) The Employee Pre-Tax Credits and Employer Matching Credits credited
under this Plan on behalf of the Participant pursuant to Sections 4.3 and 4.5;

 

     (b) The credits or debits for investment earnings or losses under Section
4.6; and

 

     (c) The payments of benefits to the Participant or the Participant's
Beneficiary under Article VI.

        4.2 Investment Obligation of the Plan Sponsor. Benefits are payable as
they become due irrespective of any actual investments the Plan Sponsor may make
to meet its obligations. Neither the Plan Sponsor, nor any trustee (in the event
the Plan Sponsor elects to use a grantor trust to accumulate funds) shall be
obligated to purchase or maintain any asset, and any reference to investments or
Vanguard Funds is solely for the purpose of computing the value of benefits. To
the extent a Participant or any person acquires a right to receive payments from
the Plan Sponsor under this Plan, such right shall be no greater than the right
of any unsecured creditor of the Plan Sponsor. Neither this Plan nor any action
taken pursuant to the terms of this Plan shall be considered to create a
fiduciary relationship between the Plan Sponsor and the Participants or any
other persons or to establish a trust in which the assets are beyond the claims
of any unsecured creditor of the Plan Sponsor.

        4.3 Employee Pre-Tax Credit.

 

     (a) Manner of Election. A Participant may elect, by completing an Excess
Salary Reduction Agreement, to reduce the amount of Compensation that the
Participant would otherwise receive from the Participating Companies and have
the amount of such reduction credited to the Participant’s Excess 401(k) Plan
Account as an Employee Pre-Tax Credit.

 

     (b) Condition Precedent to Employee Pre-Tax Credits under Plan. In order to
be eligible to have the Plan Sponsor credit amounts as Employee Pre-Tax Credits
to the Participant’s Excess 401(k) Plan Account under this Plan, the Participant
must have elected to make the maximum Employee Pre-Tax Contributions (i.e.,Basic
Contributions) permitted by the Qualified Plan after taking into account any
limitations imposed on such Employee Pre-Tax Contributions by Sections
401(a)(17), 401(k), 401(m), 402(g), or 415 of the Code or any other limitation
imposed by the Qualified Plan. Further, in no event shall any Employee Pre-Tax
Contributions (i.e.,Basic Contributions) or Employer Matching Contributions
contributed to the Qualified Plan on behalf of any Participant be transferred to
this Plan from the Qualified Plan.

 

     (c) Participant Employed during Plan Year. For purposes of determining the
Employee Pre-Tax Credit of a Participant who (1) was previously employed by an
unrelated employer, (2) was covered by a qualified cash or deferred arrangement
described in Section 401(k)(2) of the Code of such unrelated employer, and (3)
is first employed by a Participating Company during a Plan Year, the maximum
salary deferral that such

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Participant may have credited to his or her Excess 401(k) Plan Account for any
Plan Year as an Employee Pre-Tax Credit under the Plan shall be the amount
determined by multiplying his or her Compensation by the salary deferral
percentage elected by the Participant under this Plan after taking into account
(i) the Employee Pre-Tax Contributions for such Plan Year under the Qualified
Plan, plus (ii) the elective deferrals made by such Participant under the
unrelated employer’s qualified cash or deferred arrangement for such Plan Year.

        4.4 Salary Reduction Agreement. An Excess Salary Reduction Agreement for
any Plan Year shall be made before the beginning of that Plan Year and shall
remain in full force and effect for subsequent Plan Years unless revoked by the
Participant. In the case of an Eligible Employee who is hired during a Plan Year
or an employee who becomes an Eligible Employee during a Plan Year, such
Eligible Employee may enter into an Excess Salary Reduction Agreement within
sixty days after the date he/she becomes eligible. In the case of the Plan Year
in which the Plan is first implemented, Eligible Employees may enter into an
Excess Salary Reduction Agreement within two months prior to the Effective Date
of the Plan.

        4.5 Employer Matching Credits. For each Payroll Period, the Plan Sponsor
shall credit each Participant’s Excess 401(k) Plan Account with Employer
Matching Credits in an amount equal to:

 

     (a) The lesser of: (1) 5% of the Eligible Employee's Compensation for the
Payroll Period; or (2) the sum of the Employee Pre-Tax Contributions and
Employee Pre-Tax Credits on behalf of the Participant for the Payroll Period;
minus

 

     (b) The amount of Employer Matching Contributions made to the Qualified
Plan on behalf of the Participant for the Payroll Period.

        4.6 Allocation Among Investment Options. A Participant may direct that
the Employee Pre-Tax Credits and the Employer Matching Credits credited to his
or her Excess 401(k) Plan Accounts be valued, in accordance with Section 4.8, as
if the balance credited to the Excess 401(k) Plan Account were invested in one
or more Vanguard Funds or other investments selected by the Participant. The
Participant may select any of the investment options set forth in Appendix A in
multiples of 5% (or such smaller percentage as the Administrator may determine).
The designation of one or more investment options, whether a Vanguard Fund or
otherwise, by a Participant under this Section 4.6 shall be used solely to
measure the amounts of investment earnings or losses that will be credited or
debited to the Participant’s Excess 401(k) Plan Account on the Plan Sponsor’s
books and records, and the Plan Sponsor shall not be required under the Plan to
establish any account in the Vanguard Funds or to purchase any Vanguard Fund
shares or other investment on the Participant’s behalf. The designation by a
Participant of any investment option under this Section 4.6 shall be made in
accordance with the rules and procedures prescribed by the Administrator.

        4.7 Administration of Investments. The investment gain or loss with
respect to Employee Pre-Tax Credits and the Employer Matching Credits credited
to the Participant’s Excess 401(k) Plan Account on behalf of such Participant
shall continue to be determined in the manner selected by the Participant
pursuant to Section 4.6 until a new designation is filed with the Administrator
or its appointee. If any Participant fails to file a designation, he or she
shall be deemed to have elected to continue to follow the investment
designation, if any, in effect for the immediately preceding Plan Year. A
designation filed by a Participant changing his or her investment option
selection shall apply to either future contributions, amounts already
accumulated in his or her Excess 401(k) Plan Account, or both. A Participant may
change his or her investment selection on any Valuation Date and such change
shall be effected as soon as administratively practicable.

        4.8 Valuation of Excess 401(k) Plan Accounts. The Excess 401(k) Plan
Account of each Participant shall be valued on each Valuation Date based upon
the performance of the investment option or options selected by the Participant.
Such valuation shall reflect the net asset value expressed per share of each
designated investment option. Each Excess 401(k) Plan Account shall be valued
separately. A valuation summary shall be prepared on each Determination Date
and/or such other dates as may be determined by the Administrator.

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ARTICLE V —VESTING

        5.1 Immediate Vesting. At all times, a Participant will be 100% vested
in his or her Excess 401(k) Plan Account.

ARTICLE VI —PAYMENT OF BENEFITS

        6.1 Benefit upon Termination of Employment. Upon a Participant’s
Employment Termination Date, the Plan Sponsor shall pay to the Participant an
amount equal to the balance in the Participant’s Excess 401(k) Plan Account in
two installments:

 

     (a) The first installment, in an amount equal to 50% of the balance in the
Excess 401(k) Plan Account, shall be paid within 60 days following his/her
Employment Termination Date; and

 

     (b) The second installment, in an amount equal to the then remaining
balance in the Excess 401(k) Plan Account, shall be paid during the first Annual
Distribution Period following the date on which the first installment was paid.

        6.2 Payment of Benefits at Retirement. If a Participant remains
continuously employed by a Participating Company until he or she reaches his or
her “Early Retirement Date” (as such term is defined in the PMA Capital
Corporation Pension Plan), the Plan Sponsor shall pay the Participant a benefit
either:

 

     (a) In two installments, according to the provisions of Section 6.1 above;
or

 

     (b) If the Participant makes an irrevocable election at least 90 days prior
to the Plan Year in which he or she retires, in the following five annual
installments:

 

     (1) During the first Annual Distribution Period following the Participant’s
Employment Termination Date, a cash payment in an amount equal to 20% of the
balance in the Participant’s Excess 401(k) Plan Account on the Valuation Date
coincident with, or next preceding, the date payment is made;

 

     (2) During the second Annual Distribution Period following the
Participant’s Employment Termination Date, a cash payment in an amount equal to
25% of the then balance in the Participant’s Excess 401(k) Plan Account on the
Valuation Date coincident with, or next preceding, the date payment is made;

 

     (3) During the third Annual Distribution Period following the Participant’s
Employment Termination Date, a cash payment in an amount equal to 33% of the
then balance in the Participant’s Excess 401(k) Plan Account on the Valuation
Date coincident with, or next preceding, the date payment is made;

 

     (4) During the fourth Annual Distribution Period following the
Participant’s Employment Termination Date, a cash payment in an amount equal to
50% of the then balance in the Participant’s Excess 401(k) Plan Account on the
Valuation Date coincident with, or next preceding, the date payment is made; and

 

     (5) During the fifth Annual Distribution Period following the Participant’s
Employment Termination Date, a cash payment in an amount equal to the then
remaining balance in the Participant’s Excess 401(k) Plan Account on the
Valuation Date coincident with, or next preceding, the date payment is made.

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        6.3 Payment of Benefits Following Death. Upon a Participant’s date of
death, the Administrator shall reduce the balance in the Participant’s Excess
401(k) Plan Account by the amount that the Participant has previously received
or shall receive pursuant to Section 6.2. Thereafter, the Plan Sponsor shall pay
to the Participant’s Beneficiary a single sum payment, in cash, equal to the
balance credited to the Participant’s Excess 401(k) Plan Account on the
Valuation Date coincident with, or next preceding, the date payment is made.
Payment under this Section 6.3 shall be made as soon as practicable following
the receipt by the Plan Sponsor of acceptable proof of the Participant’s death.

        6.4 Earnings where Installment Payments Are Made. Where any benefit is
paid in annual installments, the undistributed balance credited to the Account
during the period of the installment payments and ending on the date of the last
installment payment shall be credited with investment earnings or debited with
investment losses in accordance with Section 4.6.

        6.5 Form of Payment. All payments under this Plan shall be in cash only
and no Participant or Beneficiary shall have any right to receive a distribution
in any other form of payment.

        6.6 Change of Control where Installment Payments Are Made. In the event
of a Change of Control of the Plan Sponsor, a terminated or retired Participant,
who has not received his or her entire balance under Section 6.1 or 6.2, shall
be paid by the Plan Sponsor any undistributed balance credited to the
Participant’s Excess 401(k) Plan Account, in a single sum payment, in cash, as
soon as practicable following such Change of Control.

        6.7 Reduced Benefit upon Request following a Change of Control. Within
60 days following a Change of Control, a Participant may elect in writing to
receive an immediate distribution of a reduced benefit under the Plan. If the
Participant makes such an election under this Section 6.7, the amount of the
reduced benefit shall equal the balance credited to the Participant’s Excess
401(k) Plan Account, reduced by the lesser of 5% of the balance or $25,000.

        6.8 Total Disability. If a Participant incurs a Total Disability, he or
she will be deemed to have incurred his or her Employment Termination Date on
the date that is 26 weeks after the date he or she commenced receiving short
term disability benefits under the Plan Sponsor’s Health and Welfare Plan and
the provisions of Section 6.1 shall apply to such Participant.

ARTICLE VII —ADMINISTRATION OF THE PLAN

        7.1 Administrator. The Committee appointed by the President of the Plan
Sponsor is hereby designated as the administrator of the Plan. If no Committee
is appointed by the Plan Sponsor as the Administrator, the Plan Sponsor shall be
the Administrator of the Plan. The Administrator shall have the authority to
control and manage the operation and administration of the Plan. The President
of the Plan Sponsor may appoint another person to be the Administrator at any
time. The President of the Plan Sponsor may also remove an Administrator and
fill any vacancy which may arise.

        7.2 Committee Action. If a Committee is appointed as Administrator, the
following rules apply:

 

     (a) On all matters within the jurisdiction of the Committee, the decision
of a majority of the members of the Committee shall govern and control. The
Committee may take action either at a meeting or in writing without a meeting,
provided that in the latter instance all members of the Committee shall have
been advised of the action contemplated and that the written instrument
evidencing the action shall be signed by a majority of the members.

 

     (b) The President of the Plan Sponsor shall appoint the Chair of the
Committee. The Committee may appoint, either from among its members or
otherwise, a secretary who shall keep a record of all meetings and actions taken
by the Committee. Either the Chair of the Committee or any member of the
Committee designated by the Chair shall execute any certificate, instrument or
other written direction on behalf of the Committee. Any action taken on matters
within the discretion of the

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Committee. Any action taken on matters within the discretion of the Committee
shall be final and conclusive as to the parties thereto and as to all
Participants or beneficiaries claiming any right under the Plan.

        7.3 Powers and Duties of the Administrator. The Administrator shall have
all powers necessary to supervise the administration of the Plan and to control
its operation in accordance with its terms, including, without limiting the
generality of the foregoing, the power to:

 

     (a) Appoint, retain, and terminate such persons as it deems necessary or
advisable to assist in the administration of the Plan or to render advice with
respect to the responsibilities of the Administrator under the Plan, including
accountants, attorneys and physicians;

 

     (b) Make use of the services of the employees of the Participating Company
in administrative matters;

 

     (c) Obtain and act on the basis of all valuations, certificates, opinions
and reports furnished by the persons described in (a) or (b) above;

 

     (d) Review the manner in which benefit claims and other aspects of the Plan
administration have been handled by the employees of the Participating Company;

 

     (e) Determine all benefits and resolve all questions pertaining to the
administration and interpretation of the Plan provisions, either by rules of
general applicability or by particular decisions; to the maximum extent
permitted by law, all interpretations of the Plan and other decisions of the
Administrator shall be conclusive and binding on all parties;

 

     (f) Adopt such forms, rules and regulations as it shall deem necessary or
appropriate for the administration of the Plan and the conduct of its affairs,
provided that any such forms, rules and regulations shall not be inconsistent
with the provisions of the Plan;

 

     (g) Remedy any inequity from incorrect information received or communicated
or from administrative error;

 

     (h) Commence or defend any litigation arising from the operation of the
Plan in any legal or administrative proceeding;

 

     (i) Determine all considerations affecting the eligibility of any Eligible
Employee to become a Participant or remain a Participant in the Plan;

 

     (j) Determine the status and rights of Participants and their
Beneficiaries;

 

     (k) Direct the Plan Sponsor to pay benefits under the Plan, and to give
such other directions and instructions as may be necessary for the proper
administration of the Plan; and

 

     (l) Be responsible for the preparation, filing and disclosure on behalf of
the Plan of such documents and reports as are required by any applicable federal
or state law.

        7.4 Decisions of Administrator. All decisions of the Administrator, and
any action taken by it in respect of the Plan shall be conclusive and binding on
all persons, subject to the claims and appeal procedure described in Section
7.10 hereof.

        7.5 Administrative Expenses. All expenses incident to the operation and
administration of the Plan reasonably incurred, including, without limitation by
way of specification, the fees and expenses of attorneys and

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advisors, and for such other professional, technical and clerical assistance as
may be required, shall be paid by the Plan Sponsor.

        7.6 Eligibility to Participate. No member of the Administrator who is
also an Eligible Employee shall be precluded from participating in the Plan if
otherwise eligible, but he or she shall not be entitled, as a member of the
Administrator, to act or pass upon any matters pertaining specifically to his or
her own benefit under the Plan.

        7.7 Insurance and Indemnification for Liability. The rules relating to
the insurance and indemnification for liability are as follows:

 

     (a) Insurance.The Plan Sponsor may, in its discretion, obtain, pay for, and
keep current a policy or policies of insurance, insuring members of the
Administrator and other employees to whom any responsibility with respect to
administration of the Plan has been delegated against any and all liabilities,
costs and expenses incurred by such persons as a result of any act, or omission
to act, in connection with the performance of their duties, responsibilities and
obligations under the Plan and any applicable federal or state law.

 

     (b) Indemnity.If the Plan Sponsor does not obtain, pay for, and keep
current the type of insurance policy or policies referred to in Section 7.7(a)
above, or if such insurance is provided but any of the members of the
Administrator or other employees referred to in Section 7.7(a) above incur any
costs or expenses which are not covered under such policies, then, in either
event, the Plan Sponsor shall, to the extent permitted by law, indemnify and
hold harmless such parties against any and all costs, expenses and liabilities
incurred by such parties in performing their duties and responsibilities under
this Plan, provided such party or parties were acting in good faith within what
was reasonably believed to have been in the best interests of the Plan and its
Participants.

        7.8 Agent for Service of Legal Process. The name and address of the
person designated as the agent for service of legal process are:

Plan Administrator
PMA Capital Corporation
1735 Market Street, 27th Floor
Philadelphia, PA 19103

        7.9 Delegation of Responsibility. The Administrator may designate a
committee of one or more persons to carry out any of the responsibilities or
functions assigned or allocated to the Administrator under the Plan. Each
reference to the Administrator in this Plan shall include the Administrator as
well as any person to whom the Administrator may have delegated the performance
of a particular function or responsibility under this Section 7.9.

        7.10 Claims Procedure.

 

     (a) Claim for Benefits.All claims for benefits under the Plan shall be made
in writing and shall be signed by the applicant. Claims shall be submitted to a
representative designated by the Administrator and hereinafter referred to as
the “Claims Coordinator”.

 

     Each claim hereunder shall be acted on and approved or disapproved by the
Claims Coordinator within 60 days following the receipt by the Claims
Coordinator of the information necessary to process the claim.

 

     In the event the Claims Coordinator denies a claim for benefits, in whole
or in part, the Claims Coordinator shall notify the applicant in writing of the
denial of the claim and notify such applicant of his or her right to a review of
the Claims Coordinator’s decision by the Administrator. Such notice by the
Claims Coordinator shall also set forth, in a manner calculated to be understood
by the applicant, the specific reason for such denial, the specific Plan
provisions on which the denial is based, a description of any additional

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material or information necessary to perfect the claim, with an explanation of
why such material or information is necessary, and an explanation of the Plan’s
claims review procedure as set forth in this Section 7.10.

 

     If no action is taken by the Claims Coordinator on an applicant’s claim
within 60 days after receipt by the Claim Coordinator, such application shall be
deemed to be denied for purposes of the following appeals procedure.

 

     (b) Appeals Procedure.Any applicant whose claim for benefits is denied in
whole or in part (“Claimant”) may appeal from such denial to the Administrator
for a review of the decision by the Administrator. Such appeal must be made
within six months after the Claimant has received written notice of the denial
as provided above in Section 7.10(a). An appeal must be submitted in writing
within such period and must:

 

     (1) Request a review by the Administrator of the claim for benefits under
the Plan;

 

     (2) Set forth all of the grounds upon which the Claimant's request for
review is based and any facts in support thereof; and

 

     (3) Set forth any issues or comments which the Claimant deems pertinent to
the appeal.

 

     The Administrator shall regularly review appeals by Claimants. The
Administrator shall act upon each appeal within 60 days after receipt thereof
unless special circumstances require an extension of the time for processing the
Claimant’s request for review. If such an extension of time for processing is
required, written notice of the extension shall be forwarded to the Claimant
prior to the commencement of the extension. In no event shall such extension
exceed a period of 120 days after the request for review is received by the
Administrator.

 

     The Administrator shall make a full and fair review of each appeal and any
written materials submitted by the Claimant and/or the Participating Company in
connection therewith. The Administrator may require the Claimant and/or the
Participating Company to submit such additional facts, documents or other
evidence as the Administrator in its discretion deems necessary or advisable in
making its review. The Claimant shall be given the opportunity to review
pertinent documents or materials upon submission of a written request to the
Administrator, provided the Administrator finds the requested documents or
materials are pertinent to the appeal.

 

     On the basis of its review, the Administrator shall make an independent
determination of the Claimant’s eligibility for benefits under the Plan. The
decision of the Administrator on any claim for benefits shall be final and
conclusive upon all parties thereto.

 

     In the event the Administrator denies an appeal, in whole or in part, the
Administrator shall give written notice of the decision to the Claimant, which
notice shall set forth, in a manner calculated to be understood by the Claimant,
the specific reasons for such denial and which shall make specific reference to
the pertinent Plan provisions on which the Administrator’s decision was based.

 

     (c) Compliance with Regulations.It is intended that the claims procedure of
this Plan be administered in accordance with the claims procedure regulations of
the Department of Labor set forth in 29 CFR § 2560.503-1.

ARTICLE VIII —AMENDMENT AND TERMINATION

        8.1 Amendment or Termination.

 

     (a) The Board of Directors shall have the right to alter, amend, modify,
restate or terminate the

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Plan, or any part thereof, through the adoption of a written resolution when in
its absolute discretion, it determines such action to be advisable; provided,
however, that no such action by the Board of Directors shall reduce the amount
credited to a Participant’s Excess 401(k) Plan Account at the time of the
adoption of the amendment, modification or restatement and no such amendment,
modification or restatement or termination may occur as a result of a Change of
Control, within two years after a Change of Control, or as part of any plan to
effect a Change of Control. Each amendment shall be set forth in a written
instrument.

 

     (b) In the event of termination, the Plan Sponsor, at its option, may pay
each Participant an amount equal to the total amount credited to the
Participant’s Excess 401(k) Plan Account in a single sum payment of cash or, in
the alternative, pay such amount in accordance with the provisions of Article
VI. Termination of the Plan shall not serve to reduce the amount credited to a
Participant’s Excess 401(k) Plan Account on the date of termination. Moreover,
no such termination may occur as a result of a Change of Control, within two
years after a Change of Control, or as part of any plan to effect a Change of
Control.

ARTICLE IX —MISCELLANEOUS

        9.1 Funding. Nothing contained in this Plan and no action taken pursuant
to this Plan will create or be construed to create or require a funded
arrangement or any kind of fiduciary duty between the Plan Sponsor and/or the
Administrator and a Participant. Benefits payable under this Plan to a
Participant or Beneficiary, if applicable, shall be paid directly by the Plan
Sponsor from a grantor trust (the “Trust”) within the meaning of Section 671 of
the Code, to the extent that such benefits are not paid from the general assets
of the Plan Sponsor or other Participating Company. The Trust must be an
irrevocable grantor trust, the assets of which are subject to the claims of the
general creditors of the Plan Sponsor in the event of its insolvency, defined
for the purposes of this provision as the Plan Sponsor’s inability to pay its
debts as they become due or that the Plan Sponsor is subject to a pending
proceeding under the United States Bankruptcy Code. Except as to any amounts
paid or payable to the Trust, the Plan Sponsor shall not be obligated to set
aside, earmark or escrow any funds or other assets to satisfy its obligations
under this Plan, and the Participant and his or her Beneficiary shall not have
any property interest in any specific assets of the Plan Sponsor other than an
unsecured right to receive payments from the Plan Sponsor as provided herein. To
the extent any person acquires a right hereunder, such right(s) shall be no
greater than those of a general, unsecured creditor of the Plan Sponsor. In the
event that the amounts accumulated in the Trust are not sufficient to pay the
benefits payable under this Plan, such benefits shall be paid directly from the
general assets of the Plan Sponsor or other Participating Company.

        9.2 Status of Employment. Neither the establishment or maintenance of
the Plan, nor any action of the Plan Sponsor or any Participating Company or the
Administrator shall be held or construed to confer upon any individual any right
to be continued as an employee nor, upon dismissal, any right or interest in any
assets of the Plan Sponsor or a Participating Company nor to affect any
Participant’s right to terminate his/her employment at any time.

        9.3 Payments to Minors and Incompetents. If a Participant or Beneficiary
entitled to receive any benefits hereunder is a minor or is deemed by the
Administrator or is adjudged to be legally incapable of giving a valid receipt
and discharge for such benefits, they will be paid to the duly appointed
guardian of such minor or incompetent or to such other legally appointed person
as the Administrator may designate. Such payment shall, to the extent made, be
deemed a complete discharge of any liability for such payment under the Plan.

        9.4 Inalienability of Benefits.

 

     (a) Benefits payable under the Plan are not subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
charge, garnishment, execution, or levy of any kind, whether voluntary or
involuntary. Any attempt to anticipate, alienate, sell, transfer, assign,
pledge, encumber, charge or otherwise dispose of any right to benefits under the
Plan shall be void. The Plan Sponsor or other Participating Company shall not in
any manner be liable for, or subject to, the debts, contracts, liabilities,
engagements or torts of any person entitled to benefits under the Plan.

 

     (b) Notwithstanding Section 9.4(a), if a Participant is indebted to the
Plan Sponsor or other

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Participating Company at any time when payments are to be made by the Plan
Sponsor to the Participant under the provisions of the Plan, the Plan Sponsor
shall have the right to reduce the amount of payment to be made to the
Participant (or the Participant’s Beneficiary) to the extent of such
indebtedness. Any election by the Plan Sponsor not to reduce such payment shall
not constitute a waiver of its claim for such indebtedness.

        9.5 Governing Law. Except to the extent preempted by federal law, the
Plan shall be governed by and construed in accordance with the internal laws of
the Commonwealth of Pennsylvania.

        9.6 Severability. In case any provision of this Plan shall be held
illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining provisions of the Plan, and the Plan shall be construed and
enforced as if such illegal and invalid provisions had never been set forth.

        9.7 Required Information to Administrator. Each Participant will furnish
to the Administrator such information as the Administrator considers necessary
or desirable for purposes of administering the Plan, and the provisions of the
Plan respecting any payments thereunder are conditional upon the Participant’s
furnishing promptly such true, full and complete information as the
Administrator may request. The Administrator, in its sole discretion, may
request a Participant to submit proof of his/her age. The Administrator will, if
such proof of age is not submitted when requested, use as conclusive evidence
thereof such information as is deemed by it to be reliable, regardless of the
lack of proof. Any notice or information which, according to the terms of the
Plan or the rules of the Administrator, must be filed with the Administrator,
shall be deemed so filed if addressed and either delivered in person or mailed
to and received by the Administrator at the following address:

Plan Administrator
PMA Capital Corporation
1735 Market Street, 27th Floor
Philadelphia, PA 19103

Failure on the part of the Participant or Beneficiary to comply with any such
request within a reasonable period of time shall be sufficient grounds for delay
in the payment of benefits under the Plan until such information or proof is
received by the Administrator.

        9.8 Income and Payroll Tax Withholding. To the extent required by the
laws in effect at the time payments are made under this Plan, the Plan Sponsor
shall withhold from such deferred compensation payments any taxes required to be
withheld for federal, state or local tax purposes.

        9.9 Application of Plan. The Plan, as set forth herein, shall apply to
any Participant terminating employment on or after the Effective Date. The
Deferred Compensation Plan, as in effect on a Participant’s Employment
Termination Date, shall apply to any such Participant terminating employment
before the Effective Date.

        9.10 No Effect on Other Benefits. No amount credited under this Plan
shall be deemed part of the total compensation for the purpose of computing
benefits to which a Participant may be entitled under any pension plan or other
supplemental compensation arrangement, unless such plan or arrangement
specifically provides to the contrary. The amounts payable to the Participant
hereunder will be in addition to any benefits paid or payable to the Participant
under any other pension, disability, annuity or retirement plan or policy
whatsoever. Nothing herein contained will in any manner modify, impair or affect
any existing or future rights of the Participant to participate in any other
employee benefits plan or receive benefits in accordance with such plan or to
participate in any current or future pension plan of the Plan Sponsor or any
supplemental arrangement which constitutes a part of the Plan Sponsor’s regular
compensation structure.

        9.11 Inurement. The Plan shall be binding upon, and shall inure to, the
benefit of the Participating Company and its successors and assigns, and the
Participant and the Participant’s Beneficiaries, successors, heirs, executors
and administrators.

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        9.12 Notice. Any notices or elections required or permitted to be given
or made under this Plan will be sufficient if in writing and if sent by first
class, postage paid mail to the Participant’s last known address as shown on the
Participating Company’s personnel records or to the principal office of the
Participating Company, as the case may be. The date of such mailing shall be
deemed the date of notice, consent or demand. Either party may change the
address to which notice is to be sent by giving notice of the change of address
in the manner aforesaid.

        9.13 Captions. The captions contained in, and the table of contents
prefixed to, the Plan are inserted only as a matter of convenience and for ease
of reference in no way define, limit, enlarge or describe the scope or intent of
this Plan or in any way affect the Plan or the construction of any provision
thereof.

        9.14 Acceleration of Payments. Notwithstanding any other provision of
the Plan, if the Administrator determines, based on a change in the tax or
revenue laws of the United States of America, a published ruling or similar
announcement issued by the Internal Revenue Service, a regulation issued by the
Secretary of the Treasury or his/her delegate, a decision by a court of
competent jurisdiction involving a Participant, or a closing agreement involving
a Participant made under Section 7121 of the Code that is approved by the
Commissioner, that such Participant or Beneficiary has recognized or will
recognize income for federal income tax purposes with respect to benefits that
are or will be payable to the Participant under the Plan before they otherwise
would be paid to the Participant or Beneficiary (as applicable), upon the
request of the Participant or Beneficiary, the Administrator shall immediately
make distribution to the Participant or Beneficiary of the amount so taxable.

        9.15 Reporting and Disclosure Requirements. In order to comply with the
requirements of Title I of ERISA, the Administrator shall:

 

     (a) File a statement with the Secretary of Labor that includes the name and
address of the employer, the employer identification number assigned by the
Internal Revenue Service, a declaration that the employer maintains the Plan
primarily for the purpose of providing deferred compensation for a select group
of management or highly compensated employees and a statement of the number of
such plans and the number of employees in each; and

 

     (b) Provide plan documents, if any, to the Secretary of Labor upon request
as required by Section 104(a)(1) of ERISA. It is intended that this provision
comply with the requirements of 29 CFR §2520.104-23.

        This method of compliance is available to the Plan only so long as the
Plan is maintained by an employer primarily for the purpose of providing
deferred compensation for a select group of management or highly compensated
employees and for which benefits are paid as needed solely from the general
assets of the employer or are provided exclusively through insurance contracts
or policies, the premiums for which are paid directly by the employer from its
general assets, issued by an insurance company or similar organization which is
qualified to do business in any State, or both.

        9.16 Gender and Number. Whenever any words are used herein in any
specific gender, they shall be construed as though they were used in any other
applicable gender. The singular form, whenever used herein, shall mean or
include the plural form where applicable and vice versa.

ARTICLE X — ADOPTION BY AFFILIATED EMPLOYERS

        10.1 Adoption of Plan. The following rules shall apply with respect to
the adoption of the Plan:

 

     (a) Adoption by Affiliated Employers. The terms of this Plan may be adopted
by any Affiliated Employer, provided:

 

     (1) The Board of Directors consents to such adoption by an appropriate
written resolution;

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     (2) The board of directors of the Affiliated Employer adopts this Plan by
an appropriate written resolution which defines the Eligible Employees; and

 

     (3) The Affiliated Employer executes a Plan Adoption Agreement in the form
attached hereto as Plan Exhibit A, applicable to the Eligible Employees of such
Affiliated Employer. The Affiliated Employer may elect in such Adoption
Agreement to have special provisions apply with respect to the Eligible
Employees of the Affiliated Employer which differ from the provisions of the
Plan applicable to other Eligible Employees; and

 

     (4) The Affiliated Employer executes such other documents as may be
required to make such Affiliated Employer a party to the Plan as a Participating
Company.

 

     (b) Effect of Adoption. An Affiliated Employer that adopts the Plan is
thereafter a Participating Company with respect to its Eligible Employees.

        10.2 Withdrawal from Plan. Any Participating Company may at any time
withdraw from the Plan upon giving the Board of Directors at least 30 days prior
written notice of its intention to withdraw.

        10.3 Application of Withdrawal Provisions. The withdrawal provisions
contained in Section 10.2 shall be applicable only if the withdrawing
Participating Company continues to cover its Participants under a plan similar
to this Plan. Otherwise the termination provisions of the Plan shall apply.

        10.4 Plan Sponsor Appointed Agent of Participating Companies. As a
condition precedent to the adoption of the Plan, each Affiliated Employer must
appoint the Board of Directors as its agent to exercise on its behalf all of the
power and authority conferred upon the Plan Sponsor by the Plan, including,
without limitation, the power to amend or to terminate the Plan.

        TO RECORD the adoption of this Plan, the Plan Sponsor on behalf of
itself and each other Participating Company has caused this document to be
executed by its duly authorized officers as of the 29th day of March, 2001.

ATTEST: PMA CAPITAL CORPORATION       /s/ Robert L. Pratter

--------------------------------------------------------------------------------

By: /s/ Francis W. McDonnell

--------------------------------------------------------------------------------

Robert L. Pratter, Secretary Francis W. McDonnell, Senior Vice President,
Treasurer & Chief Financial Officer

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APPENDIX A - INVESTMENT OPTIONS AVAILABLE FOR MEASUREMENT OF INVESTMENT
EARNINGS OR LOSSES UNDER PLAN

        (a)   Morgan Growth Fund

        (b)   Total Bond Market Index Fund

        (c)   LIFEStrategy - Moderate Growth Fund (not available after March 31,
2001)

        (d)   LIFEStrategy - Growth Fund (not available after March 31, 2001)

        (e)   500 Index Fund

        (f)   Treasury Money Market Fund

        (g)   STAR Fund

        (h)   Windsor II Fund

        (i)   International Growth Fund

        (j)   Retirement Savings Trust

        (k)   Any other investment option selected by the Administrator

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APPENDIX B —LIST OF PARTICIPATING COMPANIES

        (a)   PMA Capital Corporation

        (b)   Pennsylvania Manufacturers’Association Insurance Company

        (c)   PMA Capital Insurance Company (formerly PMA Reinsurance
Corporation)

        (d)   Caliber One Indemnity Company

        (e)   Caliber One Management Company, Inc.

        (f)   PMA Management Corp.

        (g)   PMA Re Management Company

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PLAN EXHIBIT A —PLAN ADOPTION AGREEMENT

[INSERT NAME OF ADOPTING AFFILIATED EMPLOYER]

PMA CAPITAL CORPORATION 401(k) EXCESS PLAN

[NOTE: Plan Exhibit A is not to be completed or executed. If an Affiliated
Employer adopts the Plan, a separate instrument following the form of this Plan
Exhibit A shall be completed and filed with the Administrator.]

By executing this Adoption Agreement, [ NAME OF ADOPTING AFFILIATED EMPLOYER],
on this __________ day of ____, 19___ hereby adopts the PMA CAPITAL CORPORATION
401(k) EXCESS PLAN (“Plan”), the terms of which Plan are incorporated herein by
reference, and by adopting said Plan hereby becomes a Participating Company in
said Plan effective , 20 .

        1. The Effective Date of the Plan hereby created or continued is
______________, 20__.

        2. The Board of Directors of PMA CAPITAL CORPORATION consented to the
adoption of the Plan by the Affiliated Employer named herein on
________________, 20__.

        3. The Board of Directors of [NAME OF ADOPTING AFFILIATED EMPLOYER]
adopted the Plan on ________________, 20__.

Attest: Name of Participating Company       [SEAL]      

--------------------------------------------------------------------------------

By Secretary

--------------------------------------------------------------------------------

President       Attest: ADOPTION CONSENTED TO BY:
      PMA CAPITAL CORPORATION       [SEAL]      

--------------------------------------------------------------------------------

By Secretary

--------------------------------------------------------------------------------

President

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