Document:

exv10w3

Exhibit 10.3

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (this “Agreement”) dated as of July 29, 2011 among Donegal Mutual
Insurance Company, a Pennsylvania mutual insurance company having its principal place of business
at 1195 River Road, Marietta, Pennsylvania 17547 (“Donegal Mutual”), Donegal Group Inc., a Delaware
corporation having its principal place of business at 1195 River Road, Marietta, Pennsylvania 17547
(“DGI,” and, together with Donegal Mutual, the “Employers”), and Kevin G. Burke, an individual
whose principal office address is 1195 River Road, Marietta, Pennsylvania 17547 (the “Executive”).

WITNESSETH:

     WHEREAS, the Employers desire, by this Agreement, to provide for the continued employment of
the Executive by the Employers, and the Executive agrees to the continued employment of the
Executive by the Employers, all in accordance with the terms and subject to the conditions set
forth in this Agreement; and

     WHEREAS, the parties are entering into this Agreement to set forth and confirm their
respective rights and obligations with respect to the Executive’s continued employment by the
Employers;

     NOW, THEREFORE, in consideration of the premises and the mutual covenants contained in this
Agreement, the Employers and the Executive, intending to be legally bound hereby, mutually agree as
follows:

     1. Employment and Term.

          (a) (i) Effective August 1, 2011 (the “Effective Date”), (i) Donegal Mutual agrees to continue
to employ the Executive, and the Executive agrees to continue the Executive’s employment as, the
Senior Vice President of Human Resources of Donegal Mutual and (ii) DGI agrees to employ the
Executive, and the Executive agrees to continue the Executive’s employment as, the Senior Vice
President of DGI, with positions described in clauses (i) and (ii) collectively referred to in this
Agreement as the “Position”, in accordance with the terms and subject to the conditions this
Agreement sets forth. Donegal Mutual and DGI shall be jointly and severally liable to the
Executive with respect to (i) all liabilities of Donegal Mutual to the Executive under this
Agreement and (ii) all liabilities of DGI to the Executive under this Agreement; provided, however,
that Donegal Mutual shall not be responsible for any liability of DGI to the Executive to the
extent that DGI has discharged such liability, and DGI shall not be responsible for any liability
of Donegal Mutual to the Executive to the extent that Donegal Mutual has discharged such liability.

 

               (ii) The term of this Agreement, as the same may be extended from time to time pursuant to the
provisions of this clause (ii) or otherwise, shall commence on the Effective Date and end on the
third anniversary of the Effective Date, provided, however, that on the first anniversary of the
Effective Date and on each subsequent anniversary of the Effective Date (each, an “Extension
Date”), the Term shall automatically extend for one additional year so that on each such succeeding
Extension Date, this Agreement shall have a remaining Term of three years, unless either the
Executive or the respective board of directors of Donegal Mutual and DGI (together, the “Boards”)
give notice to the other, not less than 90 days in advance of the next succeeding Extension Date,
that such automatic extensions shall terminate as of such next succeeding Extension Date, unless
the Employers earlier terminate the employment of the Executive for Cause, as defined in this
Agreement, or because of the death or the Permanent Disability, as defined in this Agreement, of
the Executive.

          (b) Notwithstanding paragraph 1(a) of this Agreement, the Employers, by action of the Boards
and effective as specified in a written notice thereof to the Executive in accordance with the
terms of this Agreement, shall have the right to terminate the Executive’s employment under this
Agreement at any time during the Term, for Cause or other than for Cause or on account of the
Executive’s death or Permanent Disability subject to the provisions of this paragraph 1.

               (i) As used in this Agreement, “Cause” shall mean (A) the Executive’s willful and continued
failure substantially to perform the Executive’s material duties with the Employers as set forth in
this Agreement, or the commission by the Executive of any activities constituting a willful
violation or breach under any material federal, state or local law or regulation applicable to the
activities of Donegal Mutual or DGI or their respective subsidiaries and affiliates, in each case,
after notice of such failure, breach or violation from the Employers to the Executive and a
reasonable opportunity for the Executive to cure such failure, breach or violation in all material
respects, (B) fraud, breach of fiduciary duty, dishonesty, misappropriation or other actions by the
Executive that cause intentional material damage to the property or business of Donegal Mutual or
DGI or their respective subsidiaries and affiliates, (C) the Executive’s repeated absences from
work such that the Executive is substantially unable to perform the Executive’s duties under this
Agreement in all material respects other than for physical or mental impairment or illness or (D)
the Executive’s non-compliance with the provisions of paragraph 2(b) of this Agreement after notice
of such non-compliance from the Employers to the Executive and a reasonable opportunity for the
Executive to cure such non-compliance.

               (ii) As used in this Agreement, “Permanent Disability” shall mean a physical or mental
disability of the Executive such that the Executive is substantially unable to perform those duties
that the Executive would otherwise reasonably be expected to continue to perform and the
Executive’s nonperformance of such duties has continued for a

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period of 180 consecutive days, provided, however, that in order to terminate the Executive’s
employment under this Agreement on account of Permanent Disability, the Employers must provide the
Executive with written notice of the Boards’ good faith determinations to terminate the Executive’s
employment under this Agreement for reason of Permanent Disability not less than 30 days prior to
such termination, and such notice shall specify the date of termination. Until the specified
effective date of termination by reason of Permanent Disability, the Executive shall continue to
receive compensation at the rates set forth in paragraph 3 of this Agreement. No termination of
the Executive’s employment under this Agreement because of Permanent Disability shall impair any
rights of the Executive under any disability insurance policy the Employers maintained at the
commencement of the aforesaid 180-day period.

          (c) The Executive shall have the right to terminate the Executive’s employment under this
Agreement at any time during the Term for Good Reason or without Good Reason or in the event a
Change of Control occurs. As used in this Agreement, “Good Reason” shall mean (A) a material
diminishment of the Executive’s Position or the scope of the Executive’s authority, duties or
responsibilities as this Agreement describes without the Executive’s written consent, excluding for
this purpose any action the Employers do not take in bad faith and that the Employers remedy
promptly following written notice thereof from the Executive to the Employers, or (B) a material
breach by either Employer of its respective obligations to the Executive under this Agreement,
provided, that with respect to any termination by the Executive for Good Reason, the Executive
shall have provided the Employers with written notice within 90 days of the date on which the
Employers first had actual knowledge of the existence of the Good Reason and which Good Reason
shall not have been cured or otherwise rectified by the Employers in all material respects to the
reasonable satisfaction of the Executive within 30 days after the Employers receive such written
notice or (C) any termination of the Executive’s employment under this Agreement without Cause.

          (d) “Change of Control” shall mean (A) the acquisition of shares of DGI by any “person” or
“group,” as Rule 13d-3 uses such terms under the Securities Exchange Act of 1934, as now or
hereafter amended, in a transaction or series of transactions that result in such person or group
directly or indirectly first owning after the Effective Date more than 25% of the aggregate voting
power of DGI’s Class A common stock and Class B common stock taken as a single class, (B) the
consummation of a merger or other business combination transaction after which the holders of the
outstanding voting capital stock of DGI taken as a single class do not collectively own 60% or more
of the aggregate voting power of the entity surviving such merger or other business combination
transaction, (C) the sale, lease, exchange or other transfer in a transaction or series of
transactions of all or substantially all of the assets of DGI, but excluding therefrom the sale and
re-investment of the consolidated investment portfolio of DGI and its subsidiaries, (D) as the
result of or in connection with any cash tender offer or exchange offer, merger or other business
combination transaction, sale of assets or contested-election of directors or any combination of
the foregoing transactions or

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(E) a change of “control” of Donegal Mutual as such term is defined in the Pennsylvania
Insurance Holding Companies Act (each, a “Transaction”), the persons who constituted a majority of
the members of the respective Boards on the Effective Date and persons whose election as members of
the respective Boards received the approval of such members then still in office or whose
subsequent election had been so approved prior to the date of a Transaction, but before the
occurrence of an event that constitutes a Change of Control, no longer constitute such a majority
of the Boards then in office. A Transaction constituting a Change of Control shall only be deemed
to have occurred upon the closing of the Transaction.

          (e) (i) If (A) the Employers terminate the Executive’s employment under this Agreement for any
reason other than for Cause and such termination occurs as of a date that is within 180 days
preceding or within 180 days after the consummation of a Change of Control (such 180-day period
preceding the Change of Control and such 180-day period after the Change of Control collectively
referred to in this Agreement as a “Change of Control Period”, (B) the Employers terminate this
Agreement as a result of the death or Permanent Disability of the Executive, effective as of a date
within a Change of Control Period, (C) the Executive terminates the Executive’s employment under
this Agreement for Good Reason or (D) the acquisition of “control” of Donegal Mutual as defined in
the Pennsylvania Insurance Holding Companies Act, the Employers shall pay to the Executive or the
Executive’s estate promptly after the event giving rise to such payment occurs, an amount equal to
the sum of (x) (1) the Executive’s Base Salary, as defined in this Agreement, accrued through the
date the termination of the Executive’s employment under this Agreement is effective, (2) any
incentive, as defined in this Agreement, the Employers have the obligation to pay to the Executive
pursuant to paragraph 3(b) of this Agreement, (3) any amounts payable under any of the Employers’
benefit plans in accordance with the terms of such plans, except as Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”) may otherwise require and (4) any amount in respect
of excise taxes the Employers have the obligation to pay to the Executive pursuant to paragraph
1(f) of this Agreement, with such payments, rights and benefits described in clauses (x)(1), (x)(2)
and (x)(3) of this Agreement being collectively referred to in this Agreement as the “Accrued
Obligations,” (y) an amount equal to the aggregate premiums that the Executive would have to pay to
maintain in effect throughout the period (the “Subsequent Period”) from the date of termination of
the Executive’s employment under this Agreement through the remainder of the Term had the Executive
remained employed, assuming no increase in insurance premium rates, the same medical, health,
disability and life insurance coverage the Employers provided to the Executive immediately prior to
the date of such termination (the “Benefit Obligations”) and (z) the Employers shall pay to the
Executive or the Executive’s estate, as a severance payment, for three years from the date of such
termination, the Executive’s annual Base Salary as of the effective date of termination of the
Executive’s employment under this Agreement and any incentive paid to the Executive during the last
completed fiscal year of the Employers before

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such termination. The Employers shall pay such amounts for the Executive in 36 equal monthly
installments.

               (ii) If (A) the Employers terminate the Executive’s employment under this Agreement for any
reason other than for Cause effective as of a date that is not within a Change of Control Period or
(B) the Executive terminates the Executive’s employment under this Agreement for Good Reason
effective as of a date that is not within a Change of Control Period, the Employers shall pay the
Executive, provided the Executive concurrently signs and delivers a general release in a
commercially reasonable form that is mutually acceptable to the Employers and the Executive in
favor of the Employers and their respective subsidiaries, an amount equal to the sum of (w) the
Accrued Obligations, (x) the Benefit Obligations and (y) the Executive’s Base Salary as of the
effective date of termination of the Executive’s employment under this Agreement the Executive
would have received had the Executive remained employed under this Agreement for the Subsequent
Period. The Employers shall pay such amounts to the Executive at the same time and in the same
installments had the Executive remained employed under this Agreement for the Subsequent Period.

               (iii) If (A) the Employers terminate the Executive’s employment under this Agreement for Cause
or because of the death or Permanent Disability of the Executive or (B) the Executive terminates
the Executive’s employment under this Agreement for any reason other than Good Reason, the
Executive’s death or Permanent Disability, or (C) the Employers terminate this Agreement as a
result of the death or Permanent Disability of the Executive effective as of a date that is not
within a Change of Control Period, the sole obligation of the Employers to the Executive under this
Agreement shall be to pay the Accrued Obligations to the Executive or the Executive’s estate,
provided, however, that in the event the Employers terminate the employment of the Executive under
this Agreement because of the death of the Executive, the Employers shall pay to the personal
representatives of the Executive an amount equal to the Executive’s Base Salary and incentive for
the remainder of the Term.

               (iv) No provision of this Agreement shall adversely affect any vested rights of the Executive
under the Employers’ existing employee benefit plans or other plans the Employers may establish in
the future; provided, however, upon the termination of the employment of the Executive as provided
in this Agreement, all future vesting of the Executive’s rights under all existing and any future
employee benefit plans shall terminate without further action by the Employers.

               (v) The Employers and the Executive intend that this Agreement be drafted and administered in
compliance with Section 409A of the Code, including, but not limited to, any future amendments to
Section 409A, and any other Internal Revenue Service (“IRS”) or other governmental rulings or
interpretations (together, “Section 409A”) issued pursuant to Section 409A so as not to subject the
Executive to payment of interest or any

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additional tax under Section 409A. The Employers and the Executives intend for any payments
under paragraphs 1(e)(i), (ii) or (iii) to satisfy either the requirements of Section 409A or to be
exempt from the application of Section 409A, and the Employers and the Executive shall construe and
interpret this Agreement accordingly. In furtherance of such intent, if payment or provision of
any amount or benefit under this Agreement that is subject to Section 409A at the time specified in
this Agreement would subject such amount or benefit to any additional tax under Section 409A, the
Employers shall postpone payment or provision of such amount or benefit to the earliest
commencement date on which the Employers can make such payment or provision of such amount or
benefit without incurring such additional tax but not in excess of six months. In addition, to the
extent that any IRS guidance issued under Section 409A would result in the Executive being subject
to the payment of interest or any additional tax under Section 409A, the Employers and the
Executive agree, to the extent reasonably possible, to amend this Agreement in order to avoid the
imposition of any such interest or additional tax under Section 409A. Any such amendment shall
have the minimum economic effect necessary and be determined reasonably and in good faith by the
Employers and the Executive.

               (vi) If a payment under paragraph 1(e)(i), (ii) or (iii) of this Agreement does not qualify as
a short-term deferral under Section 409A or any similar or successor provisions, and the Executive
is a Specified Employee, as defined in this Agreement, as of the Executive’s Termination Date, the
Employers may not make such distributions to the Executive before a date that is six months after
the date of the Executive’s Termination Date or, if earlier, the date of the Executive’s death (the
“Six-Month Delay”). The Employers shall accumulate payments to which the Executive would otherwise
be entitled during the first six months following the Termination Date (the “Six-Month Delay
Period”) and make such payments on the first day of the seventh month following the Executive’s
Termination Date. Notwithstanding the Six-Month Delay set forth in this paragraph 1(e)(vi):

     (A) To the maximum extent Section 409A or any similar or successor
provisions permit, during each month of the Six-Month Delay Period, the
Employers will pay the Executive an amount equal to the lesser of (I) the
total monthly severance for which paragraph 1(e)(ii) and (iii) provide or (II)
one-sixth of the lesser of (1) the maximum amount that Section 401(a)(17)
permits to be taken into account under a qualified plan for the year in which
the Executive’s Date of Termination occurs and (2) the sum of the Executive’s
annualized compensation based upon the annual rate of pay for services
provided to the Employers for the taxable year of the Executive preceding the
taxable year of the Executive in which the Executive’s Termination Date
occurs, adjusted for any increase during that year that the parties expected
to continue indefinitely if the Executive’s Termination Date has not occurred
; provided that amounts paid under this sentence will count toward, and

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will not be in addition to, the total payment amount the Employers have
the obligation to pay to the Executive under paragraphs 1(e)(i) and (ii) of
this Agreement; and

     (B) To the maximum extent Section 409A, or any similar or successor
provisions, permits within ten days following the Executive’s Termination
Date, the Employers shall pay the Executive an amount equal to the applicable
dollar amount under Section 402(g)(1)(B) for the year in which the Executive’s
Termination Date occurred; provided that the amount the Employers pay under
this sentence may include, and need not be in addition to, the total payment
amount this Agreement requires the Employers to pay to the Executive under
paragraph 1(b).

     (C) For purposes of this Agreement, “Specified Employee” has the meaning
given that term in Section 409A or any similar or successor provisions. The
Employers’ “specified employee identification date” as described in Section
409A will be December 31 of each year, and the Employers’ “specified employee
effective date” as described in Section 409A or any similar or successor
provisions) will be February 1 of each succeeding year.

          (f) In the event that the independent registered public accounting firm of either of the
Employers or the IRS determines that any payment, coverage or benefit provided to the Executive
pursuant to this Agreement is subject to the excise tax imposed by Sections 280G or 4999 or any
successor provisions of Sections 280G and 4999 or any interest or penalties the Executive incurs
with respect to such excise tax, the Employers, within 30 days thereafter, shall pay to the
Executive, in addition to any other payment, coverage or benefit due and owing under this
Agreement, an additional amount that will result in the Executive’s net after tax position, after
taking into account any interest, penalties or taxes imposed on the amounts payable under this
paragraph 1(f), upon the receipt of the payments for which this Agreement provides being no less
advantageous to the Executive than the net after tax position to the Executive that would have been
obtained had Sections 280G and 4999 not been applicable to such payment, coverage or benefits.
Except as this Agreement otherwise provides, tax counsel, whose selection shall be reasonably
acceptable to the Executive and the Employers and whose fees and costs shall be paid for by the
Employers, shall make all determinations this paragraph 1(f) requires.

          (g) In the event that the independent registered public accounting firm of either of the
Employers or the IRS determines that any payment, coverage or benefit due or owing to the Executive
pursuant to this Agreement is subject to the excise tax Section 409A imposes or any successor
provision of Section 409A or any interest or penalties, including interest imposed under Section
409(A)(1)(B)(i)(I), the Executive incurs as a result of the application of such provision, the
Employers, within 30 days of the date of such impositions,

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shall pay to the Executive, in addition to any other payment, coverage or benefit due and
owing under this Agreement, an additional amount that will result in the Executive’s net after tax
position, after taking into account any interest, penalties or taxes imposed on the amounts paid
under this paragraph 1(g), being no less advantageous to the Executive than the net after tax
position the Executive would have obtained had Section 409A not been applicable to such payment,
coverage or benefits. Except as this Agreement otherwise provides, tax counsel, whose selection
shall be reasonably acceptable to the Executive and the Employers and whose fees and costs the
Employers shall pay, shall make all determinations this paragraph 1(g) requires.

          (h) The Employers and the Executive shall give any notice of termination of this Agreement to
the Executive or the Employers, as the case may be, in accordance with the provisions of paragraph
10.

          (i) The Employers agree to reimburse the Executive for the reasonable fees and expenses of the
Executive’s attorneys and for court and related costs in any proceeding to enforce the provisions
of this Agreement in which the Executive is successful on the merits.

     2. Duties of the Executive.

          (a) Subject to the ultimate control and discretion of the Boards, the Executive shall serve in
the Position and perform all duties and services commensurate with the Position. Throughout the
Term of this Agreement as the same may be extended from time to time, the Executive shall perform
all duties reasonably assigned or delegated to the Executive under the By-laws of the Employers or
from time to time by the Boards consistent with the Position. Except for travel normally
incidental and reasonably necessary to the business of the Employers and the duties of the
Executive under this Agreement, the duties of the Executive shall be performed from an office
location not greater than 35 miles from Marietta, Pennsylvania.

          (b) The Executive shall devote substantially all of the Executive’s business time and
attention to the performance of the Executive’s duties under this Agreement and, during the term of
the Executive’s employment under this Agreement, the Executive shall not engage in any other
business enterprise that requires any significant amount of the Executive’s personal time or
attention, unless granted the prior permission of the respective Boards. The foregoing provision
shall not prevent the Executive’s purchase, ownership or sale of any interest in, or the
Executive’s engaging in, any business that does not compete with the business of the Employers or
the Executive’s involvement in charitable or community activities, provided, that the time and
attention that the Executive devotes to such business and charitable or community activities does
not materially interfere with the performance of the Executive’s duties under this Agreement and
that a material portion of the time the Executive devotes to charitable or community activities are
devoted to charitable

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or community activities within the Employers’ market area and further provided that such
conduct complies in all material respects with applicable policies of the Employers.

          (c) The Employers shall accrue earned but unused vacation in accordance with the Employers’
vacation policy.

     3. Compensation. For all services the Executive renders under this Agreement:

          (a) The Employers shall pay the Executive a base salary (the “Base Salary”) at an annual rate
equal to the annual rate of compensation the Executive is currently receiving from the Employers,
plus such other compensation as the Employers may, from time to time, determine. The Employers
shall pay such Base Salary and other compensation in accordance with the Employers’ normal payroll
practices as in effect from time to time.

          (b) The Employers agree that the Executive shall be entitled to participate in the annual
incentive programs of the Employers, in accordance in all material respects with applicable
policies of the Employers relating to incentive compensation for executive officers, based on the
objectives set forth in the Employers’ Executive Incentive Plan.

          (c) The compensation provided for in this paragraph 3 shall be in addition to such rights as
the Executive may have, during the Executive’s employment under this Agreement or after such
employment, to participate in and receive benefits from or under any benefit plans the Employers
may in their discretion establish for their employees or executives, including, but not limited to,
employee benefit plans and group health insurance, life insurance and disability insurance plans.
To the extent the Executive incurs a tax liability as a result of any of such benefits, the
Executive shall be solely responsible for such taxes.

          (d) The parties acknowledge that Towers Watson is in the process of evaluating the
compensation and employee benefit plans the Employers make available to their senior executive
officers. To the extent the respective boards of directors of the Employers, based upon the
recommendations of Towers Watson, to enhance the compensation and other benefits the Employers make
available to their senior executive officers, the Employers and the Executive agree to negotiate in
good faith and to execute an amendment to this Agreement that would appropriately reflect such
enhancements.

     4. Expenses. The Employers shall promptly reimburse the Executive for all reasonable
expenses the Executive pays or incurs in connection with the performance of the Executive’s duties
and responsibilities under this Agreement, upon presentation of expense vouchers or other
appropriate documentation therefor.

     5. Indemnification. Notwithstanding anything in the Employers’ respective
certificates or articles of incorporation or their By-laws to the contrary, the Employers shall at
all times indemnify the Executive during the Executive’s employment by the Employers or while the
Executive is providing consulting services to the Employers, and thereafter, to the

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fullest extent applicable law permits for any matter in any way relating to the Executive’s
employment by, consultation with or other affiliation with the Employers or its subsidiaries;
provided, however, that if the Employers shall have terminated the Executive’s employment under
this Agreement for Cause, then, except to the extent otherwise required by law, the Employers shall
have no obligation whatsoever to indemnify the Executive for any claim arising out of the matter
for which the Employer shall have terminated the Executive’s employment under this Agreement for
Cause or for any conduct of the Executive not within the scope of the Executive’s duties under this
Agreement.

     6. Confidential Information. The Executive understands that in the course of the
Executive’s employment by the Employers the Executive will receive confidential information
concerning the business of the Employers and that the Employers desire to protect. The Executive
agrees that the Executive will not at any time during or after the period of the Executive’s
employment by the Employers reveal to anyone outside the Employers, or use for the Executive’s own
benefit, any such information that the Employers have designated as confidential or that the
Executive understood to be confidential without specific designation by the Employers. Upon
termination of the employment of the Executive under this Agreement, and upon the request of the
Employers, the Executive shall promptly deliver to the Employers any and all written materials,
records and documents, including all copies of such written materials, documents and records, the
Executive made or that come into the Executive’s possession during the Term and the Executive
retained that contain or concern confidential information of the Employers and all other written
materials the Employers furnished to the Executive for the Executive’s use during the Term,
including all copies of such written materials, documents and records, whether of a confidential
nature or otherwise.

     7. Representation and Warranty of the Executive. The Executive represents and
warrants that the Executive is not under any obligation, contractual or otherwise, to any other
firm or corporation, which would prevent the Executive’s performance of the terms of this
Agreement.

     8. Entire Agreement; Amendment. This Agreement and the Consulting Agreement contain
the entire agreement between the Employers and the Executive with respect to the subject matter of
this Agreement, and may not be amended, waived, changed, modified or discharged except by an
instrument in writing executed by the Employers and the Executive.

     9. Assignability. The services of the Executive under this Agreement are personal in
nature, and the Employers may not assign their respective rights or obligations under this
Agreement, whether by operation of law or otherwise, without the Executive’s prior written consent.
This Agreement shall be binding upon, and inure to the benefit of, the Employers and their
permitted successors and assigns under this Agreement. This Agreement shall not

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be assignable by the Executive, but shall inure to the benefit of the Executive’s heirs,
executors, administrators and personal representatives.

     10. Notice. Any notice that a party to this Agreement may give under this Agreement
shall be in writing and be deemed given when hand delivered and acknowledged or, if mailed, one day
after mailing by registered or certified mail, return receipt requested, or if delivered by an
overnight delivery service, one day after the notice is delivered to such service, to the Employers
or the Executive at their respective addresses stated in the preamble to this Agreement, or at such
other address as either party may by similar notice designate.

     11. Specific Performance. The Employers and the Executive agree that irreparable
damage would occur in the event that any of the provisions of paragraph 6 of this Agreement were
not performed in accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the Employers and the Executive shall have the right to an injunction or
injunctions to prevent breaches of such paragraph 6 and to enforce specifically the terms and
provisions of such paragraph 6, this being in addition to any other remedy to which the Employers
or the Executive are entitled at law or in equity.

     12. No Third Party Beneficiaries. Nothing in this Agreement, express or implied,
shall confer upon any person or entity other than the Employers and the Executive (and the
Executive’s heirs, executors, administrators and personal representatives) any rights or remedies
of any nature under or by reason of this Agreement.

     13. Successor Liability. The Employers 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 Employers to assume expressly and agree to perform this Agreement in the
same manner and to the same extent that the Employers would be required to perform it if no such
succession had taken place.

     14. Mitigation. The Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise, nor shall the
amount of any payment or benefit provided for in this Agreement be reduced by any compensation the
Executive earns as the result of employment by another employer or by retirement benefits payable
after the termination of this Agreement, except that the Employers shall not be required to provide
the Executive and the Executive’s eligible dependents with medical insurance coverage as long as
the Executive and the Executive’s eligible dependents are receiving comparable medical insurance
coverage from another employer.

     15. Waiver of Breach. The failure at any time to enforce or exercise any right under
any of the provisions of this Agreement or to require at any time performance by the other parties
of any of the provisions hereof shall in no way be construed to be a waiver of such provisions or
to affect either the validity of this Agreement or any part of this Agreement, or

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the right of any party hereafter to enforce or exercise its rights under each and every
provision in accordance with the terms of this Agreement.

     16. No Attachment. Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance,
charge, pledge or hypothecation or to execution, attachment, levy or similar process or assignment
by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be
null, void and of no effect; provided, however, that nothing in this paragraph 16 shall preclude
the assumption of such rights by executors, administrators or other legal representatives of the
Executive or the Executive’s estate and their assigning any rights hereunder to the person or
persons entitled to such rights.

     17. Severability. The invalidity or unenforceability of any term, phrase, clause,
paragraph, restriction, covenant, agreement or other provision of this Agreement shall in no way
affect the validity or enforceability of any other provision, or any part of this Agreement, but
this Agreement shall be construed as if such invalid or unenforceable term, phrase, clause,
paragraph, restriction, covenant, agreement or other provision had never been contained in this
Agreement unless the deletion of such term, phrase, clause, paragraph, restriction, covenant,
agreement or other provision would result in such a material change as to cause the covenants and
agreements contained in this Agreement to be unreasonable or would materially and adversely
frustrate the objectives of the Employers and the Executive as expressed in this Agreement.

     18. Construction. This Agreement shall be governed by and construed in accordance
with the internal laws of the Commonwealth of Pennsylvania, without giving effect to principles of
conflict of laws. All headings in this Agreement have been inserted solely for convenience of
reference only, are not to be considered a part of this Agreement and shall not affect the
interpretation of any of the provisions of this Agreement.

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.

	 	 	 	 	 
	 	DONEGAL MUTUAL INSURANCE COMPANY

 	 
	 	By:  	/s/ Donald H. Nikolaus
 	 
	 	 	Donald H. Nikolaus, President and  	 
	 	 	Chief Executive Officer 	 
	 
	 	DONEGAL GROUP INC.

 	 
	 	By:  	/s/ Jeffrey D. Miller
 	 
	 	 	Jeffrey D. Miller, Senior Vice President and 	 
	 	 	Chief Financial Officer 	 
	 
	 	 	 
	 	/s/ Kevin G. Burke
 	 
	 	Kevin G. Burke 	 
	 	 	 
	 

-13-exv10w4

Exhibit 10.4

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (this “Agreement”) dated as of July 29, 2011 among Donegal Mutual
Insurance Company, a Pennsylvania mutual insurance company having its principal place of business
at 1195 River Road, Marietta, Pennsylvania 17547 (“Donegal Mutual”), Donegal Group Inc., a Delaware
corporation having its principal place of business at 1195 River Road, Marietta, Pennsylvania 17547
(“DGI,” and, together with Donegal Mutual, the “Employers”), and Cyril J. Greenya, an individual
whose principal office address is 1195 River Road, Marietta, Pennsylvania 17547 (the “Executive”).

WITNESSETH:

     WHEREAS, the Employers desire, by this Agreement, to provide for the continued employment of
the Executive by the Employers, and the Executive agrees to the continued employment of the
Executive by the Employers, all in accordance with the terms and subject to the conditions set
forth in this Agreement; and

     WHEREAS, the parties are entering into this Agreement to set forth and confirm their
respective rights and obligations with respect to the Executive’s continued employment by the
Employers;

     NOW, THEREFORE, in consideration of the premises and the mutual covenants contained in this
Agreement, the Employers and the Executive, intending to be legally bound hereby, mutually agree as
follows:

     1. Employment and Term.

          (a) (i) Effective August 1, 2011 (the “Effective Date”), (i) Donegal Mutual agrees to continue
to employ the Executive, and the Executive agrees to continue the Executive’s employment as, the
Senior Vice President and Chief Underwriting Officer of Donegal Mutual and (ii) DGI agrees to
employ the Executive, and the Executive agrees to continue the Executive’s employment as, the
Senior Vice President of DGI, with positions described in clauses (i) and (ii) collectively
referred to in this Agreement as the “Position”, in accordance with the terms and subject to the
conditions this Agreement sets forth. Donegal Mutual and DGI shall be jointly and severally liable
to the Executive with respect to (i) all liabilities of Donegal Mutual to the Executive under this
Agreement and (ii) all liabilities of DGI to the Executive under this Agreement; provided, however,
that Donegal Mutual shall not be responsible for any liability of DGI to the Executive to the
extent that DGI has discharged such liability, and DGI shall not be responsible for any liability
of Donegal Mutual to the Executive to the extent that Donegal Mutual has discharged such liability.

 

 

               (ii) The term of this Agreement, as the same may be extended from time to time pursuant to the
provisions of this clause (ii) or otherwise, shall commence on the Effective Date and end on the
third anniversary of the Effective Date, provided, however, that on the first anniversary of the
Effective Date and on each subsequent anniversary of the Effective Date (each, an “Extension
Date”), the Term shall automatically extend for one additional year so that on each such succeeding
Extension Date, this Agreement shall have a remaining Term of three years, unless either the
Executive or the respective board of directors of Donegal Mutual and DGI (together, the “Boards”)
give notice to the other, not less than 90 days in advance of the next succeeding Extension Date,
that such automatic extensions shall terminate as of such next succeeding Extension Date, unless
the Employers earlier terminate the employment of the Executive for Cause, as defined in this
Agreement, or because of the death or the Permanent Disability, as defined in this Agreement, of
the Executive.

          (b) Notwithstanding paragraph 1(a) of this Agreement, the Employers, by action of the Boards
and effective as specified in a written notice thereof to the Executive in accordance with the
terms of this Agreement, shall have the right to terminate the Executive’s employment under this
Agreement at any time during the Term, for Cause or other than for Cause or on account of the
Executive’s death or Permanent Disability subject to the provisions of this paragraph 1.

               (i) As used in this Agreement, “Cause” shall mean (A) the Executive’s willful and continued
failure substantially to perform the Executive’s material duties with the Employers as set forth in
this Agreement, or the commission by the Executive of any activities constituting a willful
violation or breach under any material federal, state or local law or regulation applicable to the
activities of Donegal Mutual or DGI or their respective subsidiaries and affiliates, in each case,
after notice of such failure, breach or violation from the Employers to the Executive and a
reasonable opportunity for the Executive to cure such failure, breach or violation in all material
respects, (B) fraud, breach of fiduciary duty, dishonesty, misappropriation or other actions by the
Executive that cause intentional material damage to the property or business of Donegal Mutual or
DGI or their respective subsidiaries and affiliates, (C) the Executive’s repeated absences from
work such that the Executive is substantially unable to perform the Executive’s duties under this
Agreement in all material respects other than for physical or mental impairment or illness or (D)
the Executive’s non-compliance with the provisions of paragraph 2(b) of this Agreement after notice
of such non-compliance from the Employers to the Executive and a reasonable opportunity for the
Executive to cure such non-compliance.

               (ii) As used in this Agreement, “Permanent Disability” shall mean a physical or mental
disability of the Executive such that the Executive is substantially unable to perform those duties
that the Executive would otherwise reasonably be expected to continue to perform and the
Executive’s nonperformance of such duties has continued for a

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period of 180 consecutive days, provided, however, that in order to terminate the Executive’s
employment under this Agreement on account of Permanent Disability, the Employers must provide the
Executive with written notice of the Boards’ good faith determinations to terminate the Executive’s
employment under this Agreement for reason of Permanent Disability not less than 30 days prior to
such termination, and such notice shall specify the date of termination. Until the specified
effective date of termination by reason of Permanent Disability, the Executive shall continue to
receive compensation at the rates set forth in paragraph 3 of this Agreement. No termination of
the Executive’s employment under this Agreement because of Permanent Disability shall impair any
rights of the Executive under any disability insurance policy the Employers maintained at the
commencement of the aforesaid 180-day period.

          (c) The Executive shall have the right to terminate the Executive’s employment under this
Agreement at any time during the Term for Good Reason or without Good Reason or in the event a
Change of Control occurs. As used in this Agreement, “Good Reason” shall mean (A) a material
diminishment of the Executive’s Position or the scope of the Executive’s authority, duties or
responsibilities as this Agreement describes without the Executive’s written consent, excluding for
this purpose any action the Employers do not take in bad faith and that the Employers remedy
promptly following written notice thereof from the Executive to the Employers, or (B) a material
breach by either Employer of its respective obligations to the Executive under this Agreement,
provided, that with respect to any termination by the Executive for Good Reason, the Executive
shall have provided the Employers with written notice within 90 days of the date on which the
Employers first had actual knowledge of the existence of the Good Reason and which Good Reason
shall not have been cured or otherwise rectified by the Employers in all material respects to the
reasonable satisfaction of the Executive within 30 days after the Employers receive such written
notice or (C) any termination of the Executive’s employment under this Agreement without Cause.

          (d) “Change of Control” shall mean (A) the acquisition of shares of DGI by any “person” or
“group,” as Rule 13d-3 uses such terms under the Securities Exchange Act of 1934, as now or
hereafter amended, in a transaction or series of transactions that result in such person or group
directly or indirectly first owning after the Effective Date more than 25% of the aggregate voting
power of DGI’s Class A common stock and Class B common stock taken as a single class, (B) the
consummation of a merger or other business combination transaction after which the holders of the
outstanding voting capital stock of DGI taken as a single class do not collectively own 60% or more
of the aggregate voting power of the entity surviving such merger or other business combination
transaction, (C) the sale, lease, exchange or other transfer in a transaction or series of
transactions of all or substantially all of the assets of DGI, but excluding therefrom the sale and
re-investment of the consolidated investment portfolio of DGI and its subsidiaries, (D) as the
result of or in connection with any cash tender offer or exchange offer, merger or other business
combination transaction, sale of assets or contested-election of directors or any combination of
the foregoing transactions or

-3-

 

(E) a change of “control” of Donegal Mutual as such term is defined in the Pennsylvania
Insurance Holding Companies Act (each, a “Transaction”), the persons who constituted a majority of
the members of the respective Boards on the Effective Date and persons whose election as members of
the respective Boards received the approval of such members then still in office or whose
subsequent election had been so approved prior to the date of a Transaction, but before the
occurrence of an event that constitutes a Change of Control, no longer constitute such a majority
of the Boards then in office. A Transaction constituting a Change of Control shall only be deemed
to have occurred upon the closing of the Transaction.

          (e) (i) If (A) the Employers terminate the Executive’s employment under this Agreement for any
reason other than for Cause and such termination occurs as of a date that is within 180 days
preceding or within 180 days after the consummation of a Change of Control (such 180-day period
preceding the Change of Control and such 180-day period after the Change of Control collectively
referred to in this Agreement as a “Change of Control Period”, (B) the Employers terminate this
Agreement as a result of the death or Permanent Disability of the Executive, effective as of a date
within a Change of Control Period, (C) the Executive terminates the Executive’s employment under
this Agreement for Good Reason or (D) the acquisition of “control” of Donegal Mutual as defined in
the Pennsylvania Insurance Holding Companies Act, the Employers shall pay to the Executive or the
Executive’s estate promptly after the event giving rise to such payment occurs, an amount equal to
the sum of (x) (1) the Executive’s Base Salary, as defined in this Agreement, accrued through the
date the termination of the Executive’s employment under this Agreement is effective, (2) any
incentive, as defined in this Agreement, the Employers have the obligation to pay to the Executive
pursuant to paragraph 3(b) of this Agreement, (3) any amounts payable under any of the Employers’
benefit plans in accordance with the terms of such plans, except as Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”) may otherwise require and (4) any amount in respect
of excise taxes the Employers have the obligation to pay to the Executive pursuant to paragraph
1(f) of this Agreement, with such payments, rights and benefits described in clauses (x)(1), (x)(2)
and (x)(3) of this Agreement being collectively referred to in this Agreement as the “Accrued
Obligations,” (y) an amount equal to the aggregate premiums that the Executive would have to pay to
maintain in effect throughout the period (the “Subsequent Period”) from the date of termination of
the Executive’s employment under this Agreement through the remainder of the Term had the Executive
remained employed, assuming no increase in insurance premium rates, the same medical, health,
disability and life insurance coverage the Employers provided to the Executive immediately prior to
the date of such termination (the “Benefit Obligations”) and (z) the Employers shall pay to the
Executive or the Executive’s estate, as a severance payment, for three years from the date of such
termination, the Executive’s annual Base Salary as of the effective date of termination of the
Executive’s employment under this Agreement and any incentive paid to the Executive during the last
completed fiscal year of the Employers before

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such termination. The Employers shall pay such amounts for the Executive in 36 equal monthly
installments.

               (ii) If (A) the Employers terminate the Executive’s employment under this Agreement for any
reason other than for Cause effective as of a date that is not within a Change of Control Period or
(B) the Executive terminates the Executive’s employment under this Agreement for Good Reason
effective as of a date that is not within a Change of Control Period, the Employers shall pay the
Executive, provided the Executive concurrently signs and delivers a general release in a
commercially reasonable form that is mutually acceptable to the Employers and the Executive in
favor of the Employers and their respective subsidiaries, an amount equal to the sum of (w) the
Accrued Obligations, (x) the Benefit Obligations and (y) the Executive’s Base Salary as of the
effective date of termination of the Executive’s employment under this Agreement the Executive
would have received had the Executive remained employed under this Agreement for the Subsequent
Period. The Employers shall pay such amounts to the Executive at the same time and in the same
installments had the Executive remained employed under this Agreement for the Subsequent Period.

               (iii) If (A) the Employers terminate the Executive’s employment under this Agreement for Cause
or because of the death or Permanent Disability of the Executive or (B) the Executive terminates
the Executive’s employment under this Agreement for any reason other than Good Reason, the
Executive’s death or Permanent Disability, or (C) the Employers terminate this Agreement as a
result of the death or Permanent Disability of the Executive effective as of a date that is not
within a Change of Control Period, the sole obligation of the Employers to the Executive under this
Agreement shall be to pay the Accrued Obligations to the Executive or the Executive’s estate,
provided, however, that in the event the Employers terminate the employment of the Executive under
this Agreement because of the death of the Executive, the Employers shall pay to the personal
representatives of the Executive an amount equal to the Executive’s Base Salary and incentive for
the remainder of the Term.

               (iv) No provision of this Agreement shall adversely affect any vested rights of the Executive
under the Employers’ existing employee benefit plans or other plans the Employers may establish in
the future; provided, however, upon the termination of the employment of the Executive as provided
in this Agreement, all future vesting of the Executive’s rights under all existing and any future
employee benefit plans shall terminate without further action by the Employers.

               (v) The Employers and the Executive intend that this Agreement be drafted and administered in
compliance with Section 409A of the Code, including, but not limited to, any future amendments to
Section 409A, and any other Internal Revenue Service (“IRS”) or other governmental rulings or
interpretations (together, “Section 409A”) issued pursuant to Section 409A so as not to subject the
Executive to payment of interest or any

-5-

 

additional tax under Section 409A. The Employers and the Executives intend for any payments
under paragraphs 1(e)(i), (ii) or (iii) to satisfy either the requirements of Section 409A or to be
exempt from the application of Section 409A, and the Employers and the Executive shall construe and
interpret this Agreement accordingly. In furtherance of such intent, if payment or provision of
any amount or benefit under this Agreement that is subject to Section 409A at the time specified in
this Agreement would subject such amount or benefit to any additional tax under Section 409A, the
Employers shall postpone payment or provision of such amount or benefit to the earliest
commencement date on which the Employers can make such payment or provision of such amount or
benefit without incurring such additional tax but not in excess of six months. In addition, to the
extent that any IRS guidance issued under Section 409A would result in the Executive being subject
to the payment of interest or any additional tax under Section 409A, the Employers and the
Executive agree, to the extent reasonably possible, to amend this Agreement in order to avoid the
imposition of any such interest or additional tax under Section 409A. Any such amendment shall
have the minimum economic effect necessary and be determined reasonably and in good faith by the
Employers and the Executive.

               (vi) If a payment under paragraph 1(e)(i), (ii) or (iii) of this Agreement does not qualify as
a short-term deferral under Section 409A or any similar or successor provisions, and the Executive
is a Specified Employee, as defined in this Agreement, as of the Executive’s Termination Date, the
Employers may not make such distributions to the Executive before a date that is six months after
the date of the Executive’s Termination Date or, if earlier, the date of the Executive’s death (the
“Six-Month Delay”). The Employers shall accumulate payments to which the Executive would otherwise
be entitled during the first six months following the Termination Date (the “Six-Month Delay
Period”) and make such payments on the first day of the seventh month following the Executive’s
Termination Date. Notwithstanding the Six-Month Delay set forth in this paragraph 1(e)(vi):

     (A) To the maximum extent Section 409A or any similar or successor
provisions permit, during each month of the Six-Month Delay Period, the
Employers will pay the Executive an amount equal to the lesser of (I) the
total monthly severance for which paragraph 1(e)(ii) and (iii) provide or (II)
one-sixth of the lesser of (1) the maximum amount that Section 401(a)(17)
permits to be taken into account under a qualified plan for the year in which
the Executive’s Date of Termination occurs and (2) the sum of the Executive’s
annualized compensation based upon the annual rate of pay for services
provided to the Employers for the taxable year of the Executive preceding the
taxable year of the Executive in which the Executive’s Termination Date
occurs, adjusted for any increase during that year that the parties expected
to continue indefinitely if the Executive’s Termination Date has not occurred
; provided that amounts paid under this sentence will count toward, and

-6-

 

will not be in addition to, the total payment amount the Employers have
the obligation to pay to the Executive under paragraphs 1(e)(i) and (ii) of
this Agreement; and

     (B) To the maximum extent Section 409A, or any similar or successor
provisions, permits within ten days following the Executive’s Termination
Date, the Employers shall pay the Executive an amount equal to the applicable
dollar amount under Section 402(g)(1)(B) for the year in which the Executive’s
Termination Date occurred; provided that the amount the Employers pay under
this sentence may include, and need not be in addition to, the total payment
amount this Agreement requires the Employers to pay to the Executive under
paragraph 1(b).

     (C) For purposes of this Agreement, “Specified Employee” has the meaning
given that term in Section 409A or any similar or successor provisions. The
Employers’ “specified employee identification date” as described in Section
409A will be December 31 of each year, and the Employers’ “specified employee
effective date” as described in Section 409A or any similar or successor
provisions) will be February 1 of each succeeding year.

          (f) In the event that the independent registered public accounting firm of either of the
Employers or the IRS determines that any payment, coverage or benefit provided to the Executive
pursuant to this Agreement is subject to the excise tax imposed by Sections 280G or 4999 or any
successor provisions of Sections 280G and 4999 or any interest or penalties the Executive incurs
with respect to such excise tax, the Employers, within 30 days thereafter, shall pay to the
Executive, in addition to any other payment, coverage or benefit due and owing under this
Agreement, an additional amount that will result in the Executive’s net after tax position, after
taking into account any interest, penalties or taxes imposed on the amounts payable under this
paragraph 1(f), upon the receipt of the payments for which this Agreement provides being no less
advantageous to the Executive than the net after tax position to the Executive that would have been
obtained had Sections 280G and 4999 not been applicable to such payment, coverage or benefits.
Except as this Agreement otherwise provides, tax counsel, whose selection shall be reasonably
acceptable to the Executive and the Employers and whose fees and costs shall be paid for by the
Employers, shall make all determinations this paragraph 1(f) requires.

          (g) In the event that the independent registered public accounting firm of either of the
Employers or the IRS determines that any payment, coverage or benefit due or owing to the Executive
pursuant to this Agreement is subject to the excise tax Section 409A imposes or any successor
provision of Section 409A or any interest or penalties, including interest imposed under Section
409(A)(1)(B)(i)(I), the Executive incurs as a result of the application of such provision, the
Employers, within 30 days of the date of such impositions,

-7-

 

shall pay to the Executive, in addition to any other payment, coverage or benefit due and
owing under this Agreement, an additional amount that will result in the Executive’s net after tax
position, after taking into account any interest, penalties or taxes imposed on the amounts paid
under this paragraph 1(g), being no less advantageous to the Executive than the net after tax
position the Executive would have obtained had Section 409A not been applicable to such payment,
coverage or benefits. Except as this Agreement otherwise provides, tax counsel, whose selection
shall be reasonably acceptable to the Executive and the Employers and whose fees and costs the
Employers shall pay, shall make all determinations this paragraph 1(g) requires.

          (h) The Employers and the Executive shall give any notice of termination of this Agreement to
the Executive or the Employers, as the case may be, in accordance with the provisions of paragraph
10.

          (i) The Employers agree to reimburse the Executive for the reasonable fees and expenses of the
Executive’s attorneys and for court and related costs in any proceeding to enforce the provisions
of this Agreement in which the Executive is successful on the merits.

     2. Duties of the Executive.

          (a) Subject to the ultimate control and discretion of the Boards, the Executive shall serve in
the Position and perform all duties and services commensurate with the Position. Throughout the
Term of this Agreement as the same may be extended from time to time, the Executive shall perform
all duties reasonably assigned or delegated to the Executive under the By-laws of the Employers or
from time to time by the Boards consistent with the Position. Except for travel normally
incidental and reasonably necessary to the business of the Employers and the duties of the
Executive under this Agreement, the duties of the Executive shall be performed from an office
location not greater than 35 miles from Marietta, Pennsylvania.

          (b) The Executive shall devote substantially all of the Executive’s business time and
attention to the performance of the Executive’s duties under this Agreement and, during the term of
the Executive’s employment under this Agreement, the Executive shall not engage in any other
business enterprise that requires any significant amount of the Executive’s personal time or
attention, unless granted the prior permission of the respective Boards. The foregoing provision
shall not prevent the Executive’s purchase, ownership or sale of any interest in, or the
Executive’s engaging in, any business that does not compete with the business of the Employers or
the Executive’s involvement in charitable or community activities, provided, that the time and
attention that the Executive devotes to such business and charitable or community activities does
not materially interfere with the performance of the Executive’s duties under this Agreement and
that a material portion of the time the Executive devotes to charitable or community activities are
devoted to charitable

-8-

 

or community activities within the Employers’ market area and further provided that such
conduct complies in all material respects with applicable policies of the Employers.

          (c) The Employers shall accrue earned but unused vacation in accordance with the Employers’
vacation policy.

     3. Compensation. For all services the Executive renders under this Agreement:

          (a) The Employers shall pay the Executive a base salary (the “Base Salary”) at an annual rate
equal to the annual rate of compensation the Executive is currently receiving from the Employers,
plus such other compensation as the Employers may, from time to time, determine. The Employers
shall pay such Base Salary and other compensation in accordance with the Employers’ normal payroll
practices as in effect from time to time.

          (b) The Employers agree that the Executive shall be entitled to participate in the annual
incentive programs of the Employers, in accordance in all material respects with applicable
policies of the Employers relating to incentive compensation for executive officers, based on the
objectives set forth in the Employers’ Executive Incentive Plan.

          (c) The compensation provided for in this paragraph 3 shall be in addition to such rights as
the Executive may have, during the Executive’s employment under this Agreement or after such
employment, to participate in and receive benefits from or under any benefit plans the Employers
may in their discretion establish for their employees or executives, including, but not limited to,
employee benefit plans and group health insurance, life insurance and disability insurance plans.
To the extent the Executive incurs a tax liability as a result of any of such benefits, the
Executive shall be solely responsible for such taxes.

          (d) The parties acknowledge that Towers Watson is in the process of evaluating the
compensation and employee benefit plans the Employers make available to their senior executive
officers. To the extent the respective boards of directors of the Employers, based upon the
recommendations of Towers Watson, to enhance the compensation and other benefits the Employers make
available to their senior executive officers, the Employers and the Executive agree to negotiate in
good faith and to execute an amendment to this Agreement that would appropriately reflect such
enhancements.

     4. Expenses. The Employers shall promptly reimburse the Executive for all reasonable
expenses the Executive pays or incurs in connection with the performance of the Executive’s duties
and responsibilities under this Agreement, upon presentation of expense vouchers or other
appropriate documentation therefor.

     5. Indemnification. Notwithstanding anything in the Employers’ respective
certificates or articles of incorporation or their By-laws to the contrary, the Employers shall at
all times indemnify the Executive during the Executive’s employment by the Employers or while the
Executive is providing consulting services to the Employers, and thereafter, to the

-9-

 

fullest extent applicable law permits for any matter in any way relating to the Executive’s
employment by, consultation with or other affiliation with the Employers or its subsidiaries;
provided, however, that if the Employers shall have terminated the Executive’s employment under
this Agreement for Cause, then, except to the extent otherwise required by law, the Employers shall
have no obligation whatsoever to indemnify the Executive for any claim arising out of the matter
for which the Employer shall have terminated the Executive’s employment under this Agreement for
Cause or for any conduct of the Executive not within the scope of the Executive’s duties under this
Agreement.

     6. Confidential Information. The Executive understands that in the course of the
Executive’s employment by the Employers the Executive will receive confidential information
concerning the business of the Employers and that the Employers desire to protect. The Executive
agrees that the Executive will not at any time during or after the period of the Executive’s
employment by the Employers reveal to anyone outside the Employers, or use for the Executive’s own
benefit, any such information that the Employers have designated as confidential or that the
Executive understood to be confidential without specific designation by the Employers. Upon
termination of the employment of the Executive under this Agreement, and upon the request of the
Employers, the Executive shall promptly deliver to the Employers any and all written materials,
records and documents, including all copies of such written materials, documents and records, the
Executive made or that come into the Executive’s possession during the Term and the Executive
retained that contain or concern confidential information of the Employers and all other written
materials the Employers furnished to the Executive for the Executive’s use during the Term,
including all copies of such written materials, documents and records, whether of a confidential
nature or otherwise.

     7. Representation and Warranty of the Executive. The Executive represents and
warrants that the Executive is not under any obligation, contractual or otherwise, to any other
firm or corporation, which would prevent the Executive’s performance of the terms of this
Agreement.

     8. Entire Agreement; Amendment. This Agreement and the Consulting Agreement contain
the entire agreement between the Employers and the Executive with respect to the subject matter of
this Agreement, and may not be amended, waived, changed, modified or discharged except by an
instrument in writing executed by the Employers and the Executive.

     9. Assignability. The services of the Executive under this Agreement are personal in
nature, and the Employers may not assign their respective rights or obligations under this
Agreement, whether by operation of law or otherwise, without the Executive’s prior written consent.
This Agreement shall be binding upon, and inure to the benefit of, the Employers and their
permitted successors and assigns under this Agreement. This Agreement shall not

-10-

 

be assignable by the Executive, but shall inure to the benefit of the Executive’s heirs,
executors, administrators and personal representatives.

     10. Notice. Any notice that a party to this Agreement may give under this Agreement
shall be in writing and be deemed given when hand delivered and acknowledged or, if mailed, one day
after mailing by registered or certified mail, return receipt requested, or if delivered by an
overnight delivery service, one day after the notice is delivered to such service, to the Employers
or the Executive at their respective addresses stated in the preamble to this Agreement, or at such
other address as either party may by similar notice designate.

     11. Specific Performance. The Employers and the Executive agree that irreparable
damage would occur in the event that any of the provisions of paragraph 6 of this Agreement were
not performed in accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the Employers and the Executive shall have the right to an injunction or
injunctions to prevent breaches of such paragraph 6 and to enforce specifically the terms and
provisions of such paragraph 6, this being in addition to any other remedy to which the Employers
or the Executive are entitled at law or in equity.

     12. No Third Party Beneficiaries. Nothing in this Agreement, express or implied,
shall confer upon any person or entity other than the Employers and the Executive (and the
Executive’s heirs, executors, administrators and personal representatives) any rights or remedies
of any nature under or by reason of this Agreement.

     13. Successor Liability. The Employers 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 Employers to assume expressly and agree to perform this Agreement in the
same manner and to the same extent that the Employers would be required to perform it if no such
succession had taken place.

     14. Mitigation. The Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise, nor shall the
amount of any payment or benefit provided for in this Agreement be reduced by any compensation the
Executive earns as the result of employment by another employer or by retirement benefits payable
after the termination of this Agreement, except that the Employers shall not be required to provide
the Executive and the Executive’s eligible dependents with medical insurance coverage as long as
the Executive and the Executive’s eligible dependents are receiving comparable medical insurance
coverage from another employer.

     15. Waiver of Breach. The failure at any time to enforce or exercise any right under
any of the provisions of this Agreement or to require at any time performance by the other parties
of any of the provisions hereof shall in no way be construed to be a waiver of such provisions or
to affect either the validity of this Agreement or any part of this Agreement, or

-11-

 

the right of any party hereafter to enforce or exercise its rights under each and every
provision in accordance with the terms of this Agreement.

     16. No Attachment. Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance,
charge, pledge or hypothecation or to execution, attachment, levy or similar process or assignment
by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be
null, void and of no effect; provided, however, that nothing in this paragraph 16 shall preclude
the assumption of such rights by executors, administrators or other legal representatives of the
Executive or the Executive’s estate and their assigning any rights hereunder to the person or
persons entitled to such rights.

     17. Severability. The invalidity or unenforceability of any term, phrase, clause,
paragraph, restriction, covenant, agreement or other provision of this Agreement shall in no way
affect the validity or enforceability of any other provision, or any part of this Agreement, but
this Agreement shall be construed as if such invalid or unenforceable term, phrase, clause,
paragraph, restriction, covenant, agreement or other provision had never been contained in this
Agreement unless the deletion of such term, phrase, clause, paragraph, restriction, covenant,
agreement or other provision would result in such a material change as to cause the covenants and
agreements contained in this Agreement to be unreasonable or would materially and adversely
frustrate the objectives of the Employers and the Executive as expressed in this Agreement.

     18. Construction. This Agreement shall be governed by and construed in accordance
with the internal laws of the Commonwealth of Pennsylvania, without giving effect to principles of
conflict of laws. All headings in this Agreement have been inserted solely for convenience of
reference only, are not to be considered a part of this Agreement and shall not affect the
interpretation of any of the provisions of this Agreement.

-12-

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.

	 	 	 	 	 
	 	DONEGAL MUTUAL INSURANCE COMPANY

 	 
	 	By:  	/s/ Donald H. Nikolaus
 	 
	 	 	Donald H. Nikolaus, President and Chief Executive Officer 	 
	 	 	 	 
	 
	 	DONEGAL GROUP INC.

 	 
	 	By:  	/s/ Jeffrey D. Miller
 	 
	 	 	Jeffrey D. Miller, Senior Vice President and 	 
	 	 	Chief Financial Officer 	 
	 
	 	 	 
	 	/s/ Cyril J. Greenya
 	 
	 	Cyril J. Greenya 	 
	 	 	 
	 

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