February
9, 2010

     

    Keith A.
Fry

    1615
Laraway Lake Drive, SE

    Grand
Rapids, MI 49546

    


    
      	
              Re:

            	
              Letter
      Agreement

            


    

    


    Dear
Keith:

     

    It is
with great pleasure that we extend an offer setting forth the following terms
for your employment with PMMHC Corporation, (the “MHC”), Penn Millers Holding
Corporation (the “Holding Corporation”), and Penn Millers Insurance Company,
(the “Insurance Company”) (the Holding Corporation and the Insurance Company are
sometimes referred to collectively or individually, as the context requires, as
the “Company,” and the MHC, the Holding Corporation, and the Insurance Company,
and their direct and indirect subsidiaries, are sometimes referred to
collectively as the “Penn Millers System”).

     

    1.           Term of
Agreement.  The term of this agreement (the “Agreement”) shall
commence on the date above (the “Effective Date”) and shall continue for a
period of two (2) years thereafter.  Commencing on the first
anniversary of the Effective Date and on each anniversary thereafter
(“Anniversary Date”), this Agreement shall automatically be renewed for one (1)
additional year beyond the term otherwise established, unless one party provides
written notice to the other party, at least ninety (90) days in advance of
an Anniversary Date, of its intent not to renew this Agreement for an additional
one year term.  Nothing in this provision shall preclude termination
as otherwise provided or permitted under this
Agreement.  Notwithstanding the foregoing, if a Change in Control
occurs after the Effective Date and during the term of this Agreement, this
Agreement shall continue in effect for a period of not less than two (2) years
beyond the date of such Change in Control.

     

    2.           Covenant Not to
Compete; Nonsolicitation; Confidential Information.

     

    2.1  During
your employment with the Company and during the Restricted Period (as defined
below), you shall not directly or indirectly, either for your own account or as
an agent, consultant, employee, partner, officer, director, proprietor, investor
(except as an investor owning less than 5% of the stock of a publicly owned
company) or otherwise, of any person, firm, corporation, or
enterprise:

     

    
      	
            	
              a.

            	
              solicit
      or hire any employees of the Company or induce any of such employees to
      terminate their employment relationship with the Company;
    or

            


    


    
      
         


      

      
        
        

        
          

        

      

      
         


      

    

     

    
      	
            	
              b.

            	
              solicit,
      induce or attempt to solicit or induce any customer, supplier or other
      entity doing business with the Company to cease doing business with the
      Company or, in the case of a customer, to place agribusiness insurance, as
      that term is commonly understood in the industry, with any competitor of
      the Company.  For purposes of the foregoing provision, the term
      “customer” shall mean a business that the Company insures on the date that
      your employment terminates (or has insured during the previous twelve
      months) and a broker who has placed business with the Company on the date
      that your employment terminates but only with respect to those clients of
      the broker for which the broker has placed business with the Company in
      the twelve-month period preceding the date that your employment
      terminates.

            


    

     

    2.2  In
addition to the limitations described in Section 2.1, during the Restricted
Period you shall not, directly or indirectly, own, manage, operate, render
services for (as a consultant or an advisor) or accept any employment with
(a) Nationwide Agribusiness Insurance Company, Michigan Millers Insurance
Company or Westfield Insurance Company or any of their successors in interest or
(b) the agribusiness insurance business of any other insurance company
whose business has, or could reasonably be expected to have, a material adverse
effect on the Company’s business insurance business.  In addition, you
shall not, directly or indirectly, own, manage, operate, render services for (as
a consultant or an adviser) or accept any employment with, within a fifty
(50) mile radius of Wilkes-Barre, Pennsylvania, any other property and
casualty insurance or reinsurance line of business to the extent that such
ownership, management, operating, rendering of services or employment (and the
activities necessarily incident thereto) have, or could reasonably be expected
to have, a material adverse effect on the Company’s business insurance
business.

     

    2.3  You
agree that you will not at any time during the term of this Agreement (as
determined under Section 1 hereof) or at any time thereafter for any
reason, in any fashion, form or manner, either directly or indirectly, divulge,
disclose or communicate to any person, firm, corporation or other business
entity, in any manner whatsoever, any confidential information or trade secrets
concerning the business of the Company, including, without limiting the
generality of the foregoing, any customer lists or other customer identifying
information, the techniques, methods or systems of the Company’s operation or
management, any information regarding its financial matters, or any other
material information concerning the business of the Company, its manner of
operation, its plan or other material data.  The provisions of this
Section 2.3 shall not apply to (i) information that is public
knowledge other than as a result of disclosure by you in breach of this
Section 2.3; (ii) information disseminated by the Company to third
parties in the ordinary course of business; (iii) information lawfully
received by you from a third party who, based upon inquiry by you, is not bound
by a confidential relationship to the Company, or (iv) information
disclosed under a requirement of law or as directed by applicable legal
authority having jurisdiction over you.

     

    2.4  Although
you and the Company consider the restrictions contained in Sections 2.1,
2.2 and 2.3 to be the minimum restriction reasonable for the purposes of
preserving the Company’s goodwill and other proprietary rights, if a final
determination is made by a court that the time or territory, or any other
restriction contained in Sections 2.1, 2.2 and 2.3 is an unreasonable or
otherwise unenforceable restriction against you, the provisions of Sections 2.1,
2.2 and 2.3 will not be rendered void, but will be deemed amended to apply as to
such maximum time and territory and to such other extent as the court may
determine to be reasonable.


    
      
         


      

      
        2

        
          

        

      

      
         


      

    

     

    2.5  Notwithstanding
anything to the contrary in Sections 3.3 or 3.4, in the event that you breach
any of the covenants contained in this Section 2:

     

    
      	
            	
              a. 

            	
              Any
      remaining payments or benefits to be provided under Sections 3.3 or 3.4
      shall not be paid or shall cease immediately upon such breach;
      and

            


    

     

    
      	
            	
              b. 

            	
              The
      Company shall be entitled to the immediate repayment of all payments and
      benefits provided under Sections 3.3 and
3.4.

            


    

     

    2.6  You
agree that the covenants contained in this Section 2 may be assigned by the
Company, as needed, to affect its purpose and intent and that the Company’s
assignee shall be entitled to the full benefit of the restrictions enjoyed by
the Company under the terms of these covenants.

     

    2.7  The
term “Restricted Period” shall mean:

     

    
      	
            	
              a. 

            	
              In
      the event you are terminated by the Company for Cause, the twelve (12)
      month period following your termination of
  employment;

            


    

     

    
      	
            	
              b. 

            	
              In
      the event you are terminated pursuant to Section 3.1, the twelve (12)
      month period following your termination of
  employment;

            


    

     

    
      	
            	
              c. 

            	
              Notwithstanding
      Section 2.7.b., in the event you are terminated pursuant to Section 3.1
      and such termination would amount to Good Reason but for the fact that it
      occurred prior to a Change in Control, a period up to twelve (12) months
      following your termination of employment, with the number of months, if
      any, selected by the Company in its sole discretion by providing written
      notice of such number to you within ten (10) days following the date on
      which you give notice of your termination of
  employment;

            


    

     

    
      	
            	
              d. 

            	
              In
      the event you are terminated pursuant to Section 3.2, the date of your
      termination of employment;

            


    

     

    
      	
            	
              e. 

            	
              In
      the event you are terminated pursuant to Section 3.3, the twelve (12)
      month period following your termination of employment;
  or

            


    

     

    
      	
            	
              f. 

            	
              In
      the event you are terminated pursuant to Section 3.4, the twenty-four (24)
      month period following your termination of
  employment.

            


    

     

    3.        
   Severance
Benefits.

     

    3.1  Termination by You on
Voluntary Basis.  In the event that you voluntarily terminate
your employment hereunder without Good Reason, you shall be entitled to
receive:


    
      
         


      

      
        3

        
          

        

      

      
         


      

    

     

    
      	
            	
              a. 

            	
              If
      such termination occurs on or after age 65, a pro-rata payment from the
      Success Sharing Plan (or other annual incentive plan in effect) based on
      the number of full months that have elapsed from the start of the current
      annual performance period to the date of your termination of employment
      and actual annual performance through the end of the current annual
      performance period to the extent that at the conclusion of such period,
      such award is deemed earned, payable at the time such award would
      otherwise have been paid had your employment not terminated, but in no
      event later than March 15 of the calendar year following the end of such
      performance period;

            


    

     

    
      	
            	
              b. 

            	
              If
      such termination occurs on or after age 65, pro-rata vesting of any
      unvested and outstanding performance-based equity awards granted to you,
      based on the number of full months that have elapsed from the date of
      grant of such award to the date of your termination of employment and
      actual performance through the end of the applicable performance period to
      the extent that at the conclusion of such period, such awards are deemed
      earned, payable in-kind at the time such award would otherwise have been
      paid had your employment not terminated, but in no event later than March
      15 of the calendar year following the end of the applicable performance
      period; provided, however, that to the extent the benefits provided in
      this Subsection conflict with the terms of any plan or other agreement
      under or pursuant to which any equity awards were granted, the terms of
      such plan or other agreement shall control;
and

            


    

     

    
      	
            	
              c. 

            	
              If
      your voluntary termination of employment would amount to Good Reason but
      for the fact that it occurred prior to a Change in Control, a lump sum
      cash payment within sixty (60) days following termination of your
      employment equal to the product of (i) the number of months selected by
      the Company pursuant to Section 2.7.c. and (ii) your annual base
      compensation, divided by twelve
(12).

            


    

     

    3.2  Termination By Reason of
Death or Permanent Disability: In the event your employment is terminated
by reason of your death or permanent disability (defined for this purpose as a
condition by reason of which you are entitled to and receiving disability
benefits under the Company’s long-term disability plan, if any, and if none,
under the U.S. Social Security Act) you, or your estate, shall be entitled to
receive:

     

    
      	
            	
              a. 

            	
              Continuation
      of your annual base compensation then in effect for one (1) year
      (commencing on the next payroll date following the date of your
      termination of employment), offset by any amounts payable to you under any
      disability insurance plan or policy provided by the
    Company;

            


    

     

    
      	
            	
              b. 

            	
              Continuation
      of employer-provided healthcare benefits for one (1) year at the levels
      and cost to you and your qualified dependents in effect on the date of
      your termination, and thereafter to elect, at your or your qualified
      dependents’ cost, COBRA continuation for the remainder of your or your
      qualified dependents’ COBRA eligibility, if any, it being understood that
      your and your dependents’ COBRA eligibility period will include the period
      during which the Company is providing benefits under this Section
      3.2.b.;

            


    


    
      
         


      

      
        4

        
          

        

      

      
         


      

    

     

    
      	
            	
              c. 

            	
              If
      you are age 55 or have 10 years of service in the year of your termination
      of employment:

            


    

     

    
      	
            	
              i.

            	
              Pro-rata
      vesting of any unvested and outstanding performance-based equity awards
      granted to you, based on the number of full months that have elapsed from
      the date of grant of such award to the date of your termination of
      employment, with all such awards payable in-kind at target levels for the
      applicable performance period within sixty (60) days following the date
      your employment terminates; and

            


    

     

    
      	
            	
              ii. 

            	
              Pro-rata
      vesting of any unvested and outstanding non-performance-based equity
      awards granted to you, based on the number of full months that have
      elapsed from the date of grant of such award to the date of termination of
      your employment, payable in-kind within sixty (60) days following the date
      your employment terminates;

            


    

     

    Notwithstanding
the foregoing, to the extent the benefits provided in this Subsection c.
conflict with the terms of any plan or other agreement under or pursuant to
which any equity awards were granted, the terms of such plan or other agreement
shall control; and

     

    
      	
            	
              d. 

            	
              A
      pro-rata payment from the Success Sharing Plan (or other annual incentive
      plan then in effect) as set forth in Section 3.1.a., without regard to the
      age requirements contained in Section
3.1.a.

            


    

     

    3.3  Termination by the Company
without Cause prior to a Change in Control:  In the event that
your employment hereunder is terminated by the Company without Cause (as defined
in Section 3.7), before a Change in Control (as defined in Section 3.6
below), you shall be entitled to receive:

     

    
      	
            	
              a. 

            	
              Continuation
      of your annual base compensation then in effect for one (1) year
      (commencing on the next payroll date following the date of your
      termination of employment);

            


    

     

    
      	
            	
              b. 

            	
              Continuation
      of employer-provided healthcare benefits for one (1) year at the levels
      and cost to you and your qualified dependents in effect on the date of
      your termination, and thereafter to elect, at your or your qualified
      dependents’ cost, COBRA continuation for the remainder of your or your
      qualified dependents’ COBRA eligibility, if any, it being understood that
      your and your dependents’ COBRA eligibility period will include the period
      during which the Company is providing benefits under this Section
      3.3.b.;

            


    

     

    
      	
            	
              c. 

            	
              Continuation
      of the annual reimbursement allowance received in lieu of reimbursement
      for or payment of country club or social club membership fees, dues or
      other fees and any automobile allowance (the “Annual Stipend”), then in
      effect for one (1) year; provided that such amount shall be paid in
      accordance with the Company’s executive payroll practices, commencing on
      the next payroll date following the date of your termination of
      employment;

            


    


    
      
         


      

      
        5

        
          

        

      

      
         


      

    

     

    
      	
            	
              d. 

            	
              If
      your termination of employment occurs prior to your attaining age 62,
      payment of all fees and expenses related to the provision of outplacement
      services through a firm of your choice, not to exceed $10,000; provided,
      however, that such outplacement expenses: (i) must be incurred no later
      than the end of the second full calendar year following the year of your
      termination of employment; and (ii) must be paid no later than the end of
      the third full calendar year following the year of your termination of
      employment; and

            


    

     

    
      	
            	
              e. 

            	
              A
      pro-rata payment from the Success Sharing Plan (or other annual incentive
      plan then in effect) as set forth in Section 3.1.a., without regard to the
      age requirements contained in Section
3.1.a.

            


    

     

    3.4  Termination by the Company
without Cause or by You with Good Reason on or after a Change in
Control:  If a Change in Control (as defined in Section 3.6
below) shall occur and concurrently therewith or during a period of twenty-four
(24) months thereafter your employment hereunder is terminated by the Company
without Cause (as defined in Section 3.7) or by you with Good Reason (as
defined in Section 3.5 below), you shall be entitled to receive:

     

    
      	
            	
              a. 

            	
              A
      lump sum cash payment within sixty (60) days following your termination of
      employment equal to one (1) times your annual base compensation then in
      effect (or immediately prior to any reduction resulting in a termination
      for Good Reason);

            


    

     

    
      	
            	
              b. 

            	
              Continuation
      of your annual base compensation then in effect (or immediately prior to
      any reduction resulting in a termination for Good Reason) for one (1) year
      (commencing on the next payroll date following the date of your
      termination of employment);

            


    

     

    
      	
            	
              c. 

            	
              Continuation
      of employer-provided healthcare benefits for two (2) years at the levels
      and cost to you and your qualified dependents in effect on the date of
      your termination (or immediately prior to any reduction resulting in a
      termination for Good Reason), and thereafter to elect, at your or your
      qualified dependents’ cost, COBRA continuation for the remainder of your
      or your qualified dependents’ COBRA eligibility, if any, it being
      understood that your and your dependents’ COBRA eligibility period will
      include the period during which the Company is providing benefits under
      this Section 3.4.c.;

            


    

     

    
      	
            	
              d. 

            	
              A
      lump sum cash payment within sixty (60) days following your termination of
      employment equal to two (2) times the Annual Stipend then in effect (or
      immediately prior to any reduction resulting in a termination for Good
      Reason);

            


    

     

    
      	
            	
              e. 

            	
              If
      your termination of employment occurs prior to your attaining age 62,
      payment of outplacement services as set forth in Section
      3.3.d.;

            


    


    
      
         


      

      
        6

        
          

        

      

      
         


      

    

     

    
      	
            	
              f. 

            	
              A
      pro-rata payment from the Success Sharing Plan (or other annual incentive
      plan then in effect) as set forth in Section 3.1.a., without regard to the
      age requirements contained in Section 3.1.a.;
  and

            


    

     

    
      	
            	
              g. 

            	
              Immediate
      and full vesting of equity awards as
follows:

            


    

     

    
      	
            	
              i. 

            	
              Immediate
      and full vesting of any unvested and outstanding performance-based equity
      awards granted to you, with all such awards payable in-kind at target
      levels for the applicable performance period within sixty (60) days
      following the date your employment terminates;
  and

            


    

     

    
      	
            	
              ii. 

            	
              Immediate
      and full vesting of any unvested and outstanding non-performance-based
      equity awards granted to you, payable in-kind within sixty (60) days
      following the date your employment
terminates.

            


    

     

    Notwithstanding
the foregoing, to the extent the benefits provided in this Subsection g.
conflict with the terms of any plan or other agreement under or pursuant to
which any equity awards were granted, the terms of such plan or other agreement
shall control.

     

    3.5  Good Reason: You
shall be considered to have terminated employment hereunder for Good Reason if
such termination of employment occurs on or within twenty-four (24) months after
a Change in Control and is on account of any of the following actions by the
Company without your express written consent:

     

    
      	
            	
              a. 

            	
              A
      material reduction in your annual base compensation as in effect
      immediately prior to a Change in
Control;

            


    

     

    
      	
            	
              b. 

            	
              Any
      material diminution of your positions, duties or responsibilities or the
      assignment to you of duties or responsibilities that are materially
      inconsistent with your then position in effect immediately prior to a
      Change in Control;

            


    

     

    
      	
            	
              c. 

            	
              A
      failure by the Company to continue you as a participant in any incentive
      plan or program (whether annual or long-term and whether paid in cash or
      in equity) on at least the same basis with respect to the potential amount
      of incentives thereunder immediately prior to a Change in
      Control;

            


    

     

    
      	
            	
              d. 

            	
              Any
      exclusion from full participation in or any material diminution in the
      benefits you are entitled to receive under any of the employee benefit
      plans of the Company in effect immediately prior to a Change in Control to
      the extent such exclusion or reduction is not imposed on executive
      officers of the Company generally;

            


    

     

    
      	
            	
              e. 

            	
               Any
      change in your principal place of work (other than a temporary change
      occasioned by the Company’s business needs) that would increase your
      commute by 50 miles or more as of the date of the Change in Control;
      or

            


    

     

    
      	
            	
              f. 

            	
              A
      material breach by the Company of its obligations under this
      Agreement.

            


    


    
      
         


      

      
        7

        
          

        

      

      
         


      

    

     

    Notwithstanding the foregoing, a
termination by you shall not be for “Good Reason,” unless you shall have given
the Company at least ten (10) business days written notice specifying the
grounds upon which you intend to terminate your employment hereunder for “Good
Reason” and such notice is received by the Company within ninety (90) days of
the date the event of “Good Reason” occurred.  In addition, any action
or inaction by the Company which is remedied within thirty (30) days following
such written notice shall not constitute “Good Reason” for termination
hereunder.

     

    3.6  Change in Control.
Change in Control shall have the same meaning as a “Change in Control” under the
Penn Millers Stock Incentive Plan, as such term may be amended from time to
time.

     

    3.7  Cause. “Cause” means
any of the following events: (a) breach of your fiduciary duty to the Company or
your duty of loyalty to the Company; (b) willful act of material dishonesty with
respect to any material matter involving the Company; (c) theft or material
misuse of Company property; (d) engaging in personal conduct that would
constitute grounds for liability for discrimination or sexual harassment (as
proscribed by the U.S. Equal Employment Opportunity Commission Guidelines or any
other applicable state or local regulatory body); (e) fraternization which
affects your objectivity in the treatment of fellow employees or abusive or
threatening behavior, after a warning by the Board of Directors of the Company
(the “Board”), the Chief Executive Officer, or Human Resources to cease; (f)
excessive absenteeism (which shall not include authorized absences for leave
pursuant to the Family and Medical Leave Act, the Americans With Disabilities
Act, or the Company’s vacation, paid time off, or short-term disability leave
plans, policies, or arrangements) having a material adverse effect on Company
business operations; (g) conviction of, or plea of guilty or nolo contendere to, a felony,
any criminal charge involving moral turpitude, or illegal substance abuse
charges; (h) illegal substance abuse or being under the influence of illegal
substances during working time; (i) continuing neglect of management duties and
responsibilities that has a material adverse effect on the Company; or (j)
willful failure to timely report to the Board or direct supervisor information
having a material adverse effect on Company business operations.

     

    3.8  Accrued
Benefits.  Upon your termination of employment for any reason,
you, or your estate, as applicable, shall receive your accrued but unpaid annual
base compensation and any accrued but unpaid or otherwise vested benefits under
any Penn Millers System benefit or incentive plan.

     

    4.      
     Best Net Benefit
Limitation.  Anything contained in this Agreement to the
contrary notwithstanding, if any of the payments or benefits received or to be
received by you pursuant to this Agreement (which the parties agree will not
include any portion of payments allocated to the non-solicitation and
non-compete provisions of Section 2 that are classified as payments of
reasonable compensation for purposes of Section 280G of the Internal Revenue
Code of 1986, as amended (the “Code”)), when taken together with payments and
benefits provided to you under any other plans, contracts, or arrangements with
the Penn Millers System (all such payments and benefits being hereinafter
referred to as the “Total Payments”), will be subject to any excise tax imposed
under Code Section 4999 (together with any interest or penalties, the “Excise
Tax”), then such Total Payments shall be reduced to the extent necessary so that
no portion thereof shall be subject to the Excise Tax; provided, however, that
if you would receive in the aggregate greater value (as determined under Code
Section 280G and the regulations thereunder) on an after tax basis if the Total
Payments were not subject to such reduction, then no such reduction shall be
made. To effectuate the reduction described above, if applicable, the Company
shall first reduce or eliminate the payments and benefits provided under this
Agreement.  All calculations required to be made under this Section,
including the portion of the payments hereunder to be allocated to the
restrictive covenants set forth in Section 2, will be made by the Company’s
independent public accountants, subject to the right of your representative to
review the same.  The parties recognize that the actual implementation
of the provisions of this Section are complex and agree to deal with each other
in good faith to resolve any questions or disagreements arising
hereunder.


    
      
         


      

      
        8

        
          

        

      

      
         


      

    

     

    5.
           Binding Effect
and Benefit.

     

    5.1  The
Company shall require any successor (whether direct or indirect, by purchase,
merger, consolidation, or otherwise) to all or substantially all of the business
or assets of the Company to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place.  Failure by the
Company to obtain such assumption and agreement prior to the effectiveness of
any such succession shall constitute a material breach of this
Agreement.  As used in this Agreement, “the Company” shall mean the
Company as hereinbefore defined and any successor to the respective business or
assets of the Company as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.

     

    5.2  This
Agreement shall inure to the benefit of and be enforceable by your personal or
legal representatives, executors, administrators, heirs, distributees, devisees,
and legatees.  If you should die while any amount is payable to you
under this Agreement if you had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to your devisee, legatee, or other designee, or, if there is no such
designee, to your estate.

     

    6.
           Assignment.  This
Agreement shall not be assignable by either party hereto, except as provided in
Section 2.6 and by the Company to any successor in interest to the business of
the Company, provided that the Company (if it remains a separate entity) shall
remain fully liable under this Agreement for all obligations, payments and
otherwise.

     

    7. 
          No Mitigation or
Offset.  In the event of termination of your employment, you
will be under no obligation to seek other employment and there will be no offset
against any payment or benefit provided for in this Agreement on account of any
remuneration or benefits from any subsequent employment that you may
obtain.


    
      
         


      

      
        9

        
          

        

      

      
         


      

    


    8.
           Application of
Code Section 409A.

     

    8.1  Notwithstanding
anything in this Agreement to the contrary, the receipt of any benefits under
this Agreement as a result of a termination of employment shall be subject to
satisfaction of the condition precedent that you undergo a “separation from
service” within the meaning of Treas. Reg. § 1.409A-1(h) or any successor
thereto.  In addition, if you are deemed to be a “specified employee”
within the meaning of that term under Code Section 409A(a)(2)(B), then with
regard to any payment or the provisions of any benefit that is required to be
delayed pursuant to Code Section 409A(a)(2)(B), such payment or benefit shall
not be made or provided prior to the earlier of (i) the expiration of the six
(6) month period measured from the date of your “separation from service” (as
such term is defined in Treas. Reg. § 1.409A-1(h)), or (ii) the date of your
death (the “Delay Period”).  Within ten (10) days following the
expiration of the Delay Period, all payments and benefits delayed pursuant to
this Section (whether they would have otherwise been payable in a single sum or
in installments in the absence of such delay) shall be paid or reimbursed to you
in a lump sum, and any remaining payments and benefits due under this Agreement
shall be paid or provided in accordance with the normal payment dates specified
for them herein.  Notwithstanding the foregoing, to the extent that
the foregoing applies to the provision of any ongoing welfare benefits to you
that would not be required to be delayed if the premiums therefore were paid by
you, you shall pay the full costs of premiums for such welfare benefits during
the Delay Period and the Company shall pay you an amount equal to the amount of
such premiums paid by you during the Delay Period within ten (10) days after the
conclusion of such Delay Period.

     

    8.2  Except
as otherwise expressly provided herein, to the extent any expense reimbursement
or other in-kind benefit is determined to be subject to Code Section 409A, the
amount of any such expenses eligible for reimbursement or in-kind benefits in
one calendar year shall not affect the expenses eligible for reimbursement or
in-kind benefits in any other taxable year (except under any lifetime limit
applicable to expenses for medical care), in no event shall any expenses be
reimbursed or in-kind benefits be provided after the last day of the calendar
year following the calendar year in which you incurred such expenses or received
such benefits, and in no event shall any right to reimbursement or in-kind
benefits be subject to liquidation or exchange for another benefit.

     

    8.3  Any
payments made pursuant to Section 3.4, to the extent of payments made from the
date of termination through March 15th of the calendar year following such date,
are intended to constitute separate payments for purposes of Treas. Reg.
§1.409A-2(b)(2) and thus payable pursuant to the “short-term deferral” rule set
forth in Treas. Reg. §1.409A-1(b)(4); to the extent such payments are made
following said March 15th, they are intended to constitute separate payments for
purposes of Treas. Reg. §1.409A-2(b)(2) made upon an involuntary termination
from service and payable pursuant to Treas. Reg. §1.409A-1(b)(9)(iii), to the
maximum extent permitted by said provision.  Notwithstanding the
foregoing, if the Company determines that any other payments hereunder fail to
satisfy the distribution requirement of Section 409A(a)(2)(A) of the Internal
Revenue Code of 1986, as amended (the “Code”), the payment of such benefit shall
be delayed to the minimum extent necessary so that such payments are not subject
to the provisions of Code Section 409A(a)(1).

     

    8.4  To
the extent it is determined that any benefits described in Section 3.4.c. are
taxable to you, they are intended to be payable pursuant to Treas. Reg.
§1.409A-1(b)(9)(v), to the maximum extent permitted by said
provision.


    
      
         


      

      
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    9.
           Miscellaneous.

     

    9.1  The
invalidity or unenforceability of any provision of this Agreement will not
affect the validity or enforceability of any other provision of this Agreement,
which will remain in full force and effect.

     

    9.2  The
validity, interpretation, construction and performance of this Agreement will be
governed by the laws of the Commonwealth of Pennsylvania.

     

    9.3  No
waiver by you or the Company at any time of any breach of, or compliance with,
any provision of this Agreement to be performed by the Company or you,
respectively, will be deemed a waiver of that or any other provision at any
subsequent time.

     

    9.4  Upon
any termination of employment that entitles you to payments and benefits under
Section 3 (other than pursuant to Section 3.8), you must, within prescribed time
limits, execute a legally enforceable release agreement substantially in the
form of Exhibit A attached hereto prior to the receipt of such payments and
benefits.  Any payments made to you will be paid net of any applicable
withholding required under federal, state or local law.

     

    9.5  This
Agreement is the exclusive agreement with respect to the severance benefits
payable to you in the event of a termination of your employment.  All
prior negotiations and agreements are hereby merged into this
Agreement.  You acknowledge and agree that any employment agreement,
offer letter and/or any agreement regarding change in control or termination
benefits, previously entered into between you and the Company are immediately
null and void.

     

    9.6  Notwithstanding
the termination of this Agreement, the provisions which specify continuing
obligations, compensation and benefits, and rights shall remain in effect until
such time as all such obligations are discharged, all such compensation and
benefits are received, and no party or beneficiary has any remaining actual or
contingent rights under this Agreement.

     

    10.          Recovery of
Bonuses and Incentive Compensation. Notwithstanding anything in this
Agreement to the contrary, all bonuses and incentive compensation paid to you
(whether in equity or in cash) shall be subject to recovery by the Company in
the event that such bonuses or incentive compensation are based on materially
inaccurate financial statements (which includes, but is not limited to,
statements of earnings, revenues, or gains) or other materially inaccurate
performance metric criteria; provided that a determination as to the recovery of
a bonus or incentive compensation shall be made within twelve (12) months
following the date such bonus or incentive compensation was paid. In the event
that the Board determines by at least a majority vote that a bonus or incentive
compensation payment to you is recoverable, you shall reimburse all or a portion
of such bonus or incentive compensation, to the fullest extent permitted by law,
as soon as practicable following written notice to you by the Company of the
same.

     

    11.          Legal
Fees.  In the event of a dispute following a Change in Control,
the Company, or its successor, shall reimburse you for all reasonable legal fees
and expenses incurred by you in attempting to obtain or enforce rights or
benefits provided by this Agreement, if, with respect to any such right or
benefit, you are successful in obtaining or enforcing such right or benefit
(including by negotiated settlement).


    
      
         


      

      
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    12.          Indemnification.

     

    12.1  The
Company shall indemnify you in the event you are made a party or are threatened
to be made a party to any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative
(including, without limitation, actions by or in the right of the Company), by
reason of the fact that you are or were a director or officer of the Company, or
a director or officer of the Company serving at the request of the Company as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys’
fees), amounts paid in settlement, judgments, and fines actually and reasonably
incurred by you in connection with such action, suit, or proceeding; provided,
however, that no indemnification shall be made in any case where the act or
failure to act giving rise to the claim for indemnification is determined by a
court to have constituted willful misconduct or recklessness.

     

    12.2  Expenses
(including attorneys’ fees) incurred in defending a civil or criminal action,
suit, or proceeding, under Section 12.1 shall be paid by the Company in advance
of the final disposition of such action, suit, or proceeding upon receipt of an
undertaking by or on behalf of you to repay such amount if it shall be
ultimately determined that you are not entitled to be indemnified by the Company
as authorized in this Section 12.

     

    12.3  The
Company shall purchase and maintain directors’ and officers’ liability insurance
on behalf of you, at the Company’s expense, consistent with the amounts and
terms provided to other directors and officers of the Company.

     

    If you
accept this offer, please sign and date this letter in the space provided below
and return a copy to the Company at 72 North Franklin Street, Wilkes-Barre, PA
18773-0016.

     

    
      
        	
                Sincerely,

              
	 
      
	
                Penn
      Millers Holding Corporation

              


      

    

    


    
      	
              Accepted: 

            	
              /s/ Keith A. Fry

            	
                Date: 

            	
              2/9/2010

            	
                Keith
      A. Fry

            


    


    
      
         


      

      
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    EXHIBIT
A

    RELEASE
AGREEMENT

     

    THIS RELEASE AGREEMENT (this
“Release Agreement”) is made as of this ____ day of ____________, 20___, by and
between PMMHC Corporation, Penn Millers Holding Corporation, and Penn Millers
Insurance Company (collectively, the “Employer”) and Keith A. Fry (the
“Executive”).  Capitalized terms not defined in this Release Agreement
shall have the meanings ascribed to them in the Letter Agreement (as defined
below).  In consideration of the mutual agreements set forth below,
the Executive and the Employer hereby agree as follows:

     

    1.           General
Release.

     

    a.      In
consideration of the payments and benefits required to be provided to the
Executive under the agreement between the Employer and the Executive, dated
February __, 2010, (the “Letter Agreement”) and after consultation with counsel,
the Executive, for himself and on behalf of each of the Executive’s heirs,
executors, administrators, representatives, agents, successors and assigns
(collectively, the “Releasors”), hereby irrevocably and unconditionally releases
and forever discharges the Employer, its majority owned subsidiaries and
affiliated companies, and each of its officers, employees, directors,
shareholders, and agents (collectively, the “Releasees”) from any and all
claims, actions, causes of action, rights, judgments, obligations, damages,
demands, accountings, or liabilities of whatever kind or character
(collectively, “Claims”), including, without limitation, any Claims under any
federal, state, local, or foreign law, that the Releasors may have, or in the
future may possess, arising out of (i) the Executive’s employment relationship
with and service as an employee, officer, or director of the Employer and any of
its majority-owned subsidiaries and affiliates, or the termination of the
Executive’s service in any and all of such relevant capacities, (ii) the Letter
Agreement, or (iii) any event, condition, circumstance, or obligation that
occurred, existed, or arose on or prior to the date hereof; provided, however,
that the release set forth in this Section shall not apply to (iv) the payment
and/or benefit obligations of the Employer or any of its affiliates,
(collectively, the “Employer Group”) under the Letter Agreement, (v) any Claims
the Executive may have under any plans or programs not covered by the Letter
Agreement in which the Executive participated and under which the Executive has
accrued and become entitled to a benefit, and (vi) any indemnification or other
rights the Executive may have under the Letter Agreement or in accordance with
the governing instruments of any member of the Employer Group or under any
director and officer liability insurance maintained by the Employer or any such
group member with respect to liabilities arising as a result of the Executive’s
service as an officer and employee of any member of the Employer Group or any
predecessor thereof.  Except as provided in the immediately preceding
sentence, the Releasors further agree that the payments and benefits as required
by the Letter Agreement shall be in full satisfaction of any and all Claims for
payments or benefits, whether express or implied, that the Releasors may have
against the Employer or any member of the Employer Group arising out of the
Executive’s employment relationship under the Letter Agreement and the
Executive’s service as an employee, officer or director of the Employer or a
member of the Employer Group under the Letter Agreement or the termination
thereof, as applicable.


    
      
         


      

      
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    2.           Specific Release of
Claims.  In further consideration of the payments and benefits
provided to the Executive under the Letter Agreement, the Releasors hereby
unconditionally release and forever discharge the Releasees from any and all
Claims that the Releasors may have in connection with the Executive’s employment
or termination of employment, arising under:

     

    a.      Title
VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act
(“ADEA”), the Americans With Disabilities Act of 1990 (“ADA”), the
Rehabilitation Act of 1973, and any similar federal, state or local laws,
including without limitation, the Pennsylvania Human Relations Act, as amended
and any other non-discrimination and fair employment practices laws of any state
and/or locality in which the Executive works or resides, all as
amended;

     

    b.      the
Fair Credit Reporting Act (“FCRA”), the Employee Retirement Income Security Act
of 1974 (“ERISA”), the Worker Adjustment and Retraining Notification Act
(“WARN”); and

     

    c.      all
common law Claims including, but not limited to, actions in tort and for breach
of contract, including, without limitation, Claims for incentive payments and/or
commissions, including but not limited to, Claims for incentive and/or
commission payments under any Employer incentive or commission plan, Claims for
severance benefits, all Claims to any non-vested ownership interest in the
Employer, contractual or otherwise, including but not limited to Claims to stock
or stock options.

     

    This release applies to any and all
Claims that the Executive may have relating to rights, known or unknown to him,
resulting from a change in ownership control of the Employer, including, without
limitation, rights pursuant to severance agreements, severance plans, incentive
plans, equity compensation plans, or any other plan or agreement relating to the
Executive’s employment.

     

    Notwithstanding anything contained
herein to the contrary, no portion of any release contained in any Section of
this Release Agreement shall release the Employer or the Employer Group from any
Claims the Executive may have for breach of the provisions of this Release
Agreement or to enforce this Release Agreement, that arise after the date of
this Release Agreement, or to challenge the validity of the Executive’s release
of ADEA Claims.

     

    By signing this Release Agreement, the
Executive hereby acknowledges and confirms the following: (i) the Executive was
advised by the Employer or his then employer in connection with his termination
of employment or retirement to consult with an attorney of his choice prior to
signing this Release Agreement and to have such attorney explain to the
Executive the terms of this Release Agreement, including, without limitation,
the terms relating to the Executive’s release of Claims arising under this
Section, and the Executive has in fact consulted with an attorney; (ii) the
Executive was given a period of not fewer than 21 days to consider the terms of
this Release Agreement prior to its signing; and (iii) the Executive knowingly
and voluntarily accepts the terms of this Release Agreement.

     

    3.           No Assignment of
Claims.  The Executive represents and warrants that he has not
assigned any of the Claims being released hereunder.


    
      
         


      

      
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    4.           Complaints.  The
Executive affirms that he has not filed any complaint against any Releasee with
any local, state or federal court and agrees not to do so in the future, except
for Claims challenging the validity of the release of ADEA
Claims.  The Executive affirms further that he has not filed any
claim, charge or complaint with the United States Equal Employment Opportunity
Commission (“EEOC”) or any state or local agency authorized to investigate
charges or complaints of unlawful employment discrimination (together,
“Agency”).  The Executive understands that nothing in this Release
Agreement prevents him from filing a charge or complaint of unlawful employment
discrimination with any Agency or assisting in or cooperating with an
investigation of a charge or complaint of unlawful employment discrimination by
an Agency, provided however that, the Executive acknowledges that he may not be
able to recover any monetary benefits in connection with any such claim, charge,
complaint or proceeding and disclaim entitlement to any such
relief.  Furthermore, if any Agency or court has now assumed or later
assumes jurisdiction of any claim, charge or complaint on the Executive’s behalf
against any Releasee, the Executive will disclaim entitlement to any
relief.

     

    5.           Revocation.  This
Release Agreement may be revoked by the Executive within the seven-day period
commencing on the date the Executive signs this Release Agreement (the
“Revocation Period”).  In the event of any such revocation by the
Executive, all obligations of the parties under this Release Agreement shall
terminate and be of no further force and effect as of the date of such
revocation.  No such revocation by the Executive shall be effective
unless it is in writing and signed by the Executive and received by the Employer
prior to the expiration of the Revocation Period.  In the event of
revocation, the Executive shall not be entitled to the payments and benefits
under the Letter Agreement, the receipt of which is conditioned on the
Executive’s execution of this Release Agreement.

     

    6.           Non-Disparagement.  The
Executive agrees not to disparage or criticize the Releasees, or any of them, or
otherwise speak of Releasees, or any of them, in any negative or unflattering
way to anyone with regard to any matters relating to the Executive’s employment
by the Employer Group or the business or employment practices of such business
entities.  The Employer agrees, on behalf of itself, and the Employer
Group, not to disparage or criticize the Executive or otherwise speak of the
Executive in any negative or unflattering way to anyone with regard to any
matters relating to the Executive’s employment with the Employer
Group.  The parties understand that this entire provision is a
material provision of this Release Agreement.  This Section shall not
operate as a bar to (i) statements reasonably necessary to be made in any
judicial, administrative or arbitral proceeding, or (ii) internal communications
between and among the employees of the Employer Group with a job-related need to
know about this Release Agreement or matters related to the administration of
this Release Agreement.

     

    7.           Cooperation.  The
Executive agrees to cooperate with the Employer with respect to all matters
arising during or related to his employment about which he has personal
knowledge because of his employment with the Employer, including but not limited
to all matters (formal or informal) in connection with any government
investigation, internal Employer investigation, litigation (potential or
ongoing), administrative, regulatory, or other proceeding which currently
exists, or which may have arisen prior to or arise following the signing of this
Release Agreement.  The Executive understands that the Employer agrees
to reimburse Executive for his reasonable out-of-pocket expenses (not including
attorney’s fees, legal costs, or lost time or opportunity) incurred in
connection with such cooperation.


    
      
         


      

      
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    8.           No Admission of
Liability.  The Executive agrees that this Release Agreement
does not constitute, nor should it be construed to constitute, an admission by
the Employer of any violation of federal, state, or local law, regulation, or
ordinance, nor as an admission of liability under the common law or for any
breach of duty the Employer owed or owes to the Executive.

     

    9.           Representations and
Warranties.  The Executive acknowledges and agrees that (i) he
is not aware of nor has he reported any conduct by any of the Releasees that
violates any federal, state, or local law, rule, or regulation, (ii) he has not
been denied any rights or benefits under the Family and Medical Leave Act of
1993 (“FMLA”) or any state or local law, act, or regulation providing for family
and/or medical leave or been discriminated against in any way for exercising his
rights under these laws, and (iii) in connection with offering the payments and
benefits provided under the Letter Agreement, the Employer has not provided to
the Executive, and has no obligation to provide to the Executive, any material
non-public information as defined in applicable federal securities laws,
concerning the Employer.

     

    10.           Confidentiality.  The
Executive agrees to maintain as confidential, the terms and contents of this
Release Agreement, and the contents of the negotiations and discussions
resulting in this Release Agreement, except (i) as needed to obtain legal
counsel, financial, or tax advice, (ii) to the extent required by federal,
state, or local law or by order of court (iii) as needed to challenge the
release of ADEA Claims or to participate in an Agency investigation, or (iv) as
otherwise agreed to in writing by an officer of the Employer.  The
Executive agrees that before he seeks legal counsel or financial or tax advice,
he will secure an agreement from such counsel or advisors to adhere to the same
confidentiality obligations that apply to him.  The Executive agrees
not to discuss either the existence of or any aspect of this Release Agreement
with any employee or ex-employee of the Employer.

     

    11.           Successors.  This
Release Agreement is for the benefit of and is binding upon the Executive and
his heirs, administrators, representatives, executors, successors, beneficiaries
and assigns, and is also for the benefit of the Releasees and their successors
and assigns.

     

    12.           Violation.  If
the Executive violates any provisions of this Release Agreement, the Employer
will be entitled to the immediate repayment of all payments and benefits paid
pursuant to the Letter Agreement.  The Executive agrees that repayment
will not invalidate this Release Agreement and acknowledges that he will be
deemed conclusively to be bound by the terms of this Release Agreement and to
waive any right to seek to overturn or avoid it.  If the Executive
violates any provisions of this Release Agreement before all of the payments and
benefits under the Letter Agreement have been provided, the Employer may
discontinue any unpaid conditional payments and benefits.

     

    13.           Additional Damages Available
for Violation. The Executive agrees that the Employer will maintain all
rights and remedies available to it at law and in equity in the event the
Executive violates any provision of this Release Agreement.  These
rights and remedies may include, but may not be limited to, the right to bring
court action to recover all consideration paid to the Executive pursuant to this
Release Agreement and any additional damages the Employer may suffer as a result
of such a breach.


    
      
         


      

      
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    14.           Entire Agreement and
Amendment.  This Release Agreement contains and constitutes the
entire understanding and agreement between the parties hereto with respect to
the Executive’s severance benefits and waiver and release of Claims against the
Employer and cancels all previous oral and written negotiations, agreements,
commitments and writings in connection therewith.  This Release
Agreement shall be binding upon the parties and may not be modified in any
manner, except by an instrument in writing of concurrent or subsequent date
signed by a duly authorized representative of the parties and their respective
agents, assign, heirs, executors, successors, and administrators.  No
delay or omission by the Employer in exercising any right under this Release
Agreement shall operate as a waiver of that or any other right.  A
waiver or consent given by the Employer on any one occasion shall be effective
only in that instance and shall not be construed as a bar or waiver of any right
on any other occasion.  The parties acknowledge and agree that
Sections 9.6 and 12 of the Letter Agreement shall survive the execution of this
Release Agreement and the termination of the Letter Agreement.

     

    15.           Applicable
Law.  This Release Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania without regard
to choice of law principles, and except as preempted by federal
law.  Should any provision of this Release Agreement be declared or be
determined by any court of competent jurisdiction to be illegal or invalid, the
validity of the remaining parts, terms or provisions shall not be affected
thereby and the illegal or invalid part, term, or provision will be deemed not
to be a part of this Release Agreement.

     

    16.           Assignment.  The
Executive’s rights and obligations under this Release Agreement shall inure to
the Executive’s benefit and shall bind the Executive, his heirs and
representatives.  The Employer’s rights and obligations under this
Release Agreement shall inure to the benefit of and shall bind the Employer, its
successors and assigns.  The Executive may not assign this Release
Agreement.  The Employer may assign this Release Agreement, but it may
not delegate the duty to make any payments hereunder without the Executive’s
written consent, which shall not be unreasonably withheld.

     

    17.           Severability.  If
any provision of this Release Agreement is held unenforceable by a court of
competent jurisdiction, all remaining provisions shall continue in full force
and effect without being impaired or invalidated in any way.

     

    18.           Notices.  All
notices required by this Release Agreement shall be in writing and shall be
deemed to have been duly delivered in person or when mailed by certified mail,
return receipt requested, as follows:

     

    a.      If
to the Executive:

     

    b.      If
to the Employer: 72 North Franklin St., Wilkes-Barre, PA 18773-0016

     

    The
Executive is hereby advised that the Executive has up to twenty-one (21)
calendar days to review this Release Agreement and that the Executive should
consult with an attorney of the Executive’s choice prior to execution of this
Release Agreement.


    
      
         


      

      
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    The
Executive agrees that any modifications, material or otherwise, made to this
Release Agreement do not restart or affect in any manner the original twenty-one
(21) calendar day consideration.

     

    Having
elected to execute this Release Agreement, to fulfill the promises and to
receive the payments and benefits under the Letter Agreement, the Executive
freely and
knowingly, after due consideration, enters into this Release Agreement
intending to waive, settle and release all claims the Executive has or might
have against the Employer.

     

    Statement by the Executive
who is signing below.  By signing this Release Agreement, I
acknowledge that the Employer has advised and encouraged me to consult with an
attorney prior to executing this Release Agreement.  I have carefully
read and fully understand the provisions of this Release Agreement and have had
sufficient time and opportunity (over a period of 21 days) to consult with my
personal tax, financial and legal advisors prior to executing this Release
Agreement, and I intend to be legally bound by its terms.

     

    IN
WITNESS WHEREOF, the Employer (on its behalf and on behalf of the members of the
Employer Group) and the Executive, intending to be legally bound have executed
this Release Agreement on the day and year first above written.


     

    
      
        
          
            
              	
                      PENN
      MILLERS HOLDING CORPORATION

                    
	 
      	 
      
	
                      By

                    	 
      
	 
      	 
      
	
                      Title

                    	 
      
	 
      	 
      
	
                      EXECUTIVE

                    
	 
      	 
      
	 
      
	
                      Keith
      A. Fry

                    


            

          

        

      

    


    
      
         


      

      
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