Document:

Exhibit 10.2

Exhibit 10.2

    SECOND
      AMENDMENT

    TO
      THE

    PMA
      CAPITAL CORPORATION 401(k) PLAN

    (As
      Amended and Restated Effective January 1, 1999)

     

    

     

    WHEREAS,
      PMA
      Capital Corporation
      (the
“Company”) maintains the PMA
      Capital Corporation 401(k) Plan (the
      “Plan”) for the benefit of certain of its employees, and the eligible employees
      of certain participating affiliates; and

     

    WHEREAS,
      the
      Plan was most recently amended and restated effective January 1, 1999 and
      has since been modified by the First Amendment thereto effective January 1,
      2003; and

     

    WHEREAS,
      the
      Company wishes to amend the Plan to implement a non-matching, age-based employer
      contribution, and to rename the Plan; and

     

    WHEREAS,
      under
      Sections 12.2 and 15.4 of the Plan, the Company has reserved the right to amend
      the Plan with respect to all Participating Companies at any time, subject to
      certain inapplicable limitations;

     

    NOW,
      THEREFORE,
      effective January 1, 2006, except as otherwise specifically provided herein,
      the
      Company hereby amends the Plan as follows:

     

    1. Section
      2.6 is amended to read as follows:

     

    “2.6 Annual
      Addition
      shall
      mean the sum of the following amounts credited to a Participant’s account for a
      Limitation Year:

     

    (a) Employer
      contributions (e.g., Pre-Tax, Employer Matching, and Retirement
      Contributions);

     

    (b) Forfeitures
      (if any) (excluding amounts necessary to reinstate previously forfeited Account
      balances in accordance with Section 7.4(g));

     

    (c) Employee
      Contributions (i.e., After-Tax Contributions), if any;

     

    (d) Any
      amount allocated to the Participant’s individual medical account (within the
      meaning of Section 415(l) of the Code) under any Defined Benefit Plan maintained
      by the Employer;

     

    (e) Any
      amount attributable to post-retirement medical benefits which is allocated
      pursuant to Section 419A(d) of the Code to the separate account of a Key
      Employee under a welfare benefit fund (within the meaning of Section 419(e)
      of
      the Code) maintained by the Employer;

     

    (f) Allocations
      under a simplified employee pension; and

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (g) Any
      Excess Amount applied under Section 5.1, 5.2, or 5.3 (if applicable), in the
      Limitation Year to reduce Employer or Affiliated Employer contributions for
      such
      Limitation Year.”

     

    2. A
      new
      Section 2.48 is added to read as follows, and all following sections of Article
      II (and all applicable cross-references) are renumbered as
      necessary:

     

    “2.48 Grandfathered
      Participant
      means a
      Participant who, as of December 31, 2005, was an Eligible Employee who had
      both
      attained age 50 and was credited with 5 or more Years of Service.”

     

    3. Section
      2.64 (renumbered from 2.63) is amended to read as follows:

     

    “2.64 Participant’s
      Account
      or
Account
      shall
      mean, as to any Participant, the separate account maintained in order to reflect
      his or her interest in the Plan. Each Participant’s Account shall be comprised
      of one or more separate subaccounts, as follows:

     

    (a) After-Tax
      Contribution Account
      shall
      mean the subaccount maintained to record the After-Tax Contributions allocated
      to a Participant’s Account and the adjustments relating thereto.

     

    (b) Employer
      Account
      shall
      mean the subaccount maintained to record any required Employer contributions
      made to the Plan on behalf of Participants who are not Key Employees under
      Section XIV with respect to any Plan Year in which the Plan is a Top-Heavy
      Plan.

     

    (c) Employer
      Matching Contribution Account (After-Tax Contributions)
      shall
      mean the subaccount maintained to record the Employer Matching Contributions
      allocated to a Participant’s Account with respect to the After-Tax Contributions
      made by such Participant and the adjustments relating thereto.

     

    (d) Employer
      Matching Contribution Account (Pre-Tax Contributions)
      shall
      mean the subaccount maintained to record the Employer Matching Contributions
      allocated to a Participant’s Account with respect to the Pre-Tax Contributions
      made on behalf of such Participant and the adjustments relating
      thereto.

     

    (e) Loan
      Account
      shall
      mean the subaccount maintained to record a Participant’s outstanding loan
      balance.

     

    (f) Pre-Tax
      Contribution Account
      shall
      mean the subaccount maintained to record the Pre-Tax Contributions made on
      behalf of a Participant and the adjustments relating thereto.

     

    (g) Qualified
      Matching Contribution Account
      shall
      mean the subaccount maintained to record the Qualified Matching Contributions
      made on behalf of a Participant and the adjustments relating
      thereto.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    (h) Qualified
      Non-Elective Contribution Account
      shall
      mean the subaccount maintained to record the Qualified Non-Elective
      Contributions made on behalf of a Participant and the adjustments relating
      thereto.

     

    (i) Retirement
      Contribution Account
      shall
      mean the subaccount maintained to record the Retirement Contributions allocated
      to the Participant’s Account under Section 4.6 and the adjustments relating
      thereto.

     

    (j) Rollover
      Account
      shall
      mean the subaccount maintained to record the Rollover Contributions made by
      a
      Participant and the adjustments relating thereto.

     

    (k) Transfer
      Account
      shall
      mean the subaccount maintained to record the amounts transferred to this Plan
      in
      a plan-to-plan transfer from any other tax-qualified retirement plan and the
      adjustments relating thereto.”

     

    4. Section
      2.70 (renumbered from 2.69) is amended to read as follows:

     

    “2.70 Plan
      shall
      mean The PMA
      Capital Corporation Retirement Savings Plan,
      as set
      forth herein and as it may be amended hereafter from time to time. Prior to
      December 7, 1998, the Plan was known as The PMA 401(k) Plan. From December
      7,
      1998 through December 31, 2005, the Plan was known as The PMA Capital
      Corporation 401(k) Plan. The Plan is intended to qualify as a
      Section 401(k) profit sharing plan for all purposes under the
      Code.”

     

    5. A
      new
      Section 2.84 is added to read as follows, and all following sections of Article
      II (and all applicable cross-references) are renumbered as
      necessary:

     

    “2.84 Retirement
      Contributions
      shall
      mean the amounts contributed under the Plan by the Employer on behalf of
      Participants in accordance with Section 4.6.”

     

    6. Section
      2.97 (renumbered from 2.95) is amended to read as follows:

     

    “2.97 Vested
      Interest
      shall
      mean the sum of the vested balances in a Participant’s Pre-Tax Contribution
      Account, Retirement Contribution Account, Employer Account, if any, Rollover
      Account, if any, Transfer Account, if any, Loan Account, if any, Employer
      Matching Contribution Account (Pre-Tax Contributions), Employer Matching
      Contribution Account (After-Tax Contributions), if any, and After-Tax
      Contribution Account, if any.”

     

    7. A
      new
      Section 4.6 is added to read as follows, and all following sections of Article
      IV (and all applicable cross-references) are renumbered as
      necessary:

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    

     

    “4.6 Retirement
      Contributions.
      With
      respect to each calendar quarter beginning on or after January 1, 2006, the
      Employer shall make a Retirement Contribution on behalf of each Participant
      described in Section (a) hereof, in an amount described in Section (b)
      hereof.

     

    (a) Eligibility.
      A
      Participant shall have a Retirement Contribution made on his or her behalf
      for
      any calendar quarter if he or she:

     

    (i) had
      been
      credited with at least one Year of Service as of the day before the beginning
      of
      the calendar quarter;

     

    (ii) was
      a
      Participant at any time during such calendar quarter;

     

    (iii) had
      Compensation for such calendar quarter; and

     

    (iv) was
      an
      Eligible Employee of the Employer as of the last day of the calendar quarter;
      provided however, that this requirement shall be deemed to be satisfied if
      the
      Participant had a Separation from Service during the calendar quarter by reason
      of his or her death, Total Disability, or after having satisfied the
      requirements for a normal, early or late retirement under the terms of the
      PMA
      Capital Corporation Pension Plan.

     

    (b) Amount.
      For any
      Participant described in Subsection (a) hereof, the Retirement Contribution
      with
      respect to any calendar quarter shall equal:

     

    (i) for
      any
      Participant who is not a Grandfathered Participant, a percentage of his or
      her
      Compensation for the calendar quarter to be determined under the following
      table, based on the Participant’s attained age as of the last day of the Plan
      Year in which the calendar quarter occurs:

    

      
        	
                Participant’s
                  Age

              	
                Percentage
                  of Compensation

              
	
                Less
                  than 30

              	
                2%

              
	
                At
                  least 30 but less than 45

              	
                3%

              
	
                At
                  least 45 but less than 55

              	
                4%

              
	
                55
                  or older

              	
                5%

              

      

       

    

    (ii) for
      any
      Grandfathered Participant, a percentage of his or her Compensation for the
      calendar quarter to be determined under the following table, based on the
      Participant’s attained age as of the last day of the Plan Year in which the
      calendar quarter occurs:

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    
      
        	
                Participant’s
                  Age

              	
                Percentage
                  of Compensation

              
	
                At
                  least 50 but less than 55

              	
                6%

              
	
                At
                  least 55 but less than 60

              	
                8%

              
	
                60
                  or older

              	
                10%”

              

      

    

     

    8. Section
      4.10(a) (renumbered from 4.9(a)) is amended to read as follows:

     

    “(a) Investment
      Elections.
      Each
      Participant shall be given the option to direct the investment of the balance
      in
      his or her Account among alternative Investment Media established as part of
      the
      overall Trust Fund. Such Investment Media may be under the full control and
      management of the Trustee, an insurance company or an Investment Manager. A
      Participant’s right to direct the investment of any contribution shall apply
      only to the selection of the desired Investment Medium or Media and shall be
      subject to such restrictions and limitations as may be imposed by each of the
      Investment Media or by the Administrator. The following rules shall apply to
      the
      administration of such Investment Media:

     

    (i) At
      the
      time an Employee becomes eligible for the Plan, he or she shall complete an
      Appropriate Form stating the percentage of his or her contributions to be
      invested in the available Investment Media. Allocations to an Investment Medium
      shall be made in such minimum percentage, as the Administrator shall determine
      from time to time.

     

    (ii) A
      Participant may change the investment of his or her future contributions on
      each
      Valuation Date.

     

    (iii) A
      Participant may elect to transfer balances from one or more Investment Media
      to
      another on each Valuation Date.

     

    (iv) All
      investment elections and changes shall be made in such manner, at such times
      and
      in such form as the Administrator may from time to time prescribe through
      uniform and nondiscriminatory rules.

     

    (v) The
      amounts contributed by all Participants to each Investment Medium shall be
      commingled for investment purposes.

     

    (vi) The
      Trustee may hold assets of the Trust Fund and make contributions therefrom
      in
      the form of cash without liability for interest, if for administrative purposes
      it becomes necessary or practical to do so.

     

    (vii) Notwithstanding
      any other provision of this Section 4.10(a) to the contrary, a Participant
      may
      direct the investment of his or her Account (exclusive of his or her Retirement
      Contribution Account) into and out of the PMA Capital Corporation Class A Common
      Stock Fund subject to the following guidelines:

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    

     

    (1) A
      Participant may elect, pursuant to procedures established by the Administrator,
      to have up to twenty-five (25) percent or such other percentage, up to one
      hundred (100) percent, as determined by the Administrator on a uniform and
      non-discriminatory basis of his or her Pre-Tax Contributions, After-Tax
      Contributions and Employer Matching Contributions invested in the PMA Capital
      Corporation Class A Common Stock Fund;

     

    (2) Once
      each
      ninety (90) days or at such other times as determined by the Administrator
      on a
      uniform and non-discriminatory basis, a Participant may elect to transfer,
      pursuant to procedures established by the Administrator, up to twenty-five
      (25)
      percent or such other percentage, up to one hundred (100) percent, as determined
      by the Administrator on a uniform and non-discriminatory basis of the balance
      in
      his or her Account (excluding the outstanding balance of any Plan loans to
      such
      Participant and excluding his or her Retirement Contribution Account) from
      any
      other Investment Media in which his or her Account is invested to the PMA
      Capital Corporation Class A Common Stock Fund;

     

    (3) Once
      each
      ninety (90) days or at such other times as determined by the Administrator
      on a
      uniform and non-discriminatory basis, a Participant may elect to transfer,
      pursuant to procedures established by the Administrator, up to twenty-five
      (25)
      percent or such other percentage, up to one hundred (100) percent, as determined
      by the Administrator on a uniform and non-discriminatory basis of the portion
      of
      his or her Account invested in the PMA Capital Corporation Class A Common Stock
      Fund to one or more of the other Investment Media.”

     

    9. A
      new
      Section 4.10(c) is added to read as follows:

     

    “(c) Default
      Elections.
      If a
      Participant fails to make an investment election in accordance with Section
      4.10(a) that is expressly applicable to his or her Retirement Contribution
      Account, his or her Retirement Contribution Account shall be invested as
      follows:

     

    (i) If
      the
      Participant has made a currently effective investment election with respect
      to
      all subaccounts other than his or her Retirement Contribution Account, then
      his
      or her Retirement Contribution Account shall be invested among the selected
      Investment Media (other than the PMA Capital Corporation Class A Common Stock
      Fund) in the same proportions as the percentage that has been directed to each
      selected Investment Medium (other than the PMA Capital Corporation Class A
      Common Stock Fund) bears to the sum of the percentages that have been directed
      to all such other Investment Media. For example, if a Participant has elected
      to
      invest his Account as follows - 25% to Fund A, 25% to Fund B, 25% to Fund C,
      and
      25% to the PMA Capital Corporation Class A Common Stock Fund - but he has not
      made a currently effective investment election with respect to his Retirement
      Contribution Account, his Retirement Contribution Account shall be invested
      as
      follows - 331⁄3% to Fund A, 331⁄3% to Fund B and 331⁄3% to Fund C. 

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    

     

    (ii) If
      the
      Participant has no currently effective investment election under the Plan at
      the
      time a Retirement Contribution is made, his or her Retirement Contribution
      Account shall be invested in such Investment Medium or Media as is determined
      by
      the Administrator, in its sole discretion.”

     

    10. Section
      4.12 (renumbered from 4.11) is amended to read as follows:

     

    “4.12 Adjustments
      to Pre-Tax, After-Tax, Employer Matching Contribution and Retirement
      Contribution Rates.
      Notwithstanding the foregoing provisions of this Article IV, to the extent
      necessary to comply with applicable law, the maximum Pre-Tax and After-Tax
      Contribution percentage and the amount of Employer Matching Contributions or
      Retirement Contributions may be increased or decreased in the absolute
      discretion of the Administrator, provided that no such adjustment may be made
      without at least thirty (30) days prior written notice to all
      Participants.”

     

    11. Section
      4.13 (renumbered from 4.12) is amended to read as follows:

     

    “4.13 No
      Profits Limitation.
      Pre-Tax
      Contributions, Employer Matching Contributions and Retirement Contributions
      hereunder shall be made without regard to whether an Employer has current or
      accumulated net earnings.”

     

    12. Section
      6.1(a) is amended to read as follows:

     

    “6.1 Participants’
      Accounts.
      At the
      direction of the Administrator, there shall be established and maintained for
      each Participant the following subaccounts:

     

    (a) An
      After-Tax Contribution Account to which shall be credited all After-Tax
      Contributions paid to the Trust Fund at the Participant’s election pursuant to
      Section 4.2;

     

    (b) An
      Employer Account to which shall be credited any Employer contributions required
      to be made under Article XIV of the Plan on behalf of Participants who are
      not
      Key Employees for any Plan Year in which the Plan is a Top-Heavy
      Plan;

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    (c) An
      Employer Matching Contribution Account (After-Tax Contributions) to which shall
      be credited the Employer Matching Contributions made in respect of his or her
      After-Tax Contributions pursuant to Section 4.3;

     

    (d) An
      Employer Matching Contribution Account (Pre-Tax Contributions) to which shall
      be
      credited the Employer Matching Contributions made in respect of his or her
      Pre-Tax Contributions pursuant to Section 4.3;

     

    (e) A
      Loan
      Account to which shall be credited the outstanding balance of a Participant’s
      loan;

     

    (f) A
      Pre-Tax
      Contribution Account to which shall be credited all Pre-Tax Contributions paid
      to the Trust Fund at his or her election;

     

    (g) A
      Qualified Matching Contribution Account to which shall be credited the Qualified
      Matching Contributions made on behalf of the Participant pursuant to Section
      4.5;

     

    (h) A
      Qualified Non-Elective Contribution Account to which shall be credited the
      Qualified Non-Elective Contributions made on behalf of the Participant pursuant
      to Section 4.5;

     

    (i) A
      Retirement Contribution Account to which shall be credited the Retirement
      Contributions made on behalf of the Participant pursuant to Section
      4.6.

     

    (j) A
      Rollover Account to which shall be credited the Rollover Contributions made
      by,
      or on behalf of, a Participant or other Eligible Employee pursuant to Section
      4.7; and

     

    (k) A
      Transfer Account to which shall be credited any amounts transferred to this
      Plan
      from another tax-qualified plan pursuant to Section 4.8.”

     

    13. Section
      7.2(b) is amended to read as follows:

     

    “(b) Vesting
      in Other Employer Contributions and Retirement
      Contributions. 

     

    (i) Employer
      Matching Contributions.
      A
      Participant’s interest in his or her Employer Matching Contribution Account
      (After-Tax Contributions) and in his or her Employer Matching Contribution
      Account (Pre-Tax Contributions) shall be vested and nonforfeitable in accordance
      with the following schedule:

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    
      	
              Number
                of Years of Service

            	
              Account’s
                Vested Percentage

            
	
              Less
                than 1

            	
              0%

            
	
              1
                but less than 2

            	
              10%

            
	
              2
                but less than 3

            	
              40%

            
	
              3
                but less than 4

            	
              60%

            
	
              4
                but less than 5

            	
              80%

            
	
              5
                or more

            	
              100%

            

    

    

    (ii) Retirement
      Contributions.
      A
      Participant’s interest in his or her Retirement Contribution Account shall be
      vested and nonforfeitable in accordance with the following schedule:

     

    
      	
              Number
                of Years of Service

            	
              Account’s
                Vested Percentage

            
	
              Less
                than 5

            	
              0%

            
	
              5
                or more

            	
              100%

            

    

    

    Upon
      termination of the Participant’s employment with the Employer and all Affiliated
      Employers for any reason at any time, the vested portion of his or her Employer
      Matching Contribution Account (After-Tax Contributions), his or her Employer
      Matching Contribution Account (Pre-Tax Contributions), and his or her Retirement
      Contribution Account shall be distributable to him or her in the manner and
      at
      the time set forth in this Article VII. If a Participant receives a
      cash-out pursuant to Section 7.4(f), the nonvested portion of such
      Participant’s Account, if any, shall be forfeited in accordance with
      Section 7.4(f) at the time of distribution. If a Participant has a
      Separation from Service and does not receive a cash-out pursuant to
      Section 7.4(f) or otherwise receive a distribution, then the non-vested
      portion of such Participant’s Account will be forfeited after such Participant
      incurs five (5) consecutive one year Breaks in Service (i.e.,
      a
      Period of Severance of five (5) years). All forfeitures shall be utilized to
      reduce Employer Matching Contributions and/or Retirement Contributions for
      the
      then current or succeeding Plan Years.

     

    Notwithstanding
      the foregoing, a Participant’s interest in his or her Account shall be 100%
      vested and nonforfeitable upon such Participant’s death or Total Disability or
      attaining of Normal Retirement Age and shall be distributable in the manner
      and
      at the time set forth in this Article VII.

     

    If
      a
      Rehired Employee becomes a Participant after having incurred five (5)
      consecutive one year Breaks in Service (i.e., a Period of Severance of five
      (5)
      years), such Rehired Employee’s service earned after such five consecutive one
      year Breaks in Service (i.e., a Period of Severance of five (5) years) will
      be
      disregarded for the purpose of determining the vested percentage in his/her
      Account which accrued before such five consecutive one year Breaks in Service
      (i.e.,
      a
      Period of Severance of five (5) years). However, as to such a Rehired Employee,
      both pre-Break and post-Break service will count for purposes of determining
      the
      vested percentage in his or her Account that accrued after such
      Break.”

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    14. A
      new
      Section 7.4(f)(v) is added, effective for distributions made on and after March
      28, 2005 (including distributions to Participants who terminate employment
      prior
      to such date), to read as follows:

     

    “(v) In
      the
      event of a mandatory distribution greater than $1,000 in accordance with the
      provisions of Section 7.4(f)(i), if the Participant does not elect to have
      such
      distribution paid directly to an eligible retirement plan specified by the
      Participant in a direct rollover in accordance with Section 7.13 or to receive
      the distribution directly, then the Administrator will pay the distribution
      in a
      direct rollover to an individual retirement account designated by the
      Administrator.”

     

    15. Section
      8.1(a) is amended to read as follows:

     

    “(a) General.
      Subject
      to the provisions of this Section 8.1 and once the Participant’s After-Tax
      Contribution Account has been withdrawn in full pursuant to Section 8.2(a),
      a
      Participant, other than a Participant who is no longer an Employee, may make
      a
“Hardship” (as defined below) withdrawal (with the approval of the
      Administrator) from the Participant’s Account (exclusive of his or her
      Retirement Contribution Account), in order to satisfy an immediate and heavy
      financial need specified in Section 8.1(d), in the following order of priority:
      (i) Rollover Account balance, (ii) Transfer Account balance, (iii) Pre-Tax
      Contribution Account balance, (iv) Employer Matching Contribution Account
      (After-Tax Contributions) balance, to the extent vested, and (v) Employer
      Matching Contribution Account (Pre-Tax Contributions) balance, to the extent
      vested. As required by Section 8.1(d), no Hardship withdrawal pursuant to this
      Section 8.1 shall be permitted until the Participant elects to withdraw, or
      has
      withdrawn, the entire balance in his or her After-Tax Contribution Account
      in
      accordance with Section 8.2(a). For purposes of this Section 8.1, “Hardship” is
      defined as an immediate and heavy financial need, as specified in Section
      8.1(d), of the Participant where such Participant lacks other available
      resources.”

     

    16. Section
      8.2(b) is amended to read as follows:

     

    “(b) Upon
      and After Attaining Age 591⁄2.
      Upon
      attaining age 591⁄2, a Participant, by filing an Appropriate Form, may elect to
      withdraw up to the total value of his or her Account (exclusive of his or her
      Retirement Contribution Account), determined as of the Valuation Date coinciding
      with, or if the Valuation Date does not coincide with the benefit commencement
      date, the Valuation Date immediately preceding the benefit commencement date.
      Withdrawals pursuant to this Section 8.2(b) may be elected no more frequently
      than once per Plan Year.”

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    17. Section
      9.3 is amended to read as follows:

     

    “9.3 Amount
      of Loan.
      The
      amount an eligible Participant may borrow may not be:

     

    (a) Less
      than
      $200, and

     

    (b) More
      than
      the amount which (when added to the outstanding balance of any other loan made
      from the Plan or any other quantified retirement plan maintained by the Employer
      or an Affiliated Employer) is the lesser of:

     

    (i) $50,000,
      reduced by the excess of

     

    (1) The
      highest outstanding balance of loans from the Plan during the 12 months ending
      on the day before the date a new loan is made over

     

    (2) The
      outstanding loan balance on the date of the new loan, or

     

    (ii) Fifty
      percent (50%) of the value of the eligible Participant’s Vested Interest
      (exclusive of any Vested Interest in his or her Retirement Contribution
      Account).”

     

    18. Section
      9.4(b) is amended to read as follows:

     

    “(b) Allocation
      between Accounts.
      All
      loans shall first be made from the Participant’s Rollover Account, then from the
      Transfer Account, then from the Employer Matching Contribution Account (Pre-Tax
      Contributions), to the extent vested, then from the Employer Matching
      Contribution Account (After-Tax Contributions), to the extent vested, then
      from
      the Pre-Tax Contribution Account and finally from the After-Tax Contribution
      Account. No loans shall be made from a Participant’s Retirement Contribution
      Account. Repayments of principal and interest shall be invested in accordance
      with the investment election then in effect with respect to the Participant’s
      Pre-Tax Contributions. If no Pre-Tax Contributions are being made to the Plan
      by
      the Participant or if there is no valid investment election in effect, the
      principal and interest repayments shall be invested in such Investment Medium
      or
      Media as is determined by the Administrator, in its sole
      discretion.”

     

    19. Section
      11.3 is amended to read as follows:

     

    “11.3 Continuing
      Conditions with Respect to Contributions.
      Any
      obligation to contribute Pre-Tax Contributions and/or to make Employer Matching
      Contributions or Retirement Contributions to the Trust Fund is hereby
      conditioned upon the continued qualification of the Plan under Section 401(a)
      of
      the Code and the exempt status of the Trust Fund under Section 501(a) of the
      Code and upon the deductibility of such contributions under Section 404(a)
      of
      the Code. That portion of any Pre-Tax Contributions, Employer Matching
      Contributions, or Retirement Contributions which is contributed or made by
      reason of a good faith mistake of fact, or by reason of a good faith mistake
      in
      determining the deductibility of such contribution, shall be returned to the
      Employer as promptly as practicable, but not later than one year after the
      contribution was made or the deduction was disallowed (as the case may be).
      The
      amount returned pursuant to the preceding sentence shall he an amount equal
      to
      the excess of the amount actually contributed over the amount that would have
      been contributed if the mistake had not been made; provided, however, that
      gains
      attributable to the returnable portion shall be retained in the Trust Fund;
      and
      provided, further, that the returnable portion shall be reduced (a) by any
      losses attributable thereto and (b) to avoid a reduction in the balance of
      any
      Participant’s Account below the balance that would have resulted if the mistake
      had not been made.”

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    20. Section
      11.4 is amended to read as follows:

     

    “11.4 Status
      as Eligible Individual Account Plan.
      Pursuant to Section 407 of ERISA, up to one hundred (100) percent of the Plan’s
      assets (exclusive of those assets which are attributable to Retirement
      Contributions) may be invested in Qualifying Employer Securities that are PMA
      Capital Corporation Class A Common Stock.”

     

    21. Section
      12.1 is amended to read as follows:

     

    “12.1 Employer’s
      Obligations Limited.
      The
      Plan is voluntary on the part of each Employer, and except as required by
      applicable law, each Employer shall have no responsibility to satisfy any
      liabilities under the Plan. Furthermore, the Employer and Plan Sponsor do not
      guarantee to continue the Plan, and the Plan Sponsor at any time may, by
      appropriate amendment of the Plan, suspend or discontinue Employer Matching
      Contributions and/or Retirement Contributions, with or without cause. Complete
      discontinuance of all Pre-Tax Contributions, Employer Matching Contributions
      and
      Retirement Contributions shall be deemed a termination of the Plan. If Employer
      Matching Contributions are suspended, each Eligible Employee shall be notified
      of the suspension and each Eligible Employee may thereupon elect to suspend
      his
      or her Pre-Tax Contributions for the period during which Employer Matching
      Contributions are suspended.”

     

    22. Section
      12.3 is amended to read as follows:

     

    “12.3 Effect
      of Termination.
      If the
      Plan is completely or partially terminated, or if there is a complete
      discontinuance of Pre-Tax, Employer Matching, and Retirement Contributions,
      then
      the interests of all Participants affected by such termination or discontinuance
      in their Accounts shall be 100% vested and nonforfeitable. The balances credited
      to the Accounts of the affected Participants may be distributed to them in
      the
      manner set forth in Article VII hereof, as if a distribution event described
      in
      Section 7.1 hereof had occurred with respect to each affected Participant on
      the
      date of the termination; or the Administrator (in its sole discretion) may
      direct that the following sentence shall apply to their Accounts.
      Notwithstanding the foregoing, the balances credited to the Pre-Tax Contribution
      Accounts of the affected Participants may be distributed prior to the occurrence
      of a distribution event described in Section 7.1 only to the extent permitted
      by
      the Code.”

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

     

    IN
      WITNESS WHEREOF, PMA CAPITAL CORPORATION
      has
      caused these presents to be duly executed, under seal, this 24th day
      of  October, 2005.

     

    
      	
              Attest:

            	
              PMA
                CAPITAL CORPORATION

            
	
              [SEAL]

            	 

    

    

    
      	
              /s/
                Robert L. Pratter

            	
              /s/
                William E. Hitselberger

            
	
              Robert
                L. Pratter, Secretary

            	
              William
                E. Hitselberger, Executive Vice President and Chief Financial
                Officer

            

    

    
 

     

    13Exhibit 10.3

                                                                                                                            Exhibit
    10.3
    SECOND
      AMENDMENT

     

    TO
      THE

     

    PMA
      CAPITAL CORPORATION EXECUTIVE MANAGEMENT PENSION PLAN 

     

    (as
      amended and restated effective january 1, 2000)

     

    

     

    WHEREAS,
      some
      executives hired in mid-career by PMA
      Capital Corporation
      (the
“Company”) are not able to be credited under the PMA Capital Corporation Pension
      Plan (the “Pension Plan”) with the maximum number of years of benefit service
      allowable under the Pension Plan (“Short Service Reduction”); and

     

    WHEREAS,
      the
      Company maintains the PMA
      Capital Corporation Executive Management Pension Plan
      (the
“Plan”) to provide the Short Service Reduction benefits to a select group of
      management and highly compensated employees; and

     

    WHEREAS,
      the
      Plan was most recently amended and restated effective January 1, 2000 and has
      since been modified by the First Amendment thereto effective January 1, 2003;
      and

     

    WHEREAS,
      the
      Company now desires to close participation in the Plan to new eligible
      executives and to modify the method by which Plan benefits are calculated by
      (1)
      freezing the accrual of benefits under the current Plan formula effective
      December 31, 2005 (but not freezing future reductions to accrued benefits as
      may
      result from future service with the Company), and (2) supplementing such frozen
      accruals with benefits derived from future “Contribution Credits” to be made to
      the Plan for plan years beginning on or after January 1, 2006; and

     

    WHEREAS,
      under
      Sections 7.2(a) and 8.4 of the Plan, the Company has reserved the right to
      amend
      the Plan with respect to all Participating Companies at any time, subject to
      certain inapplicable limitations;

     

    NOW,
      THEREFORE,
      effective January 1, 2006, except as otherwise specifically provided herein,
      the
      Company hereby amends the Plan as follows:

     

    1.  A
      new
      Section 1.4 is added to read as follows, and all following sections of Article
      I
      (and all applicable cross-references) are renumbered as necessary:

     

    “1.4 Beneficiary.
      The
      person or persons, or legal entity or entities, designated by a Participant
      or
      otherwise eligible under Section 6.3 to receive benefits (with respect to the
      Participant’s Post-2005 Service Retirement Benefit) after the Participant’s
      death.”

     

    2.  A
      new
      Section 1.9 is added to read as follows, and all following sections of Article
      I
      (and all applicable cross-references) are renumbered as necessary:

     

    “1.9 Compensation.
      With
      respect to any Participant, his or her “Compensation” (as such term is defined
      in Article II of the Retirement Savings Plan) equal to his or her annual rate
      of
      pay as in effect on the date that he or she first performed an Hour of
      Service.”

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    3.  A
      new
      Section 1.10 is added to read as follows, and all following sections of Article
      I (and all applicable cross-references) are renumbered as
      necessary:

     

    “1.10 Contribution
      Account.
      With
      respect to any Participant, the recordkeeping entry maintained on the books
      and
      records of the Plan Sponsor to reflect Contribution Credits made on the
      Participant’s behalf (reduced by the value of any Expired Contribution
      Subaccounts), and adjustments thereto, pursuant to Article III.”

     

    4.  A
      new
      Section 1.11 is added to read as follows, and all following sections of Article
      I (and all applicable cross-references) are renumbered as
      necessary:

     

    “1.11 Contribution
      Credits.
      Those
      amounts which are credited to a Participant’s Contribution Account pursuant to
      Section 3.1.”

     

    5.  A
      new
      Section 1.12 is added to read as follows, and all following sections of Article
      I (and all applicable cross-references) are renumbered as
      necessary:

     

    “1.12 Contribution
      Subaccount.
      A
      subaccount maintained within a Participant’s Contribution Account, with respect
      to Contribution Credits for a given Plan Year, and adjustments
      thereto.”

     

    6.  A
      new
      Section 1.13 is added to read as follows, and all following sections of Article
      I (and all applicable cross-references) are renumbered as
      necessary:

     

    “1.13 Determination
      Date.
      March
      31, June 30, September 30 and December 31 of each Plan Year.”

     

    7.  A
      new
      Section 1.15 is added to read as follows, and all following sections of Article
      I (and all applicable cross-references) are renumbered as
      necessary:

     

    “1.15 Expired
      Contribution Subaccount.
      Solely
      with respect to a Participant whose Past Service Credit under the Plan has
      been
      reduced to zero in accordance with Section 2.1, the oldest Contribution
      Subaccount of any Participant shall become an Expired Contribution Subaccount
      on
      the date as of which two times the Participant’s Years of Service after
      December 31, 2005 under the Retirement Savings Plan exceeds
      twenty-five (25). An example of the conversion of Contribution Subaccounts
      to
      Expired Contribution Subaccounts is set forth in Section 2.1(c). Upon his
      or her completion of each subsequent Year of Service under the Retirement
      Savings Plan, the Participant’s next oldest Contribution Subaccount shall become
      an additional Expired Contribution Subaccount.”

     

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    8.  A
      new
      Section 1.17 is added to read as follows, and all following sections of Article
      I (and all applicable cross-references) are renumbered as
      necessary:

     

    “1.17 Grandfathered
      Participant.
      A
      Participant who, as of December 31, 2005, was an Eligible Executive who had
      both
      attained age 50 and was credited with 5 or more actual Years of Vesting Service
      under the Pension Plan (excluding any additional years of service that are
      recognized under this Plan).

     

    9.  Section
      1.18 (renumbered from 1.10) is amended to read as follows:

     

    “1.18 Participant.
      An
      Eligible Executive or Former Eligible Executive who accrues, or has accrued,
      benefits under this Plan on and after January 1, 1999. No Eligible Executive
      shall become a Participant after December 31, 2005.”

     

    10.  Section
      1.21 (renumbered from 1.13) is amended to read as follows:

     

    “1.21 Past
      Service Retirement Benefit.
      That
      portion of a Participant’s Retirement Benefit that is attributable to his past
      service retirement benefit under this Plan on and after January 1, 1999 (and
      frozen with respect to future accruals effective December 31, 2005), and under
      the PMA SERP before January 1, 1999, both as determined in accordance with
      Section 2.2 hereof.”

     

    11.  A
      new
      Section 1.27 is added to read as follows, and all following sections of Article
      I (and all applicable cross-references) are renumbered as
      necessary:

     

    “1.27 Post-2005
      Service Retirement Benefit.
      That
      portion of a Participant’s Retirement Benefit that is attributable to
      Contribution Credits credited on his or her behalf pursuant to Section
      3.1.”

     

    12.  A
      new
      Section 1.29 is added to read as follows, and all following sections of Article
      I (and all applicable cross-references) are renumbered as
      necessary:

     

    “1.29 Retirement
      Benefit.
      For any
      Participant, the sum of his or her Past Service Retirement Benefit and Post-2005
      Service Retirement Benefit.”

     

    13.  A
      new
      Section 1.30 is added to read as follows, and all following sections of Article
      I (and all applicable cross-references) are renumbered as
      necessary:

     

    “1.30 Retirement
      Savings Plan.
      The PMA
      Capital Corporation Retirement Savings Plan (formerly known as the PMA Capital
      Corporation 401(k) Plan) as in effect on January 1, 2006 and as such plan may
      be
      further amended and/or restated from time to time and each successor or
      replacement tax-qualified retirement plan.”

     

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    14.  A
      new
      Section 1.36 is added to read as follows:

     

    “1.36 Valuation
      Date.
      Each
      day on which the NYSE is open for business and such other dates(s), if any,
      as
      the Administrator shall determine.”

     

    15.  Section
      2.1 is amended to read as follows:

     

    “2.1 Past
      Service Credit.
      

     

    (a) A
      Participant’s Past Service Credit under the Plan on and after
      January 1, 1999, and under the PMA SERP before
      January 1, 1999, shall be determined as follows. A Participant who is
      or was an Eligible Executive shall be credited with one additional year of
      Benefit Service (as such term is defined in Article I of the Pension Plan)
      under
      this Plan on and after January 1, 1999, and under the PMA SERP before
      January 1, 1999, for each year of Benefit Service credited under the
      Pension Plan through December 31, 2005 until the sum of the
      Participant’s years of Benefit Service credited under this Plan on and after
      January 1, 1999, and under the PMA SERP before
      January 1, 1999 (i.e. the Participant’s Past Service Credit under the
      Plan on and after January 1, 1999 and under the PMA SERP before
      January 1, 1999) and the Participant’s years of Benefit Service
      credited under the Pension Plan through December 31, 2005 equals
      twenty-five (25). A Participant’s Past Service Credit shall not increase after
      December 31, 2005.

     

    (b) If:
      

     

    (1) before
      January 1, 2006, the sum of a Participant’s Past Service Credit under
      the Plan on and after January 1, 1999, the PMA SERP before
      January 1, 1999, and such Participant’s years of Benefit Service under
      the Pension Plan is greater than twenty-five (25); or

     

    (2) after
      December 31, 2005, the sum of a Participant’s Past Service Credit
      under the Plan on and after January 1, 1999 through
      December 31, 2005 and the PMA SERP before January 1, 1999,
      the Participant’s years of Benefit Service under the Pension Plan through
      December 31, 2005, and two times the Participant’s Years of Service
      after December 31, 2005 under the Retirement Savings Plan is greater
      than twenty-five (25); 

     

    such
      Participant’s Past Service Credit under the Plan and under the PMA SERP shall be
      reduced so that such sum does not exceed twenty-five (25). For each succeeding
      year in which the Participant earns a Year of Service under the Retirement
      Savings Plan, his Past Service Credit shall be reduced by one year (but not
      below zero). Any such reduction shall be made first under the PMA SERP and
      then
      under this Plan. Once a Participant’s Past Service Credit is reduced to zero
      under this Section 2.1, 

     

     

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    his
      Contribution Subaccounts shall begin to be converted into Expired Contribution
      Subaccounts as he accumulates additional Years of Service under the Retirement
      Savings Plan, as described in Section 1.15 (definition of Expired Contribution
      Subaccount).

     

    (c) Example.
      Assume
      that, as of December 31, 2005, a Participant has 10 years of Past Service Credit
      (including such credit under this Plan and the PMA SERP) and 10 years of Benefit
      Service under the Pension Plan. In 2006, the Participant begins to accumulate
      Contribution Credits which are allocated to his Contribution Subaccounts for
      each year. In 2008, the sum of his Past Service Credit (10 years), his Benefit
      Service under the Pension Plan (10 years) and two times his Years of Service
      under the Retirement Savings Plan (2 x 3 years = 6 years) exceeds the 25-year
      limit. At that point, he will no longer receive Contribution Credits and his
      Past Service Credit will begin to be reduced (starting with his Past Service
      Credit under the PMA SERP). If he continues to earn Years of Service under
      the
      Retirement Savings Plan, his Past Service Credit will be reduced to zero by
      2018. At that point, two times his Years of Service under the Retirement Savings
      Plan (2 x 13 years = 26 years) will exceed the 25-year limit and his oldest
      Contribution Subaccount (from 2006) will be converted into an Expired
      Contribution Subaccount. If he continues to earn Years of Service under the
      Retirement Savings Plan, his last Contribution Subaccount will be converted
      into
      an Expired Contribution Subaccount in 2020, and he will cease to be entitled
      to
      any benefit under this Plan.”

     

    16.  Section
      2.2 is amended to read as follows:

     

    “2.2 Past
      Service Retirement Benefit.
      Subject
      to Sections 2.3 and 8.2 hereof, a Participant’s Past Service Retirement Benefit,
      if any, shall be an amount equal to the amount that would be payable under
      the
      benefit formula actually used in determining such Participant’s benefit under
      Article V of the Pension Plan at the time such benefit becomes payable but
      using
      only the Participant’s Past Service Credit determined under Section 2.1 as
      his/her Years of Benefit Service (as defined in Article I of the Pension Plan)
      under the Pension Plan and the following additional assumptions:

     

    (a) The
      Participant shall be deemed to receive Compensation (as such term is defined
      in
      Article I of the Pension Plan) during each year of past service equal to such
      Participant’s annual rate of pay as in effect on the Participant’s Employment
      Commencement Date (as such term is defined in Article I of the Pension Plan)
      without taking into account the Section 401(a)(17) Limitation or any salary
      reduction contributions by such Participant to the PMA Capital Corporation
      Excess Retirement Savings Plan or to the PMA Capital Corporation Executive
      Deferred Compensation Plan; and

     

     

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    (b) The
      Section 415 Limitation contained in Article XI of the Pension Plan shall not
      be
      taken into account.”

     

    17.  Section
      2.3 is amended to read as follows:

     

    “2.3 Reemployment.
      If a
      Participant whose employment with a Participating Company was terminated at
      a
      time when such Participant had a Past Service Retirement Benefit and whose
      benefit had commenced to be paid under this Plan or under the PMA SERP becomes
      reemployed by the Participating Company, payment of such Past Service Retirement
      Benefit shall be suspended until such individual again ceases to be employed
      by
      the Participating Company. Thereupon, payment of such Past Service Retirement
      Benefit shall recommence.”

     

    18.  A
      new
      Article III is added to read as follows, and all following Articles and Sections
      (and all applicable cross-references) are renumbered as necessary:

     

    “ARTICLE
      III - POST-2005 RETIREMENT SERVICE BENEFITS

     

    3.1 Contribution
      Credits.
      With
      respect to each calendar quarter in each Plan Year beginning on or after January
      1, 2006, the Plan Sponsor shall credit the Contribution Account of each
      Participant described in Section (a) hereof with a Contribution Credit in the
      amount described in Section (b) hereof.

     

    (a) Eligibility.
      A
      Participant shall have a Contribution Credit credited on his or her behalf
      for
      any calendar quarter if he or she:

     

    (i) had
      been
      credited with at least one Year of Eligibility Service (as defined in the
      Pension Plan) as of the day before the beginning of the calendar
      quarter;

     

    (ii) was
      a
      Participant at any time during such calendar quarter; and

     

    (iii) was
      an
      Eligible Executive of a Participating Company as of the last day of the calendar
      quarter; provided however, that this requirement shall be deemed to be satisfied
      if the Participant had retired from the Participating Company during the
      calendar quarter after having satisfied the requirements for a normal, early
      or
      late retirement under the terms of the Pension Plan.

     

    Notwithstanding
      the foregoing, no further Contribution Credits shall be credited on behalf
      of a
      Participant where the sum of (x) the Participant’s years of Past Service Credit
      as determined under Section 2.1, plus (y) the Participant’s years of Benefit
      Service credited under the Pension Plan, plus two (2) times the Participant’s
      Years of Service credited after 

     

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

     

    December 31, 2005
      under the Retirement Savings Plan, exceeds twenty-five (25).

     

    (b) Amount.
      For any
      Participant described in Subsection (a) hereof, the Contribution Credit with
      respect to any calendar quarter shall equal:

     

    (i) for
      any
      Participant who is not a Grandfathered Participant, one fourth (1/4) of a
      percentage of his or her Compensation to be determined under the following
      table, based on the Participant’s attained age as of the last day of the Plan
      Year in which the calendar quarter occurs:

     

    
      	
              Participant’s
                Age

            	
              Percentage
                of Compensation

               

            
	
              Less
                than 30

            	
              2%

               

            
	
              At
                least 30 but less than 45

               

            	
              3%

               

            
	
              At
                least 45 but less than 55

               

            	
              4%

               

            
	
              55
                or older

               

            	
              5%

               

            

    

     

    (ii) for
      any
      Grandfathered Participant, a percentage of one fourth (1/4) of his or her
      Compensation, to be determined under the following table, based on the
      Participant’s attained age as of the last day of the Plan Year in which the
      calendar quarter occurs:

     

    
      	
              Participant’s
                Age

               

            	
              Percentage
                of Compensation

               

            
	
              At
                least 50 but less than 55

               

            	
              6%

               

            
	
              At
                least 55 but less than 60

               

            	
              8%

               

            
	
              60
                or older

               

            	
              10%

               

            

    

     

    3.2 Establishment
      of Plan Accounts.
      The
      Plan Sponsor shall establish and maintain on its books and records, solely
      as a
      bookkeeping entry, a Contribution Account for each Participant. Within such
      Contribution Account, the Plan Sponsor shall maintain an individual Contribution
      Subaccount with respect to each Plan Year for which Contribution Credits are
      credited on behalf of a Participant. Each Contribution Subaccount will be used
      to record:

     

    (a) The
      Contribution Credits credited under this Plan on behalf of the Participant
      pursuant to Section 3.1 for the Plan Year for which the Contribution Subaccount
      was established;

     

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    (b) The
      related credits or debits for investment earnings or losses under Section 3.3;
      and

     

    (c) The
      payments of benefits to the Participant or the Participant’s Spouse under
      Articles V or VI from such Subaccount.

     

    3.3 Allocation
      among Investment Options.
      A
      Participant may direct that the Contribution Credits credited to his or her
      Contribution Account be valued, in accordance with Section 3.5 as if the balance
      credited to the Contribution 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 3.3 shall be used solely to measure the amounts
      of investment earnings or losses that will be credited or debited to each of
      the
      Participant’s Contribution Subaccounts 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 3.3 shall be made in accordance with the
      rules and procedures prescribed by the Administrator.

     

    3.4 Administration
      of Investments.
      The
      investment gain or loss with respect to Contributions Credits credited to the
      Participant’s Contribution Account on behalf of such Participant shall continue
      to be determined in the manner selected by the Participant pursuant to Section
      3.3 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 Contribution 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.

     

    3.5 Valuation
      of Contribution Accounts.
      The
      Contribution 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 Contribution 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.

     

     

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    3.6 Calculation
      of Post-2005 Service Retirement Benefit.
      As of
      any date of determination, the value of a Participant’s Post-2005 Service
      Retirement Benefit, when expressed as a lump sum value, shall equal the sum
      of
      the balances in each of his or her Contribution Subaccounts, other than Expired
      Contribution Subaccounts. Solely with respect to a Participant whose Past
      Service Credit under the Plan has been reduced to zero in accordance with
      Section 2.1, the oldest Contribution Subaccount of any Participant for any
      Plan
      Year for which Contribution Credits were credited on his or her behalf shall
      become an Expired Contribution Subaccount on the date as of which two times
      the
      Participant’s Years of Service credited after December 31, 2005 under the
      Retirement Savings Plan, exceeds twenty-five (25). Upon his or her completion
      of
      each subsequent Year of Service under the Retirement Savings Plan, the
      Participant’s next oldest Contribution Subaccount shall become an additional
      Expired Contribution Subaccount. Upon becoming an Expired Contribution
      Subaccount, any Contribution Subaccount shall be permanently forfeited by the
      Participant. An example of the conversion of Contribution Subaccounts to Expired
      Contribution Subaccounts set forth in Section 2.1(c).

     

    3.7 Reemployment.
      If a
      Participant whose employment with a Participating Company was terminated at
      a
      time when such Participant had a Post-2005 Service Retirement Benefit and whose
      benefit had commenced to be paid under this Plan or under the PMA SERP becomes
      reemployed by the Participating Company, payment of such Post-2005 Service
      Retirement Benefit shall be suspended until such individual again ceases to
      be
      employed by the Participating Company. Thereupon, payment of such Post-2005
      Service Retirement Benefit shall recommence.”

     

    19.  Article
      IV (renumbered from Article III) is renamed as “VESTING OF RETIREMENT
      BENEFITS.”

     

    20.  Section
      4.1 (renumbered from 3.1) is amended to read as follows:

     

    “4.1 Full
      Vesting.
      Except
      as otherwise provided in this Section 4.1 and in Section 8.2 hereof, a
      Participant shall have a fully (100%) vested and nonforfeitable interest in
      his/her Retirement Benefit, if any, once he/she has satisfied the age and
      service requirements for early or normal retirement under the Pension Plan,
      as
      amended effective June 1, 1999, whichever occurs first. Notwithstanding the
      foregoing: 

     

    (a) a
      Participant shall forfeit his/her vested interest, if any, in his/her Retirement
      Benefit if his/her employment is terminated for Cause; and

     

    (b) a
      Participant shall have no vested interest in any Expired Contribution
      Subaccount.”

     

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    21.  Article
      V
      (renumbered from Article IV) is renamed as “FORM OF PAYMENT OF RETIREMENT
      BENEFITS.”

     

    22.  Section
      5.1 (renumbered from 4.1) is amended to read as follows:

     

    “5.1 Payment
      of Retirement Benefit.
      Except
      as otherwise provided in Sections 5.3 and 8.2 hereof, a Participant’s vested
      Retirement Benefit, if any, shall commence to be paid at the time retirement
      income payments commence being made to the Participant under the Pension Plan.
      If a Participant elects early retirement under the Pension Plan then the
      Participant’s Retirement Benefit shall commence at the same time as payments
      from the Pension Plan and shall be reduced by the same early retirement
      reduction factors, if any, applicable to his/her retirement income from the
      Pension Plan, as amended effective June 1, 1999.”

     

    23.  Section
      5.2 (renumbered from 4.2) is amended to read as follows:

     

    “5.2 Form
      of Payment.
      The
      normal form of payment of a Participant’s Retirement Benefit shall be the same
      as that provided under the Pension Plan. Subject to Section 5.5 hereof, a
      Participant’s Retirement Benefit shall be paid, however, in the same form which
      the Participant has elected, or is deemed to have elected, pursuant to the
      Pension Plan. The Participant’s election under the Pension Plan (with the valid
      consent of his/her Spouse where required under the Pension Plan) shall also
      be
      applicable to the payment of his/her Retirement Benefit. Notwithstanding the
      foregoing, any Participant who elects a Social Security level income option
      to
      augment his/her benefit under the Pension Plan, on account of his/her retirement
      before he/she is eligible for retirement benefits under the Federal Social
      Security system (as such optional form is described in Section 7.2 of the
      Pension Plan) shall receive his/her Retirement Benefit in the form of a single
      life annuity, as reduced, if necessary, in the manner set forth in Section
      5.1
      hereof. The Administrator shall have the sole and absolute discretion and
      authority to approve or reject a Participant’s request for a different method of
      payment than specified herein.”

     

    24.  Section
      5.3 (renumbered from 4.3) is amended to read as follows:

     

    “5.3 Change
      of Control during Employment.
      Upon a
      Change of Control, or within two years thereafter, regardless of whether or
      not
      the Plan has been terminated during such period, if the Participating Company
      (or any successor corporation) shall terminate the Participant’s employment for
      other than Cause or if the Participant shall terminate employment for Good
      Reason or retirement, death, or Total Disability, then the Participant shall
      become eligible for, and entitled to receive, the Participant’s Retirement
      Benefit. The Participant’s Retirement Benefit under this provision shall be paid
      out in a lump sum upon such termination of employment. Such benefit shall be
      paid by the Participating Company 

     

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    (or
      any
      successor corporation) to the Participant in a lump sum, in cash, within ninety
      days following the date of termination. Such amount will be calculated as the
      sum of (a) the Actuarial Equivalent of the Participant’s Past Service Retirement
      Benefit using
      the assumptions for determining Actuarial Equivalence provided under the Pension
      Plan for determining lump sum distributions,
      plus
      (b) the balance of his Contribution Account. Any Participant who remains
      employed by the Participating Company (or any successor corporation) for two
      or
      more years after a Change of Control shall receive the Retirement Benefit in
      accordance with Sections 5.1 and 5.2 hereof.”

     

    25.  Section
      5.4 (renumbered from 4.4) is amended to read as follows:

     

    “5.4 Change
      of Control during Retirement.
      In the
      event of a Change of Control of the Plan Sponsor, any Participant who has
      previously retired from the Participating Company and is receiving payment
      of
      the Participant’s Retirement Benefit shall receive, within ninety days following
      such Change of Control, a single payment in cash which is the Actuarial
      Equivalent of the Participant’s remaining benefit under this Plan using the
      assumptions for determining Actuarial Equivalence provided under the Pension
      Plan for determining lump sum distributions.”

     

    26.  Section
      5.5 (renumbered from 4.5) is amended to read as follows:

     

    “5.5 Failure
      to Assume Plan upon Change of Control.
      In the
      event the Plan is not assumed by a successor upon a Change of Control of the
      Plan Sponsor, then all Participants shall become eligible for, and entitled
      to
      receive, their Retirement Benefit. Such Retirement Benefit shall be paid out
      in
      a lump sum upon such failure to assume the Plan. Such benefit shall be paid
      by
      the Participating Company (or any successor corporation) to the Participant
      in a
      lump sum, in cash, within ninety days following the date of the failure to
      assume the Plan. Such amount will be calculated as the sum of (a) the Actuarial
      Equivalent of the Participant’s Past Service Retirement Benefit, plus (b) the
      balance of his Contribution Account.”

     

    27.  Section
      5.6 (renumbered from 4.6) is amended to read as follows:

     

    “5.6 Actuarial
      Equivalent.
      A
      Retirement Benefit which is payable in any form other than the normal form
      under
      the Pension Plan, i.e., a straight life annuity over the lifetime of the
      Participant, or which commences at any time prior to the Participant’s Normal
      Retirement Date, shall be the Actuarial Equivalent of the Retirement Benefit
      payable hereunder using
      the assumptions for determining Actuarial Equivalence provided under the Pension
      Plan for making a comparable determination.”

     

     

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    28.  Article
      VI (renumbered from V) is amended to read as follows:

     

    “ARTICLE
      VI - DEATH BENEFITS

     

    6.1 Death
      Benefit - Past Service Retirement Benefit.
      Except
      as otherwise provided herein, a death benefit shall be payable to the surviving
      Spouse of a Participant who dies before commencement of his/her Past Service
      Retirement Benefit, if the Spouse is entitled to a qualified pre-retirement
      survivor annuity under Article VI of the Pension Plan. The amount of the death
      benefit hereunder shall be based on the amount of the Participant’s Past Service
      Retirement Benefit determined using the date of death as the date of retirement
      or separation from service and, for purposes of converting the Past Service
      Retirement Benefit to a spousal survivor death benefit, using the rules
      contained in Article VI of the Pension Plan. The death benefit under this
      Section 6.1 shall be administered and distributed in accordance with the
      provisions of Article VI of the Pension Plan.

     

    In
      the
      event of a Change of Control of the Plan Sponsor, any surviving Spouse who
      is
      receiving payment of a death benefit pursuant to this Section 6.1 shall receive
      a single lump sum cash payment which is the Actuarial Equivalent of the
      surviving Spouse’s remaining death benefit. Such benefit shall be paid by the
      Participating Company (or any successor corporation) to the surviving Spouse
      within ninety days following the date of the Change of Control.

     

    6.2 Death
      Benefit - Post-2005 Service Retirement Benefit.
      The
      payment of death benefits with respect to a Participant’s Post-2005 Service
      Retirement Benefit shall be governed by the following rules:

     

    (a) Death
      After Commencement of Benefit Payments.
      If the
      Participant dies after commencing to receive his or her Post-2005 Service
      Retirement Benefit, any death benefit with respect thereto shall be determined
      solely in accordance with the form of payment that the Participant had elected
      for his or her Post-2005 Service Retirement Benefit.

     

    (b) Death
      Prior to Commencement of Benefit Payments.
      If the
      Participant dies before commencing to receive his or her Post-2005 Service
      Retirement Benefit, the then current balance of his or her Contribution Account
      shall be paid to his or her Beneficiary(ies) in a single sum payment as soon
      as
      administratively practicable following the Participant’s death.

     

    6.3 Beneficiary
      Designations.
      Each
      Participant may designate, in a signed writing delivered to the Administrator
      in
      a form approved by the Administrator, one or more Beneficiaries to receive
      any
      distribution of a 

     

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

    Post-2005
      Service Retirement Benefit which may become payable as the result of the
      Participant’s death.

     

    (a) Changes
      and Failed Designations.
      A
      Participant may designate different Beneficiaries at any time by delivering
      a
      new designation. Any designation shall become effective only upon its receipt
      by
      the Administrator, and the last effective designation received by the
      Administrator shall supersede all prior designations. If a Participant dies
      without having designated a Beneficiary, or if no Beneficiary survives the
      Participant, the Participant’s Contribution Account shall be payable (i) to his
      or her surviving Spouse, (ii) if the Participant is not survived by a Spouse,
      to
      the Participant’s Beneficiary under his or her Participating Company’s basic
      group-term life insurance program (if any), or (iii) if neither (i) nor (ii)
      is
      applicable, to the executors and/or administrators of his or her
      estate.

     

    (b) Divorced
      Participant.
      Notwithstanding the foregoing or any other provision of the Plan to the
      contrary, in the case of a divorced Participant who named his or her former
      Spouse as his or her Beneficiary prior to his or her divorce and who dies
      without changing such Beneficiary designation, such deceased Participant’s
      former Spouse shall be deemed to have predeceased the Participant. In that
      event, (i) the deceased Participant’s current surviving Spouse shall be deemed
      to replace his or her former Spouse as his or her Beneficiary in accordance
      with
      the terms of his or her Beneficiary designation form and the remainder of his
      or
      her Beneficiary designation form shall continue in effect in accordance with
      its
      terms, or (ii) if there is no current surviving Spouse, the deceased
      Participant’s Beneficiary shall be the deceased Participant’s surviving primary
      Beneficiary (ies) as designated on, and in accordance with the terms of, his
      or
      her Beneficiary designation form, or (iii) if there is no current surviving
      primary Beneficiary, the deceased Participant’s Beneficiary shall be the
      deceased Participant’s surviving secondary Beneficiary (ies) as designated on,
      and in accordance with the terms of, his Beneficiary designation form, or (iv)
      if there is no surviving secondary Beneficiary, the deceased Participant’s
      Beneficiary shall be the executor of the deceased Participant’s will or the
      administrator of his or her estate.

     

    (c) Documentary
      Proof.
      The
      Administrator may require the execution and delivery of any documents, papers,
      and receipts that the Administrator deems reasonably necessary in order to
      be
      assured that the payment of any death benefit is made to the person or persons
      entitled to payment.

     

    6.4 Payments
      to Incompetents.
      If any
      individual to whom a benefit is payable under the Plan is a minor, or if the
      Administrator determines that any individual to whom a benefit is payable under
      the Plan is incompetent to receive such payment or to give a valid release
      therefor, payment shall be made to the guardian, committee or other
      representative of the estate of such individual which has been duly appointed
      by
      a court of competent jurisdiction. If no guardian, committee or other
      representative has been appointed, payment may be made to any person as
      custodian for such individual under any Uniform Transfer to Minors Act or may
      be
      made to or applied to or for the benefit of the minor or incompetent, the
      incompetent’s spouse, children or other dependents, the institution or persons
      maintaining the minor or incompetent, or any of them, in such proportions as
      the
      Administrator from time to time shall determine; and the release of the person
      or institution receiving the payment shall 

     

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    be
      a
      valid and complete discharge of any liability of the Plan with respect to any
      benefit so paid. 

     

    6.5 Simultaneous
      Death.
      In the
      event of the simultaneous death of a Participant eligible for a death benefit
      under this Article VI and his/her Spouse or other Beneficiary so that it is
      not
      possible to determine which one was the survivor, it shall be presumed for
      purposes of this Article VI that the Spouse or other Beneficiary predeceased
      the
      Participant.”

     

    29.  Section
      8.2 (renumbered from 7.2) is amended to read as follows:

     

    “8.2 Amendment
      or Termination.

     

    (a) The
      Board
      of Directors reserves the right to alter, amend or terminate the Plan, or any
      part thereof, through the adoption of a written resolution; provided, however,
      that no such action by the Board of Directors shall reduce a Participant’s
      Retirement Benefit accrued as of the time thereof and no such amendment 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) If
      the
      Plan is terminated, a determination shall be made of each Participant’s
      Retirement Benefit as of the Plan termination date. The amount of a
      Participant’s benefit or benefits shall be payable to the Participant at the
      time it would have been payable under Article V hereof if the Plan had not
      been
      terminated. If a Participant dies after termination of the Plan, but prior
      to
      his/her Termination of Employment, his/her surviving Spouse shall receive a
      distribution of his/her death benefit, determined in accordance with Article
      VI
      hereof, but based on the Participant’s Retirement Benefit as of the Plan
      termination date.”

     

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

    30.  An
      “Appendix B” is added to the Plan to read as follows:

     

    “APPENDIX
      B - INVESTMENT OPTIONS AVAILABLE FOR MEASUREMENT OF INVESTMENT EARNINGS OR
      LOSSES IN CONTRIBUTION ACCOUNTS UNDER PLAN

     

    (a) Morgan
      Growth Fund

     

    (b) Total
      Bond Market Index Fund

     

    (c) 500
      Index
      Fund

     

    (d) Treasury
      Money Market Fund

     

    (e) STAR
      Fund

     

    (f) Windsor
      II Fund

     

    (g) International
      Growth Fund

     

    (h) Explorer
      Fund

     

    (i) Extended
      Market Index Fund

     

    (j) Total
      International Stock Index Fund

     

    (k) Any
      other
      investment options selected by the Administrator”

     

    

     

    IN
      WITNESS WHEREOF, PMA CAPITAL CORPORATION has caused these presents to be duly
      executed, under seal, this 24th
      day of October, 2005.

     

    
      	
              Attest:

            	
              PMA
                CAPITAL CORPORATION

            
	
              [SEAL]

            	 
	 	 
	
              /s/
                Robert L. Pratter

            	
              /s/
                William E. Hitselberger

            
	 	 
	
              Robert
                L. Pratter, Secretary

            	
              William
                E. Hitselberger, Executive Vice President and Chief Financial
                Officer

            
	 

    

    

    
      
         

      

      
        15

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