8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 12, 2010

Penn Millers Holding Corporation
(Exact name of registrant as specified in its charter)

Pennsylvania	001-34496	80-0482459
(State or other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

72 North Franklin Street, PO Box P Wilkes-Barre, Pennsylvania	18773
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (800) 233-8347

Not Applicable

(Former name or former address if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 5.07 Submission of Matters to a Vote of Security Holders

Penn Millers Holding Corporation (the Company) held its annual meeting of shareholders on May 12, 2010 (the Annual Meeting). At the Annual Meeting, the Company’s shareholders elected each of the Company’s nominees for director to hold office until the 2013 annual meeting of shareholders and until their successors are duly elected and qualified. The Company’s shareholders also ratified the appointment of KPMG LLP as the Company’s independent registered public accounting firm for 2010. The Company’s shareholders also approved the Penn Millers Stock Incentive Plan. The final voting results for each matter submitted to a vote of shareholders at the meeting are as follows:

Proposal No. 1 – Election of Directors

Name	Votes For		Votes Withheld		Broker Non-Votes
John L. Churnetski		2,788,841		93,863		648,486
John M. Coleman		2,785,726		96,978		648,486
Robert A. Nearing, Jr.		2,785,291		97,413		648,486

Proposal No. 2 – Ratification of Independent Registered Public Accounting Firm

Votes For	Votes Against		Votes Abstained
3,526,988		3,802		400

Proposal No. 3 – Approval of Penn Millers Holding Corporation Stock Incentive Plan

Votes For	Votes Against		Votes Abstained		Broker Non-Votes
1,869,796		1,006,452		6,456		648,486

Item 5.02    Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On May 12, 2010, the Company’s Board of Directors appointed F. Kenneth Ackerman, Jr., the Vice Chairman of the Board and a Board member since 1979, as Chairman of the Board of Penn Millers Holding Corporation and its direct and indirect subsidiaries. Mr. Ackerman replaced Mr. J. Harvey Sproul, Jr. who retired from the Company’s Board of Directors at the Annual Meeting due to his reaching the Company’s mandatory retirement age for Board members. The Company does not plan to fill the vacancy on the Board created by Mr. Sproul’s retirement.

On May 12, 2010 the shareholders of the Company approved the Penn Millers Stock Incentive Plan (the Plan). The Plan provides for the issuance of stock-based awards in the form of incentive stock options, nonqualified stock options, restricted common stock and restricted stock units to directors, management and employees. Under the Plan, the aggregate number of shares of common stock that can be awarded is limited to 762,163 shares, subject to certain adjustments.

In connection with the approval of the Plan by the Company’s shareholders, the Company’s Board of Directors terminated the Company’s Supplemental Executive Retirement Plan (SERP) for active participants. Certain of the Company’s executive officers were eligible to participate in the SERP, and on May 12, 2010 the compensation committee of the Board of Directors granted restricted stock awards to these executives in order to replace the lost SERP benefit. The Company believes that the restricted stock grants and the Plan, generally, will more closely align the interests of our officers and shareholders.

On May 12, 2010, the Company’s Board of Directors approved the Penn Millers Holding Corporation Open Market Share Purchase Incentive Plan. The purpose of this plan is to provide for cash award opportunities to certain designated employees of the Company based upon achievement of performance goals over a two-or-three-year period. Awards under the plan will be used by the participants to purchase the Company’s common stock on the open market in order to satisfy company stock ownership requirements.

Item 9.01   Financial Statements and Exhibits.

(d) Exhibits.

10.1	Penn Millers Stock Incentive Plan, effective as of May 12, 2010
10.2	Penn Millers Holding Corporation Open Market Share Purchase Incentive Plan
10.3	Form of Penn Millers Stock Incentive Plan Restricted Stock Agreement
10.4	Form of Penn Millers Stock Incentive Plan Restricted Stock Unit Agreement
10.5	Form of Penn Millers Stock Incentive Plan Stock Option Agreement for Incentive Stock Option
10.6	Form of Penn Millers Stock Incentive Plan Stock Option Agreement for Nonqualified Stock Option for Non-Management Directors
10.7	Form of Penn Millers Stock Incentive Plan Stock Option Agreement for Nonqualified Stock Option for Employees

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		PENN MILLERS HOLDING CORPORATION
Date:	May 14, 2010	By:	/s/ Michael O. Banks
		Michael O. Banks
		Executive Vice President and Chief Financial Officer

EXHIBIT INDEX

Exhibit Number	Description
10.1	Penn Millers Stock Incentive Plan, effective as of May 12, 2010
10.2	Penn Millers Holding Corporation Open Market Share Purchase Incentive Plan
10.3	Form of Penn Millers Stock Incentive Plan Restricted Stock Agreement
10.4	Form of Penn Millers Stock Incentive Plan Restricted Stock Unit Agreement
10.5	Form of Penn Millers Stock Incentive Plan Stock Option Agreement for Incentive Stock Option
10.6	Form of Penn Millers Stock Incentive Plan Stock Option Agreement for Nonqualified Stock Option for Non-Management Directors
10.7	Form of Penn Millers Stock Incentive Plan Stock Option Agreement for Nonqualified Stock Option for Employees

EX-10.1

Exhibit 10.1

PENN MILLERS
STOCK INCENTIVE PLAN

PENN MILLERS
STOCK INCENTIVE PLAN

TABLE OF CONTENTS

ARTICLE	PAGE
ARTICLE 1. PURPOSE OF THE PLAN; TYPES OF AWARDS		1
ARTICLE 2. DEFINITIONS		1
ARTICLE 3. ADMINISTRATION		5
ARTICLE 4. COMMON STOCK SUBJECT TO THE PLAN		6
ARTICLE 5. ELIGIBILITY		7
ARTICLE 6. STOCK OPTIONS IN GENERAL		8
ARTICLE 7. TERM, VESTING AND EXERCISE OF OPTIONS		9
ARTICLE 8. EXERCISE OF OPTIONS FOLLOWING TERMINATION OF EMPLOYMENT OR SERVICE		10
ARTICLE 9. RESTRICTED STOCK		11
ARTICLE 10. RESTRICTED STOCK UNITS		13
ARTICLE 11. ADJUSTMENT PROVISIONS		14
ARTICLE 12. GENERAL PROVISIONS		14

ARTICLE 1. PURPOSE OF THE PLAN; TYPES OF AWARDS

1.1 Purpose. The Penn Millers Stock Incentive Plan, effective as of May 12, 2010, is intended to provide selected employees and non-employee directors of Penn Millers Holding Corporation (the “Corporation”) and its Subsidiaries (as hereinafter defined) with an opportunity to acquire Common Stock of the Corporation. The Plan is designed to help the Corporation attract, retain, and motivate employees and non-employee directors to make substantial contributions to the success of the Corporation’s business and the businesses of its Subsidiaries. Awards made under the Plan are based upon, among other things, a participant’s level of responsibility and performance within the Corporation and its Subsidiaries.

1.2 Authorized Plan Awards. Incentive Stock Options, Nonqualified Stock Options, Restricted Stock and Restricted Stock Units may be awarded within the limitations of the Plan herein described.

ARTICLE 2. DEFINITIONS

2.1 “Agreement.” A written or electronic agreement between the Corporation and a Participant evidencing an Award. A Participant may be issued one or more Agreements from time to time, reflecting one or more Awards.

2.2 “Award.” The award of a Stock Option, Restricted Stock, or Restricted Stock Unit.

2.3 “Board.” The Board of Directors of the Corporation.

2.4 “Change in Control.” Except as otherwise provided in an Agreement, the first to occur of any of the following events:

(a) any “Person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), except for any of the Corporation’s employee benefit plans, or any entity holding the Corporation’s voting securities for, or pursuant to, the terms of any such plan (or any trust forming a part thereof) (the “Benefit Plan(s)”), is or becomes the beneficial owner, directly or indirectly, of the Corporation’s securities representing 25% or more of the combined voting power of the Corporation’s then outstanding securities other than pursuant to a transaction excepted in Clause (b);

(b) the shareholders of the Corporation approve a merger, consolidation, or other reorganization of the Corporation, unless:

(i) under the terms of the agreement providing for such merger, consolidation, or reorganization, the shareholders of the Corporation immediately before such merger, consolidation, or reorganization, will own, directly or indirectly immediately following such merger, consolidation, or reorganization, at least 60% of the combined voting power of the outstanding voting securities of the Corporation resulting from such merger, consolidation, or reorganization (the “Surviving Corporation”) in substantially the same proportion as their ownership of the voting securities immediately before such merger, consolidation, or reorganization;

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(ii) under the terms of the agreement providing for such merger, consolidation, or reorganization, the individuals who were members of the Board immediately prior to the execution of such agreement will constitute at least a majority of the members of the board of directors of the Surviving Corporation after such merger, consolidation, or reorganization; and

(iii) based on the terms of the agreement providing for such merger, consolidation, or reorganization, no Person (other than (A) the Corporation or any Subsidiary of the Corporation, (B) any Benefit Plan, (C) the Surviving Corporation or any Subsidiary of the Surviving Corporation, or (D) any Person who, immediately prior to such merger, consolidation, or reorganization had beneficial ownership of 25% or more of the then outstanding voting securities) will have beneficial ownership of 25% or more of the combined voting power of the Surviving Corporation’s then outstanding voting securities;

(c) a plan of liquidation or dissolution of the Corporation, other than pursuant to bankruptcy or insolvency laws, is adopted; or

(d) during any period of two consecutive years, individuals, who at the beginning of such period, constituted the Board cease for any reason to constitute at least a majority of the Board unless the election, or the nomination for election by the Corporation’s shareholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period.

Notwithstanding Clause (a), a Change in Control shall not be deemed to have occurred if a Person becomes the beneficial owner, directly or indirectly, of the Corporation’s securities representing 25% or more of the combined voting power of the Corporation’s then outstanding securities solely as a result of an acquisition by the Corporation of its voting securities which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by such Person to 25% or more of the combined voting power of the Corporation’s then outstanding securities; provided, however, that if a Person becomes a beneficial owner of 25% or more of the combined voting power of the Corporation’s then outstanding securities by reason of share purchases by the Corporation and shall, after such share purchases by the Corporation, become the beneficial owner, directly or indirectly, of any additional voting securities of the Corporation (other than as a result of a stock split, stock dividend or similar transaction), then a Change in Control of the Corporation shall be deemed to have occurred with respect to such Person under Clause (a). In no event shall a Change in Control of the Corporation be deemed to occur under Clause (a) by virtue of the acquisition of the Corporation’s securities by Benefit Plans.

2.5 “Code.” The Internal Revenue Code of 1986, as amended.

2.6 “Code of Conduct.” The policies and procedures related to employment of employees by the Corporation or a Subsidiary set forth in the Corporation’s employee handbook or any similar document. The Code of Conduct may be amended and updated at any time. The term “Code of Conduct” shall also include any other policy or procedure that may be adopted by the Corporation or a Subsidiary and communicated to Employees and Non-Employee Directors.

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2.7 “Committee.” The Compensation Committee of the Board which Committee shall be composed of two or more members of the Board, all of whom are (a) “non-employee directors” as such term is defined under the rules and regulations adopted from time to time by the Securities and Exchange Commission pursuant to Section 16(b) of the Exchange Act, (b) “outside directors” within the meaning of Code Section 162(m), and (c) independent under any applicable stock listing agreement with, or rules of, any exchange or electronic trading system. The Board may from time to time remove members from, or add members to, the Committee. Vacancies on the Committee, however caused, shall be filled by the Board.

2.8 “Common Stock.” The common stock of the Corporation (par value $0.01 per share) as described in the Corporation’s Articles of Incorporation, or such other stock as shall be substituted therefor.

2.9 “Corporation.” Penn Millers Holding Corporation, a Pennsylvania corporation.

2.10 “Disability.” “Permanent and total disability” (as defined in Code Section 22(e)(3)).

2.11 “Employee.” Any common law employee of the Corporation or a Subsidiary. An Employee does not include any individual who: (i) does not receive payment for services directly from the Corporation’s or a Subsidiary’s payroll; (ii) is employed by an employment agency that is not a Subsidiary; or (iii) who renders services pursuant to a written arrangement that expressly provides that the service provider is not eligible for participation in the Plan, regardless if such person is later determined by the Internal Revenue Service or a court of law to be a common law employee.

2.12 “Exchange Act.” The Securities Exchange Act of 1934, as amended.

2.13 “Incentive Stock Option.” A Stock Option intended to satisfy the requirements of Code Section 422(b).

2.14 “Non-Employee Director.” A member of the Board or the board of directors of a Subsidiary who is not an Employee.

2.15 “Nonqualified Stock Option.” A Stock Option which does not satisfy the requirements of Code Section 422(b).

2.16 “Optionee.” A Participant who is awarded a Stock Option pursuant to the provisions of the Plan.

2.17 “Participant.” An Employee or Non-Employee Director to whom an Award has been made and remains outstanding.

2.18 “Performance Criteria.” Any objective determination based on one or more of the following areas of performance of the Corporation, a Subsidiary, or any division, department or group of either which includes, but is not limited to: (a) earnings, (b) cash flow, (c) revenue, (d) financial ratios, (e) market performance, (f) shareholder return, (g) operating income or profits (including earnings before interest, taxes, depreciation and amortization), (h) earnings per share, (i) return on assets, (j) return on equity, (k) return on investment, (l) stock price, (m) expense reduction, (n) systems conversion, (o) special projects as determined by the Committee, (p) increases in book value, and (q) acquisition integration initiatives. Performance Criteria shall be established by the Committee prior to the issuance of a Performance Award.

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2.19 “Performance Goal.” One or more goals established by the Committee, with respect to an Award intended to constitute a Performance Award, that relate to one or more Performance Criteria. A Performance Goal shall relate to such period of time as may be specified by the Committee and set forth in an applicable Agreement at the time a Performance Award is made.

2.20 “Performance Award.” An Award, the vesting or receipt without restriction of which is conditioned on the satisfaction of one or more Performance Goals.

2.21 “Plan.” The Penn Millers Stock Incentive Plan.

2.22 “Restricted Stock.” An Award of Common Stock pursuant to the provisions of the Plan, which award is subject to such restrictions and other conditions, as may be specified by the Committee at the time of such award and set forth in an applicable Agreement.

2.23 “Restricted Stock Unit.” An Award of a right to receive, in Common Stock, the market value of one share of Common Stock, the vesting of which right is subject to such terms and conditions as may be provided by the Committee at the time of such award and set forth in an applicable Agreement. A Restricted Stock Unit Award may be payable in Common Stock or in cash as determined by the Committee in its sole discretion.

2.24 “Securities Act.” The Securities Act of 1933, as amended.

2.25 “Stock Option” or “Option.” An Award of a right to purchase Common Stock pursuant to the provisions of the Plan.

2.26 “Subsidiary.” A subsidiary corporation, as defined in Code Section 424(f), that is a subsidiary of a relevant corporation.

2.27 “Termination or Dismissal For Cause.” Termination of an Employee by the Corporation or a Subsidiary or dismissal of a Non-Employee Director after:

(a) any government regulatory agency recommends or orders in writing that the Corporation or a Subsidiary terminate the employment of such Employee or relieve him or her of his or her duties;

(b) such Employee or Non-Employee Director is convicted of or enters a plea of guilty or nolo contendere to a felony, a crime of falsehood, or a crime involving fraud or moral turpitude, or the actual incarceration of the Employee or Non-Employee Director for a period of 45 consecutive days;

(c) a determination by the Committee that such Employee willfully failed to follow the lawful instructions of the Board or any officer of the Corporation or a Subsidiary after such Employee’s receipt of written notice of such instructions, other than a failure resulting from the Employee’s incapacity because of physical or mental illness;

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(d) a determination by the Committee that the willful or continued failure by such Employee or Non-Employee Director to substantially and satisfactorily perform his duties with the Corporation or a Subsidiary (other than any such failure resulting from the Employee’s or Non-Employee Director’s Disability), within a reasonable period of time after a demand for substantial performance or notice of lack of substantial or satisfactory performance is delivered to the Employee or Non-Employee Director, which demand identifies the manner in which the Employee or Non-Employee Director has not substantially or satisfactorily performed his or her duties; or

(e) a determination by the Committee that such Employee or Non-Employee Director has failed to conform to an applicable Code of Conduct.

For purposes of the Plan, no act, or failure to act, on an Employee’s or Non-Employee Director’s part shall be deemed “willful” unless done, or omitted to be done, by such Employee or Non-Employee Director not in good faith and without reasonable belief that such Employee’s or Non-Employee Director’s action or omission was in the best interest of the Corporation or a Subsidiary.

ARTICLE 3. ADMINISTRATION

3.1 The Committee. The Plan shall be administered by the Committee.

3.2 Powers of the Committee.

(a) The Committee shall be vested with full authority to make such rules and regulations as it deems necessary or desirable to administer the Plan and to interpret the provisions of the Plan, unless otherwise determined by a majority of the disinterested members of the Board. Any determination, decision, or action of the Committee in connection with the construction, interpretation, administration, or application of the Plan shall be final, conclusive, and binding upon all Participants and any person claiming under or through a Participant, unless otherwise determined by a majority of the disinterested members of the Board.

(b) Subject to the terms, provisions and conditions of the Plan and subject to review and approval by a majority of the disinterested members of the Board, the Committee shall have exclusive jurisdiction to:

(i) determine and select the Employees and Non-Employee Directors to receive Awards (it being understood that more than one Award may be made to the same person);

(ii) determine the number of shares subject to each Award;

(iii) determine the date or dates when the Awards will be made;

(iv) determine the exercise price of shares subject to an Option in accordance with Article 6;

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(v) determine the date or dates when an Option may be exercised within the term of the Option specified pursuant to Article 7;

(vi) determine whether an Option constitutes an Incentive Stock Option or a Nonqualified Stock Option;

(vii) determine the Performance Criteria and establish Performance Goals with respect thereto, to be applied to an Award; and

(viii) prescribe the form, which shall be consistent with the Plan document, of the Agreement evidencing any Awards made under the Plan.

3.3 Liability. No member of the Board or the Committee shall be liable for any action or determination made in good faith by the Board or the Committee with respect to this Plan or any Awards made under this Plan.

3.4 Establishment and Certification of Performance Goals. The Committee shall establish, prior to award, Performance Goals with respect to each Award intended to constitute a Performance Award. Except as may otherwise be provided in Articles 6 and 7 hereof, as applicable, no Option that is intended to constitute a Performance Award may be exercised until the Performance Goal or Goals applicable thereto is or are satisfied, nor shall any Restricted Stock Unit Award that is intended to constitute a Performance Award be released to a Participant until the Performance Goal or Goals applicable thereto is or are satisfied.

3.5 No Waiver of Performance Goals. The Committee or the Board shall not waive any Performance Goals with respect to any Award hereunder.

3.6 Performance Awards Not Mandatory. Nothing herein shall be construed as requiring that any Award be made a Performance Award.

ARTICLE 4. COMMON STOCK SUBJECT TO THE PLAN

4.1 Common Stock Authorized.

(a) The total aggregate number of shares of Common Stock that Awards may be made under the Plan shall not exceed 762,163 shares. The limitation established by the preceding sentence shall be subject to adjustment as provided in Article 11 and Section 4.1(f).

(b) The maximum aggregate number of shares of Common Stock that may be issued under the Plan pursuant to the vesting of Awards of Restricted Stock or Restricted Stock Units shall not exceed 217,761 shares. The limitation established by the preceding sentence shall be subject to adjustment as provided in Article 11 and Section 4.1(f).

(c) The maximum aggregate number of shares of Common Stock that may be awarded under the Plan as Options shall not exceed 544,402. The limitation established by the preceding sentence shall be subject to adjustment as provided in Article 11 and Section 4.1(f).

(d) [Reserved.]

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(e) If any Option is exercised by tendering Common Stock, either actually or by attestation, to the Corporation as full or partial payment in connection with the exercise of such Option under the Plan, or if the tax withholding requirements are satisfied through such tender, only the number of shares of Common Stock issued net of the Common Stock tendered shall be deemed delivered for purposes of determining the maximum number of shares available for Awards under the Plan.

(f) The number of shares of Common Stock for which Awards may be made under the Plan shall automatically increase on the first trading day of January of each calendar year during the term of the Plan, beginning with calendar year 2010, by an amount equal to one percent of the shares of Common Stock outstanding on the last trading day in December of the immediately preceding calendar year. Awards from shares of Common Stock available under the Plan as a result of the operation of this Section 4.1(f) may be awarded as either Nonqualified Stock Options, Restricted Stock, or Restricted Stock Units (but not as Incentive Stock Options), subject to the limitations of Sections 4.1(b), (c), and (d).

4.2 Shares Available. The Common Stock to be issued under the Plan shall be the Corporation’s Common Stock, which shall be made available at the discretion of the Board, either from authorized but unissued Common Stock, treasury shares, or shares acquired by the Corporation, including shares purchased on the open market. In the event that any outstanding Award under the Plan for any reason expires, terminates, or is forfeited, the shares of Common Stock allocable to such expiration, termination, or forfeiture may thereafter again be made subject to an Award under the Plan.

ARTICLE 5. ELIGIBILITY

5.1 Participation. Awards shall be made by the Committee only to persons who are Employees or Non-Employee Directors.

5.2 Incentive Stock Option Eligibility. Incentive Stock Option Awards may only be made to Employees of the Corporation. Notwithstanding any other provision of the Plan to the contrary, an individual who owns more than ten percent of the total combined voting power of all classes of outstanding stock of the Corporation shall not be eligible for the award of an Incentive Stock Option, unless the special requirements set forth in Sections 6.1 and 7.1 are satisfied. For purposes of this section, in determining stock ownership, an individual shall be considered as owning the stock owned, directly or indirectly, by or for his brothers and sisters (whether by the whole or half blood), spouse, ancestors, and lineal descendants. Stock owned, directly or indirectly, by or for a corporation, partnership, estate, or trust shall be considered as being owned proportionately by or for its shareholders, partners, or beneficiaries. “Outstanding stock” shall include all stock actually issued and outstanding immediately before the award of the Option. “Outstanding stock” shall not include shares authorized for issue under outstanding Options held by the Optionee or by any other person.

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ARTICLE 6. STOCK OPTIONS IN GENERAL

6.1 Exercise Price. The exercise price of an Option to purchase a share of Common Stock shall be, in the case of an Incentive Stock Option, not less than 100% of the fair market value of a share of Common Stock on the date the Option is awarded, except that the exercise price shall be not less than 110% of such fair market value in the case of an Incentive Stock Option awarded to any individual described in the second sentence of Section 5.2. The exercise price of an Option to purchase a share of Common Stock shall be, in the case of a Nonqualified Stock Option, not less than 100% of the fair market value of a share of Common Stock on the date the Option is awarded. The exercise price shall be subject to adjustment pursuant to the limited circumstances set forth in Article 11.

6.2 Limitation on Incentive Stock Options. The aggregate fair market value (determined as of the date an Option is awarded) of the Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any individual in any calendar year (under the Plan and all other plans maintained by the Corporation and Subsidiaries) shall not exceed $100,000.

6.3 Determination of Fair Market Value.

(a) If the Common Stock is not listed on an established stock exchange or exchanges but is listed on Nasdaq, the fair market value per share shall be the closing sale price for the Common Stock on the relevant day. If no sale of Common Stock has occurred on that day, the fair market value shall be determined by reference to such price for the next preceding day on which a sale occurred.

(b) If the Common Stock is not listed on an established stock exchange or on Nasdaq, fair market value per share shall be the mean between the closing dealer “bid” and “asked” prices for the Common Stock for the day an Option is awarded, and if no “bid” and “asked” prices are quoted for the day an Option is awarded, the fair market value shall be determined by reference to such prices on the next preceding day on which such prices were quoted.

(c) If the Common Stock is listed on an established stock exchange or exchanges, the fair market value shall be deemed to be the closing price of Common Stock on such stock exchange or exchanges on the day an Option is awarded. If no sale of Common Stock has been made on any stock exchange on that day, the fair market value shall be determined by reference to such price for the next preceding day on which a sale occurred.

(d) In the event that the Common Stock is not traded on an established stock exchange or on Nasdaq, and no closing dealer “bid” and “asked” prices are available on the day an Option is awarded, then fair market value will be the price established by the Committee in good faith through the reasonable application of a reasonable valuation method and as required by Code Section 409A.

In connection with determining the fair market value of a share of Common Stock on any relevant day, the Committee may use any source deemed reliable; and its determination shall be final and binding on all affected persons, absent clear error.

6.4 Limitation on Option Awards. Stock Option Awards under this Plan (and any other plan of the Corporation or a Subsidiary providing for stock option awards) to any individual shall not exceed, in the aggregate, Options to acquire 100,000 shares of Common Stock during any period of 12 consecutive months. Such limitation shall be subject to adjustment in the manner described in Article 11.

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6.5 Transferability of Options.

(a) Except as provided in Subsection (b), an Option awarded hereunder shall not be transferable other than by will or the laws of descent and distribution, and such Option shall be exercisable, during the Optionee’s lifetime, only by him or her.

(b) An Optionee may, with the prior approval of the Committee, transfer a Nonqualified Stock Option for no consideration to or for the benefit of one or more members of the Optionee’s “immediate family” (including a trust, partnership, or limited liability company for the benefit of one or more of such members), subject to such limits as the Committee may impose, and the transferee shall remain subject to all terms and conditions applicable to the Option prior to its transfer. The term “immediate family” shall mean an Optionee’s spouse, parents, children, stepchildren, adoptive relationships, sisters, brothers, and grandchildren (and, for this purpose, shall also include the Optionee).

ARTICLE 7. TERM, VESTING AND EXERCISE OF OPTIONS

7.1 Term and Vesting. Each Option awarded under the Plan shall terminate on the date determined by the Committee, and specified in the Agreement; provided, however, that (i) each intended Incentive Stock Option awarded to an individual described in the second sentence of Section 5.2 shall terminate not later than five years after the date of the Award, (ii) each other intended Incentive Stock Option shall terminate not later than ten years after the date of the Award, and (iii) each Option awarded under the Plan which is intended to be a Nonqualified Stock Option shall terminate not later than ten years and one month after the date of the Award. Each Option awarded under the Plan shall be subject to such terms and conditions as may be provided by the Committee and set forth in the Agreement issued to a Optionee to evidence such Option; provided, however, that, unless otherwise provided by the Committee and set forth in an applicable Agreement, each Option shall be fully exercisable (i.e., become 100% vested) after the earlier of the date on which, (i) a Change in Control occurs or (ii) the Optionee terminates employment or service by reason of death or Disability). Except as provided in Article 8, an Option may be exercised only during the continuance of the Optionee’s employment or service with the Corporation or a Subsidiary.

7.2 Exercise.

(a) A person electing to exercise an Option shall give notice to the Corporation of such election and of the number of shares he or she has elected to purchase and shall at the time of exercise tender the full exercise price of the shares he or she has elected to purchase. The exercise notice shall be delivered to the Corporation in person, by certified mail, or by such other method (including electronic transmission) and in such form as determined by the Committee. The exercise price shall be paid in full, in cash, upon the exercise of the Option; provided, however, that in lieu of cash, with the approval of the Committee at or prior to exercise, an Optionee may exercise an Option by tendering to the Corporation shares of Common Stock owned by him or her and having a fair market value equal to the cash exercise price applicable to the Option (with the fair market value of such stock to be determined in the manner provided in Section 6.3) or by delivering such combination of cash and such shares as the Committee in its sole discretion may approve; further provided, however, that no such manner of exercise shall be

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permitted if such exercise would violate Section 402 of the Sarbanes-Oxley Act of 2002. Notwithstanding the foregoing, Common Stock acquired pursuant to the exercise of an Incentive Stock Option may not be tendered as payment unless the holding period requirements of Code Section 422(a)(1) have been satisfied, and Common Stock not acquired pursuant to the exercise of an Incentive Stock Option may not be tendered as payment unless it has been held, beneficially and of record, for at least six months (or such longer time as may be required by applicable securities law or accounting principles to avoid adverse consequences to the Corporation or a Participant).

(b) At the request of the Participant and to the extent permitted by applicable law, the Committee may, in its sole discretion, selectively approve an arrangement whereby the Participant irrevocably authorizes a third party to sell shares of Common Stock (or a sufficient portion of the shares) acquired upon the exercise of an Option and to remit to the Corporation a sufficient portion of the sales proceeds to pay the entire exercise price and any tax withholding required as a result of such exercise.

(c) At the request of the Participant and to the extent permitted by applicable law, the Committee may, in its sole discretion, selectively approve a “net exercise” arrangement whereby the Corporation will reduce the number of shares of Common Stock issued upon exercise of a Nonqualified Stock Option by the largest whole number of shares of Common Stock with a fair market value that does not exceed the exercise price of the Option; provided, however, that the Optionee provide cash to the Corporation to the extent of any remaining balance of the exercise price. Shares of Common Stock will no longer be subject to such Option and such Option will no longer be exercisable thereafter to the extent of the number of shares used to pay the exercise price pursuant to the net exercise, the number of shares delivered to the Optionee as a result of such net exercise and the number of shares, if any withheld to satisfy any tax withholding obligations.

(d) A person holding more than one Option at any relevant time may, in accordance with the provisions of the Plan, elect to exercise such Options in any order.

ARTICLE 8. EXERCISE OF OPTIONS FOLLOWING TERMINATION
OF EMPLOYMENT OR SERVICE

8.1 Other Termination by Corporation or Subsidiary; Change in Control. In the event of an Optionee’s termination of employment or service (i) by the Corporation or a Subsidiary other than Termination for Cause or (ii) due to a Change in Control, such Optionee’s Option shall lapse at the earlier of the expiration of the term of such Option or:

(a) in the case of an Incentive Stock Option, three months from the date of such termination of employment; and

(b) in the case of a Nonqualified Stock Option, 12 months from the date of such termination of employment or service.

8.2 Death or Total Disability. In the event of an Optionee’s termination of employment or service by reason of death or Disability, such Optionee’s Option shall lapse at the earlier of the expiration of the term of such Option or:

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(a) in the case of an Incentive Stock Option, one year from the date of such termination of employment; and

(b) in the case of a Nonqualified Stock Option, 12 months from the date of such termination of employment or service.

8.3 Termination or Dismissal For Cause; Other Termination by Optionee. In the event of an Optionee’s Termination or Dismissal For Cause, or in the event of termination of employment at the election of an Optionee, such Optionee’s Option shall lapse upon such termination.

8.4 Special Termination Provisions for Options.

(a) In the event that an Optionee’s employment or service is terminated and the Committee deems it equitable to do so, the Committee may, in its discretion and subject to the approval of a majority of the disinterested members of the Board, waive any continuous service requirement for vesting (but not any Performance Goal or Goals) specified in an applicable Agreement pursuant to Section 7.1 and permit exercise of an Option held by such Optionee prior to the satisfaction of such continuous service requirement. Any such waiver may be made with retroactive effect, provided it is made within 60 days following the Optionee’s termination of employment or service.

(b) In the event the Committee waives the continuous service requirement with respect to an Option as set forth in Section 8.4(a) above and the circumstance of an Optionee’s termination of employment or service is described in Section 8.1, the affected Option will lapse as otherwise provided in the relevant section.

(c) In the event the Committee waives the continuous service requirement with respect to an Option as set forth in Section 8.4(a) above, such Option shall lapse at the earlier of the expiration of the term of such Option or:

(i) in the case of an Incentive Stock Option, three months from the date of termination of employment; and

(ii) in the case of a Nonqualified Stock Option, 12 months from the date of termination of employment or service.

ARTICLE 9. RESTRICTED STOCK

9.1 In General. Each Restricted Stock Award shall be subject to such terms and conditions as may be specified in the Agreement issued to a Participant to evidence such Award. Subject to Section 3.6, a Restricted Stock Award shall be subject to a vesting schedule or Performance Goals, or both.

9.2 Vesting. Each Restricted Stock Award shall vest under such terms and conditions as may be provided by the Committee and set forth in an applicable Agreement; provided, however, that, unless otherwise provided by the Committee and set forth in an applicable Agreement, each Restricted Stock Award shall become fully vested upon the earlier of the date on which: (i) a Change in Control occurs; or (ii) the Participant terminates employment or service by reason of death or Disability.

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9.3 Waiver of Vesting Period for Certain Restricted Stock Awards. In the event that a Participant’s employment or service is terminated and the Committee deems it equitable to do so, the Committee may, in its discretion and subject to the approval of a majority of the disinterested members of the Board, waive any minimum vesting or holding period (but not any Performance Goal or Goals) or forfeiture provision with respect to a Restricted Stock Award held by such Participant. Any such waiver may be made with retroactive effect, provided it is made within 60 days following such Participant’s termination of employment or service.

9.4 Issuance and Retention of Share Certificates By Corporation. One or more share certificates shall be issued upon the award of Restricted Stock; but until such time as the Restricted Stock shall vest or otherwise become distributable by reason of satisfaction of one or more Performance Goals, the Corporation shall retain such share certificates.

9.5 Stock Powers. At the time of the award of Restricted Stock, the Participant to whom the award is made shall deliver such stock powers, endorsed in blank, as may be requested by the Corporation.

9.6 Release of Shares. Within 30 days following the date on which a Participant becomes entitled under an Agreement to receive shares of previously Restricted Stock, the Corporation shall deliver to him or her a certificate evidencing the ownership of such shares.

9.7 Forfeiture of Restricted Stock Awards. In the event of the forfeiture of a Restricted Stock Award, by reason of a Participant’s termination of employment or termination of service (including termination of service as a director emeritus) prior to vesting, the failure to achieve a Performance Goal or otherwise, the Corporation shall take such steps as may be necessary to cancel the affected shares and return the same to its treasury.

9.8 Assignment, Transfer, Etc. of Restricted Stock Rights. The potential rights of a Participant to shares of Restricted Stock may not be assigned, transferred, sold, pledged, hypothecated, or otherwise encumbered or disposed of until such time as the Participant receives unrestricted certificates for such shares.

9.9 Shareholder Rights. Unless otherwise provided by the Committee and set forth in an applicable Agreement, Participants who have been awarded shares of Restricted Stock shall not have voting or dividend rights until such time as the Participant receives unrestricted certificates for such shares.

9.10 Additional Holding Periods. Nothing in this Article 9 shall preclude the Committee from providing additional (a) restrictions on the transfer or assignment of Common Stock acquired by reason of the vesting of a Restricted Stock Award or (b) forfeiture provisions with respect to Common Stock acquired by reason of the vesting of a Restricted Stock Award.

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ARTICLE 10. RESTRICTED STOCK UNITS

10.1 In General. Each Restricted Stock Unit Award shall be subject to such terms and conditions as may be provided by the Committee and set forth in the Agreement issued to a Participant to evidence such Award. Subject to Section 3.6, a Restricted Stock Unit Award shall be subject to a vesting schedule or Performance Goals, or both.

10.2 Vesting. Each Restricted Stock Unit Award shall vest under such terms and conditions as may be provided by the Committee and set forth in an applicable Agreement; provided, however, that, unless otherwise provided by the Committee and set forth in an applicable Agreement, each Restricted Stock Unit Award shall become fully vested upon the earlier of the date on which: (i) a Change in Control occurs; or (ii) the Participant terminates employment or service by reason of death or Disability.

10.3 Waiver of Vesting Period for Certain Restricted Stock Unit Awards. In the event that a Participant’s employment or service is terminated and the Committee deems it equitable to do so, the Committee may, in its discretion and subject to the approval of a majority of the disinterested members of the Board, waive any minimum vesting or holding period (but not any Performance Goal or Goals) or forfeiture provision specified in the applicable Agreement with respect to a Restricted Stock Unit Award held by such Participant. Any such waiver may be made with retroactive effect, provided it is made within 60 days following such Participant’s termination of employment or service.

10.4 Release of Shares. Within 30 days following the date on which a Participant becomes entitled under an Agreement to receive shares of Common Stock pursuant to the vesting of a Restricted Stock Unit Award, the Corporation shall deliver to him or her a certificate evidencing the ownership of such shares of Common Stock.

10.5 Assignment, Transfer, Etc. of Restricted Stock Unit Rights. The potential rights of a Participant to shares of Common Stock or cash pursuant to a Restricted Stock Unit Award may not be assigned, transferred, sold, pledged, hypothecated, or otherwise encumbered or disposed of until such time as until such time as the Participant receives, with respect to such Award, cash or an unrestricted certificate for such Common Stock, as applicable.

10.6 Shareholder Rights. A Participant who receives a Restricted Stock Unit Award that is paid in shares of Common Stock shall not have voting or, unless otherwise provided by the Committee and set forth in an applicable Agreement, dividend rights until such time as the Participant receives an unrestricted certificate for such shares.

10.7 Additional Holding Periods. Nothing in this Article 10 shall preclude the Committee from providing additional (a) restrictions on the transfer or assignment of Common Stock acquired by reason of the vesting of a Restricted Stock Unit Award or (b) forfeiture provisions with respect to Common Stock acquired by reason of the vesting of a Restricted Stock Unit Award.

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ARTICLE 11. ADJUSTMENT PROVISIONS

11.1 Share Adjustments.

(a) In the event that the shares of Common Stock of the Corporation, as presently constituted, shall be changed into or exchanged for a different number or kind of shares of stock or other securities of the Corporation, or if the number of such shares of Common Stock shall be changed through the payment of a stock dividend, stock split or reverse stock split, then (i) the shares of Common Stock authorized hereunder to be made the subject of Awards, (ii) the shares of Common Stock then subject to outstanding Awards and the exercise price thereof (where relevant), (iii) the maximum number of Awards that may be made within a 12-month period and (iv) the nature and terms of the shares of stock or securities subject to Awards hereunder shall be increased, decreased or otherwise changed to such extent and in such manner as may be necessary or appropriate to reflect any of the foregoing events, provided that any such adjustment shall be made in a manner to avoid adverse tax consequences to any Participant under Code Section 409A.

(b) An Award pursuant to the Plan shall not affect in any way the right or power of the Corporation to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, to merge, to consolidate, to dissolve, to liquidate, or to sell or transfer all or any part of its business or assets.

11.2 Corporate Changes. A liquidation or dissolution of the Corporation, a merger or consolidation in which the Corporation is not the surviving Corporation or a sale of all or substantially all of the Corporation’s assets, shall cause each outstanding Award to terminate, except to the extent that another corporation may and does, in the transaction, assume, and continue the Award or substitute its own awards.

11.3 Fractional Shares. Fractional shares resulting from any adjustment in Awards pursuant to this article may be settled as the Committee shall determine.

11.4 Binding Determination. To the extent that the foregoing adjustments relate to stock or securities of the Corporation, such adjustments shall be made by a majority of the disinterested members of the Board, whose determination in that respect shall be final, binding, and conclusive. Notice of any adjustment shall be given by the Corporation to each holder of an Award which shall have been so adjusted.

ARTICLE 12. GENERAL PROVISIONS

12.1 Effective Date. The Plan shall become effective upon the adoption of the Plan by the Board, provided that any Award made hereunder shall be subject to the approval of the Plan by the shareholders of the Corporation within 12 months of adoption of the Plan by the Board.

12.2 Termination of the Plan. Unless previously terminated by the Board, the Plan shall terminate on, and no Award shall be made after, the day immediately preceding the tenth anniversary of its adoption by the Board.

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12.3 Limitation on Termination, Amendment, or Modification.

(a) The Board may at any time terminate, amend, modify or suspend the Plan, provided that, without the approval of the shareholders of the Corporation, no amendment or modification shall be made solely by the Board which:

(i) increases the maximum number of shares of Common Stock subject to Awards under the Plan (except as provided in Section 11.1);

(ii) changes the class of eligible Participants; or

(iii) otherwise requires the approval of shareholders under applicable state law or under applicable federal law to avoid potential liability or adverse consequences to the Corporation or a Participant.

(b) No amendment, modification, suspension, or termination of the Plan shall in any manner adversely affect any Award theretofore made under the Plan without the consent of the Participant. Notwithstanding the foregoing, the Committee may, in its sole and absolute discretion and without the consent of such Participant, amend, modify, suspend, or terminate the Plan or any Agreement hereunder, to take effect retroactively or otherwise, as the Committee deems necessary or advisable for the purpose of conforming the Plan or such Agreement to any present or future law, regulation, or rule applicable to the Plan, including, but not limited to, Code Section 409A.

12.4 No Right to an Award or Continued Employment or Service. Nothing contained in this Plan or otherwise shall be construed to (a) require that an Award be made to an individual who qualifies as an Employee or Non-Employee Director, or (b) confer upon a Participant any right to continue in the employ or service of the Corporation or any Subsidiary or limit in any respect the right of the Corporation or of any Subsidiary to terminate the Participant’s employment or service at any time and for any reason.

12.5 No Obligation. No exercise of discretion under this Plan with respect to an event or person shall create an obligation to exercise such discretion in any similar or same circumstance, except as otherwise provided or required by law.

12.6 Withholding Taxes.

(a) Subject to the provisions of Subsection (b), the Corporation will require, where sufficient funds are not otherwise available, that a Participant who is an Employee pay or reimburse to it any withholding taxes when withholding is required by law.

(b) With the permission of the Committee, a Participant who is an Employee may satisfy the withholding obligation described in Subsection (a), in whole or in part, by electing to have the Corporation withhold shares of Common Stock (otherwise issuable to him or her) having a fair market value equal to the amount required to be withheld. An election by a Participant who is an Employee to have shares withheld for this purpose shall be subject to such conditions as may then be imposed thereon by any applicable securities law.

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12.7 Listing and Registration of Shares.

(a) No Option awarded pursuant to the Plan shall be exercisable in whole or in part, and no share certificate with respect to any Award shall be delivered, if at any relevant time the Committee determines in its discretion that the listing, registration, or qualification of the shares of Common Stock subject to an Award on any securities exchange or under any applicable law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, such Award, until such listing, registration, qualification, consent, or approval shall have been effected or obtained free of any conditions not acceptable to the Committee.

(b) If a registration statement under the Securities Act with respect to the shares issuable under the Plan is not in effect at any relevant time, as a condition of the issuance of the shares, a Participant (or any person claiming through a Participant) shall give the Committee a written or electronic statement, satisfactory in form and substance to the Committee, that he or she is acquiring the shares for his or her own account for investment and not with a view to their distribution. The Corporation may place upon any stock certificate for shares issued under the Plan the following legend or such other legend as the Committee may prescribe to prevent disposition of the shares in violation of the Securities Act or other applicable law:

‘THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (“ACT”) AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THEM UNDER THE ACT OR A WRITTEN OPINION OF COUNSEL FOR THE CORPORATION THAT REGISTRATION IS NOT REQUIRED.’

12.8 Disinterested Director. For purposes of this Plan, a director shall be deemed “disinterested” if such person could qualify as a member of the Committee under Section 3.1.

12.9 Gender; Number. Words of one gender, wherever used herein, shall be construed to include each other gender, as the context requires. Words used herein in the singular form shall include the plural form, as the context requires, and vice versa.

12.10 Applicable Law. Except to the extent preempted by federal law, this Plan document, and the Agreements issued pursuant hereto, shall be construed, administered, and enforced in accordance with the domestic internal law of the Commonwealth of Pennsylvania.

12.11 Headings. The headings of the several articles and sections of this Plan document have been inserted for convenience of reference only and shall not be used in the construction of the same.

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EX-10.2

Exhibit 10.2

PENN MILLERS HOLDING CORPORATION

OPEN MARKET SHARE PURCHASE INCENTIVE PLAN

ARTICLE 1

INTRODUCTION

Section 1.1 Purpose. The purpose of the Penn Millers Holding Corporation Open Market Share Purchase Incentive Plan (the “Plan”) is to attract, retain and motivate certain key employees of the Penn Millers Holding Corporation (the “Company”) and its subsidiaries, to focus the efforts of employees on continued improvement in the profitability of the Company, and to promote the success and enhance the value of the Company by requiring employees to increase their stock ownership in the Company. The Plan is a cash-based long-term incentive plan that provides award opportunities based on achievement of performance goals over a two-year or three-year period.

Section 1.2 Effective Date. The “Effective Date” of the Plan is [January 1, 2010].

Section 1.3 Administration. The Plan will be administered by the Compensation Committee (the “Committee”). The Committee, from time to time, may adopt any rules and procedures it deems necessary or desirable for the proper and efficient administration of the Plan that are consistent with the terms of the Plan. Any notice or document required to be given or filed with the Committee will be properly given or filed if delivered to or mailed by registered mail, postage paid, to the Corporate Secretary of the Board of Directors, Penn Millers Holding Corporation, 72 North Franklin Street, Wilkes-Barre, Pennsylvania 18773-0016. For purposes of this Plan, the term “Compensation Committee” shall mean the Compensation Committee of the Board of Directors of the Company (the “Board”), which Committee shall be composed of two or more members of the Board, all of whom are (a) “non-employee directors” as such term is defined under the rules and regulations adopted from time to time by the Securities and Exchange Commission pursuant to Section 16(b) of the Securities Exchange Act of 1934, (b) “outside directors” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and (c) independent under any applicable stock listing agreement with, or rules of, any exchange or electronic trading system.

Section 1.4 Supplements. The provisions of the Plan may be modified by supplements to the Plan. The terms and provisions of each supplement are a part of the Plan and supersede any other provisions of the Plan to the extent necessary to eliminate any inconsistencies between the supplement and any other Plan provisions.

ARTICLE 2

ELIGIBILITY AND PARTICIPATION

Section 2.1 Eligibility. Any employee of the Company is eligible to become a “Participant” in the Plan, provided the employee is designated as a Participant by the Committee in writing.

Section 2.2 Participation. A designated employee or otherwise eligible employee will become a Participant as of the later of the Effective Date or the date specified by the Committee. Any Participant may be removed as an active Participant by the Committee effective as of any date.

ARTICLE 3

AWARDS

Section 3.1 Awards. At the beginning of each Performance Period, the Committee may, in its discretion, make an Award to a Participant. Each Award will be equal to a percentage of the Participant’s annual base salary at the beginning of the Performance Period as described in the applicable Award Agreement.

(a) Performance Period. Unless otherwise provided in an Award Agreement, a “Performance Period” is a rolling three-calendar-year period over which an Award can be earned.

(b) Award Agreement. An “Award” to a Participant will be evidenced by a written “Award Agreement” issued by the Company to a Participant that specifies the Performance Goals, the Performance Period, and other necessary terms and conditions applicable to the Award. Such Award Agreement will be substantially in the form of Exhibit A attached hereto.

(c) Award Levels. Participants will receive varying Awards based on their position with the Company.

(d) Discretionary Award. The President and Chief Executive Officer may recommend to the Committee, and the Committee, with respect to the President and Chief Executive Officer, may recommend to the Board, that an additional discretionary Award (the “Discretionary Award”) be made to a Participant to address external market considerations, including for recruiting purposes.

(e) Final Award. The “Final Award” is the amount of an Award as adjusted based upon the level at which the Performance Goals have been achieved, including any Discretionary Award, that is ultimately paid to a Participant under the Plan for a Performance Period. Final Awards may be modified up or down at the Committee’s discretion to account for performance that is not captured in the Performance Goals. The Committee in its discretion may also consider Extraordinary Occurrences when assessing performance results and determining Final Awards. “Extraordinary Occurrences” mean those events that, in the opinion and discretion of the Committee, are outside the significant influence of the Participant or the Company and are likely to have a significant unanticipated effect, whether positive or negative, on the Company’s operating and/or financial results.

Section 3.2 Performance Goals. The vesting of an Award shall be subject to the satisfaction of one or more Performance Goals, which shall be set forth in an Award Agreement. “Performance Goals” are one or more goals established by the Committee that relate to one or more Performance Criteria. “Performance Criteria” means any objective determination based on one or more of the following areas of performance of the Company, a subsidiary, or any division, department, or group of either which includes, but is not limited to: earnings, cash flow, revenue, financial ratios, market performance, shareholder return, operating income or profits (including earnings before interest, taxes, depreciation and amortization), earnings per share, return on assets, return on equity, return on investment, stock price, expense reduction, systems conversion, special projects as determined by the Committee, increases in book value, and acquisition integration initiatives. Performance Goals shall be established by the Committee prior to the issuance of an Award.

(a) Establishment of Performance Goals. Performance Goals for Performance Periods commencing on and after [January 1, 2010], will be communicated to Participants in writing after they have been established by the Committee.

(b) Achievement Level. Three achievement levels will be defined for each Performance Goal.

(i) Threshold. The “Threshold” achievement level is the minimum achievement level accepted for a Performance Goal.

(ii) Target. The “Target” achievement level is the planned achievement level for a Performance Goal.

(iii) Maximum. The “Maximum” achievement level is achievement that substantially exceeds the Target achievement level.

(c) [Interpolation. Achievement levels between Threshold — Target and Target — Maximum will be interpolated in a consistent manner as determined by the Committee.]

Section 3.3 Earning and Vesting of Awards. Generally, an Award will become earned, and therefore vested, if:

(a) the applicable Performance Goals for the Performance Period are satisfied; and

(b) the Participant is actively employed on the last day of the Performance Period.

The value of Awards will be calculated in accordance with the applicable Award Agreement.

Section 3.4 Effect of Termination of Service.

(a) In General. If a Participant incurs a Termination of Service for any reason other than a reason set forth in subsection 3.4(b), then any portion of an Award which has not otherwise become vested as of the date of Termination of Service will be forfeited, effective as of the date of such termination. For purposes of the Plan, “Termination of Service” means the occurrence of any act or event or any failure to act, that actually or effectively causes or results in a Participant ceasing, for whatever reason, to be an employee of the Company, including, but not limited to, death, Disability, retirement, termination by the Company of the Participant’s employment (whether for Cause or otherwise), and voluntary resignation or termination by the Participant of his or her employment for any reason.

(b) Termination Due to Death, Disability, or after Age 65. Notwithstanding the provisions of Section 3.3 and subsection 3.4(a), if a Participant incurs an involuntary Termination of Service due to death or Disability after reaching age 55 or 10 years of service with the Company, any portion of an Award which has not otherwise become vested as of the date of such Termination of Service will be treated as earned and vested, effective as of the date of such Termination of Service, at the Target level and in a pro rata manner equivalent to the period of time during the Performance Periods the Participant participated in the Plan prior to the Termination of Service. Notwithstanding the provisions of Section 3.3 and subsection 3.4(a), if a Participant incurs a Termination of Service for any reason other than by the Company for Cause after reaching age 65, any portion of his or her Award eligible to become earned and vested in the Performance Periods in which the termination occurs will, to the extent the Performance Goals for such Performance Periods are satisfied, be treated as earned and vested, effective as of the last day of such Performance Periods in which the Termination of Service occurs, in a pro rata manner equivalent to the period of time during the Performance Periods the Participant participated in the Plan.

(i) For purposes of the Plan, “Disability” means “permanent and total disability” as defined in Code Section 22(e)(3).

(ii) For purposes of the Plan, “Cause” will mean “cause” as defined under a Participant’s employment agreement with the Company or if there is no such agreement, or if such agreement does not define “cause,” “Cause” will mean:

(A) any government regulatory agency recommends or orders in writing that the Company or a subsidiary terminate the employment of a Participant or relieve him or her of his or her duties;

(B) a Participant is convicted of or enters a plea of guilty or nolo contendere to a felony, a crime of falsehood, or a crime involving fraud or moral turpitude, or the actual incarceration of a Participant for a period of 45 consecutive days;

(C) a determination by the Committee that a Participant willfully failed to follow the lawful instructions of the Board or any officer of the Company or a subsidiary after such Participant’s receipt of written notice of such instructions, other than a failure resulting from the Participant’s Disability;

(D) a determination by the Committee that a Participant willfully or continuously failed to substantially and satisfactorily perform his duties with the Company or a subsidiary (other than any such failure resulting from the Participant’s Disability), within a reasonable period of time after a demand for substantial performance or notice of lack of substantial or satisfactory performance is delivered to the Participant; or

(E) a determination by the Committee that a Participant has failed to conform to an applicable code of conduct of the Company.

For purposes of the Plan, no act, or failure to act, on a Participant’s part shall be deemed “willful” unless done, or omitted to be done, by such Participant not in good faith and without reasonable belief that such Participant’s action or omission was in the best interest of the Company. In addition, term “code of conduct” shall meant the policies and procedures related to employment of employees by the Company or a subsidiary set forth in the Company’s employee handbook or any similar document. The code of conduct may be amended and updated at any time. The term “code of conduct” shall also include any other policy or procedure that may be adopted by the Company or a subsidiary and communicated to employees.

Section 3.5 Effect of Change in Control. Notwithstanding the provisions of Sections 3.3 and 3.4, if a Change in Control of the Company occurs, then any portion of an Award which has not otherwise become vested as of the date of the Change in Control will be treated as earned and vested, effective as of the date of the Change in Control, at the Target level and in a pro rata manner equivalent to the period of time during the Performance Periods the Participant participated in the Plan prior to the Change in Control. “Change in Control” of the Company will mean a “Change in Control” as defined in the Penn Millers Stock Incentive Plan, as may be amended from time to time.

Section 3.6 Payment of Awards; Open Market Purchases.

(a) A Final Award will be paid in a single sum cash payment by March 15th of the year following the year in which the Award becomes vested. Compensation will be paid upon approval by the Committee. However, in the event of a Change in Control, payment of a Final Award will be made in a single sum on the date on which the Change in Control occurs.

(b) Within 30 days following payment of a Final Award to a Participant, the Participant shall purchase on the open market the number of shares of Common Stock equal to the value of such Final Award (less applicable federal, state, and local taxes) divided by the fair market value of a share of Common Stock on the date of such purchase, rounding any fractional shares to the nearest lower whole share. Within 30 days following such purchase of such shares of Common Stock, the Participant will submit proof of such purchase to the satisfaction of the Committee. The Committee will develop appropriate procedures for Participants to demonstrate the purchase of shares of Common Stock on the open market in accordance with this subsection. Notwithstanding the foregoing, in the event a Final Award is paid to a Participant at or following his or her Termination of Service as provided in subsection 3.4(b) or a Change in Control, the provisions of this subsection 3.6(b) shall not apply with respect to such Final Award.

(c) In the event that the Committee determines in its sole discretion that a Participant fails to comply with the requirements of subsection 3.6(b) above, the Committee shall have the right to recover, to the fullest extent permitted by law, the value of the most recent Final Award (less applicable federal, state, and local taxes) paid to the Participant.

(d) Nothing in this Section 3.6 shall preclude the Committee from providing additional restrictions with respect to the transfer of Common Stock purchased by reason of the requirements of subsection 3.6(b).

(e) Shares purchased pursuant to subsection 3.6(b) shall be subject to the Company’s insider trading policy (including but not limited to any blackout period), securities pre-clearance policy, stock ownership guidelines, and any other restrictions that may be imposed from time to time on the Company’s employees by the Company or applicable law.

(f) For purposes of the Plan, “Common Stock” means the common stock of the Company (par value $0.01 per share) as described in the Company’s Articles of Incorporation, or such other stock as shall be substituted therefor.

Section 3.7 Forfeiture and Recovery of Awards.

(a) Notwithstanding anything in this Plan to the contrary, the Company reserves the right to withhold, reduce, eliminate, amend, modify or suspend Awards or the payment of Final Awards based on a Participant’s failure to adhere to the Company’s stock ownership guidelines.

(b) Notwithstanding anything in this Plan to the contrary, if a Participant shall engage in any “harmful activity” (as defined herein) while employed by the Company or a subsidiary or during the six-month period thereafter, then (a) all amounts of cash received by the Participant in connection with the payment of a Final Award shall inure to the benefit of the Company and (b) any and all Awards that have not yet vested and any and all Final Awards that have not yet been paid shall immediately be forfeited. If any cash inures to the benefit of the Company under this subsection, the Participant shall pay cash to the Company within 30 days after receiving written notice from the Company that the Participant has engaged in a harmful activity. The determination by the Committee as to whether a Participant engaged in “harmful activity” while employed by the Company or a subsidiary or during the six-month period thereafter shall be final and conclusive, unless otherwise determined by a majority of disinterested members of the Board.

(c) A “harmful activity” shall have occurred if a Participant shall do any one or more of the following:

(i) Engage in any fraud or intentional misconduct that is a significant contributing factor to the Company having to restate all or a portion of its financial statement(s).

(ii) Engage in activities that would constitute grounds for the Company or a subsidiary to terminate the Participant’s employment by reason of a Termination or Dismissal for Cause (as defined in the Company’s Stock Incentive Plan) or for Cause (as defined in an applicable employment agreement between the Participant and the Company and/or a subsidiary), whether or not the Participant is employed at the time the Participant engages in such activities.

(iii) Solicit or hire any employees of the Company or a subsidiary or induce any of such employees to terminate their employment relationship with the Company or a subsidiary.

(iv) Solicit, induce, or attempt to solicit or induce any customer, supplier, or other entity doing business with the Company of a subsidiary to cease doing business with the Company or a subsidiary or, in the case of a customer, to place agribusiness insurance, as that term is commonly understood in the industry, with any competitor of the Company or a subsidiary. For purposes of the foregoing provision, the term “customer” shall mean a business that the Company or a subsidiary insures on the date that the Participant’s employment terminates (or has insured during the previous twelve months) and a broker who has placed business with the Company or a subsidiary on the date that the Participant’s employment terminates but only with respect to those clients of the broker for which the broker has placed business with the Company or a subsidiary in the 12-month period preceding the date that the Participant’s employment terminates.

(v) Directly or indirectly, own, manage, operate, render services for (as a consultant or an advisor), or accept any employment with (i) Nationwide Agribusiness Insurance Company, Michigan Millers Insurance Company, or Westfield Insurance Company, or any of their successors in interest or (ii) the agribusiness insurance business of any other insurance company whose business has, or could reasonably be expected to have, a material adverse effect on the Company’s or a subsidiary’s business insurance business.

(vi) Directly or indirectly, own, manage, operate, render services for (as a consultant or an adviser), or accept any employment with, within a 50-mile radius of Wilkes-Barre, Pennsylvania, any other property and casualty insurance or reinsurance line of business to the extent that such ownership, management, operating, rendering of services, or employment (and the activities necessarily incident thereto) have, or could reasonably be expected to have, a material adverse effect on the Company’s or a subsidiary’s business insurance business.

(vii) For any reason, in any fashion, form or manner, either directly or indirectly, divulge, disclose or communicate to any person, firm, corporation, or other business entity, in any manner whatsoever, any confidential information or trade secrets concerning the business of the Company or a subsidiary, including, without limiting the generality of the foregoing, any customer lists or other customer identifying information, the techniques, methods or systems of the Company’s or a subsidiary’s operations or management, any information regarding their respective financial matters, or any other material information concerning the business of the Company or a subsidiary, their manner of operation, plan, or other material data. The provisions of this subsection shall not apply to (i) information that is public knowledge other than as result of Participant’s authorized disclosure; (ii) information disseminated by the Company or a subsidiary to third parties in the ordinary course of business; (iii) information lawfully received by the Participant from a third party who, based upon inquiry by the Participant, is not bound by a confidential relationship to the Company or a subsidiary; or (iv) information disclosed under a requirement of law or as directed by applicable legal authority having jurisdiction over the Participant.

ARTICLE 4

ADMINISTRATION

Section 4.1 Appointment of the Committee. The Committee, or a duly authorized officer or officers of the Company empowered by the Committee to act on its behalf under sub-section 4.2(d), will be responsible for administering the Plan, will be charged with the full power and the responsibility for administering the Plan in all its details, and will be vested with full authority to make such rules and regulations as it deems necessary or desirable to administer the Plan and to interpret the provisions of the Plan, unless otherwise determined by a majority of the disinterested members of the Board.

Section 4.2 Powers and Responsibilities of the Committee. Subject to the terms, provisions and conditions of the Plan and subject to review and approval by a majority of the disinterested members of the Board, the Committee will have all powers necessary to administer the Plan, including, but not limited to, the power to construe and interpret the Plan document, to decide all questions relating to an individual’s eligibility to participate in the Plan, to determine the amount of any Award, to determine the date or dates when Awards will be made, determine the Performance Criteria and establish Performance Goals with respect thereto, to be applied to an Award, to prescribe the form, which shall be consistent with the Plan, of the Award Agreement evidencing any Awards made under the Plan, to determine the amount, manner and timing of any distribution of benefits under the Plan, to resolve any claim for benefits in accordance with Article 5, and to appoint or employ advisors, including legal counsel, to render advice with respect to any of the Committee’s responsibilities under the Plan. Any construction, interpretation, or application of the Plan by the Committee will be final, conclusive and binding. Any determination, decision, or action of the Committee in connection with the construction, interpretation, administration, or application of the Plan shall be final, conclusive, and binding upon all Participants and any person claiming under or through a Participant, unless otherwise determined by a majority of the disinterested members of the Board.

(a) Records and Reports. The Committee will be responsible for maintaining sufficient records to determine each Participant’s eligibility to participate in the Plan.

(b) Rules and Decisions. The Committee may adopt such rules as it deems necessary, desirable, or appropriate in the administration of the Plan. All rules and decisions of the Committee will be applied uniformly and consistently to all Participants in similar circumstances. When making a determination or calculation, the Committee will be entitled to rely upon information furnished by a Participant, the Company, or the legal counsel of the Company.

(c) Application for Benefits. The Committee may require a Participant to complete and file with it an application for a benefit, and to furnish all pertinent information requested by it. The Committee may rely upon all such information so furnished to it, including the Participant’s current mailing address.

(d) Delegation. The Committee may authorize one or more officers of the Company to perform administrative responsibilities on its behalf under the Plan. Any such duly authorized officer will have all powers necessary to carry out the administrative duties delegated to such officer by the Committee.

Section 4.3 Income and Employment Tax Withholding. The Company will withhold from payments to Participants of their Awards, to the extent required by law, all applicable federal, state, and local taxes.

Section 4.4 Plan Expenses. The expenses incurred for the administration and maintenance of the Plan will be paid by the Company.

ARTICLE 5

BENEFIT CLAIMS

While a Participant need not file a claim to receive his or her benefit under the Plan, if he or she wishes to do so, a claim must be made in writing and filed with the Committee. If a claim is denied, the Committee will furnish the claimant with written notice of its decision. A claimant may request a full and fair review of the denial of a claim for benefits by filing a written request with the Committee.

ARTICLE 6

AMENDMENT AND TERMINATION OF THE PLAN

Section 6.1 Amendment or Termination of the Plan. The Board may amend or terminate the Plan at any time in its sole discretion. Notwithstanding the foregoing, no amendment, modification, suspension, or termination of the Plan shall in any manner adversely affect any Award theretofore made under the Plan without the consent of the Participant; provided, however, that the Committee may, in its sole and absolute discretion and without the consent of such Participant, amend, modify, suspend, or terminate the Plan or any Award Agreement hereunder, to take effect retroactively or otherwise, as the Committee deems necessary or advisable for the purpose of conforming the Plan or such Award Agreement to any present or future law, regulation, or rule applicable to the Plan.

Section 6.2 Payment of Benefits upon Plan Termination. Absent an amendment to the contrary, in the event of a termination of the Plan, Plan benefits that had vested prior to the termination of the Plan will be paid at the times and in the manner provided for by the Plan at the time of the termination.

ARTICLE 7

MISCELLANEOUS

Section 7.1 Governing Law. Except to the extent superseded by laws of the United States, the laws of the Commonwealth of Pennsylvania will be controlling in all matters relating to the Plan without regard to the choice of law principles therein. The Plan and all Award Agreements are intended to comply, and will be construed by the Company in a manner which they are exempt from or comply with the applicable provisions of Code Section 409A. To the extent there is any conflict between a provision of the Plan or an Award Agreement and a provision of Code Section 409A, the applicable provision of Code Section 409A will control.

Section 7.2 Headings and Gender. The headings and subheadings in the Plan have been inserted for convenience of reference only and will not affect the construction of the Plan provisions. In any necessary construction, the masculine will include the feminine and the singular the plural, and vice versa.

Section 7.3 Spendthrift Clause. No benefit or interest available under the Plan will be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment by creditors of a Participant, either voluntarily or involuntarily.

Section 7.4 Counterparts. This Plan may be executed in any number of counterparts, each one constituting but one and the same instrument, and may be sufficiently evidenced by any one counterpart.

Section 7.5 No Enlargement of Employment Rights. Nothing contained in the Plan may be construed as a contract of employment between the Company and any person, nor may the Plan be deemed to give any person the right to be retained in the employ of the Company or limit the right of the Company to employ or discharge any person with or without cause.

Section 7.6 Limitations on Liability. The individual members of the Board and the Committee will, in accordance with the Company’s by-laws, be indemnified and held harmless by the Company with respect to any alleged breach of responsibilities performed or to be performed hereunder. In addition, notwithstanding any other provision of the Plan, neither the Company nor any individual acting as an employee or agent of the Company will be liable to a Participant for any claim, loss, liability, or expense incurred in connection with the Plan, except when the same has been affirmatively determined by a court order or by the affirmative and binding determination of an arbitrator, to be due to the gross negligence or willful misconduct of that person.

Section 7.7 Incapacity of Participant. If any person entitled to receive a distribution under the Plan is physically or mentally incapable of personally receiving and giving a valid receipt for any payment due (unless a prior claim for the distribution has been made by a duly qualified guardian or other legal representative), then, unless and until a claim for the distribution has been made by a duly appointed guardian or other legal representative of the person, the Committee may provide for the distribution to be made to any other individual or institution then contributing toward or providing for the care and maintenance of the person. Any payment made for the benefit of the person under this Section will be a payment for the account of such person and a complete discharge of any liability of the Company and the Plan.

Section 7.8 Evidence. Evidence required of anyone under the Plan may be by certificate, affidavit, document, or other information which the person relying on the evidence considers pertinent and reliable, and signed, made or presented by the proper party or parties.

Section 7.9 Severability. In the event any provisions of the Plan are held to be illegal or invalid for any reason, the illegality or invalidity will not affect the remaining parts of the Plan, and the Plan will be construed and endorsed as if the illegal or invalid provisions had never been contained in the Plan.

Section 7.10 Information to be Furnished by a Participant. A Participant, or any other person entitled to benefits under the Plan, must furnish the Committee with any and all documents, evidence, data, or other information the Committee considers necessary or desirable for the purpose of administering the Plan. Benefit payments under the Plan are conditioned on a Participant (or other person who is entitled to benefits) furnishing full, true and complete data, evidence, or other information to the Committee, and on the prompt execution of any document reasonably related to the administration of the Plan requested by the Committee.

Section 7.11 Binding on Successors. The Plan will be binding upon and inure to the benefit of the Company and its successors and assigns, and the successors, assigns, designees, and estates of a Participant. The Plan will also be binding upon and inure to the benefit of any successor organization succeeding to substantially all of the assets and business of the Company, but nothing in the Plan will preclude the Company from merging or consolidating into or with, or transferring all or substantially all of its assets to, another organization which assumes the Plan and all obligations of the Company hereunder. The Company agrees that it will make appropriate provision for the preservation of a Participant’s rights under the Plan in any agreement or plan which it may enter into to effect any merger, consolidation, reorganization, or transfer of assets. Upon such a merger, consolidation, reorganization, or transfer of assets and assumption of Plan obligations of the Company, the term “Company” will refer to such other organization and the Plan will continue in full force and effect.

EXHIBIT A

FORM OF AWARD AGREEMENT

THIS AWARD AGREEMENT (the “Award Agreement”) is made and entered into this            day of                     , 2010, but effective as of [January 1, 2010], between Penn Millers Holding Corporation (the “Company”), and                      (the “Participant”).

WITNESSETH:

WHEREAS, the Company has adopted the Penn Millers Holding Corporation Open Market Share Purchase Incentive Plan (the “Plan”) to attract, retain and motivate designated key employees of the Company, to focus the efforts of employees on continued improvement in the profitability of the Company, and to promote the success and enhance the value of the Company by requiring employees to increase their share ownership in the Company; and

WHEREAS, the Participant is eligible to receive an Award;

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Company and the Participant agree as follows:

1. Award. The Company hereby awards to the Participant the Award specified in Schedule A to this Award Agreement which is incorporated herein as if fully set forth, subject to the terms of this Award Agreement and the provisions of the Plan (the “Award”). All provisions of the Plan, including defined terms, are incorporated herein and are expressly made a part of this Award Agreement and related schedules by reference. If any provision of this Award Agreement conflicts with a provision of the Plan, the provision of the Plan will control.

2. Open Market Shares. The Participant hereby agrees that in the event that the Participant receives payment of a Final Award under this Award Agreement and the Plan, the Participant will, within 30 days after the payment of such Final Award, purchase on the open market shares of Common Stock with a fair market value equal to the value of such Final Award (less applicable federal, state, and local taxes).

3. Income and Employment Tax Withholding. The Participant will be responsible for (and, where required by applicable law, the Company will withhold from any amounts payable under the Plan) all required federal, state, and local taxes.

4. Nontransferability. During the Participant’s lifetime, Awards will be payable only to him or her. Neither an Award nor any rights and privileges pertaining thereto, may be transferred, assigned, pledged or hypothecated by the Participant in any way, whether by operation of law or otherwise, and are not subject to execution, attachment or similar process.

5. Condition Precedent. In no event will the Company be obligated to make payment for a vested Award until it is satisfied that all conditions precedent to the payment of the Award, as provided in the Plan and this Award Agreement, have been performed and completed.

6. Acknowledgments. The Participant acknowledges receiving, reading and fully understanding all of the provisions of the Plan and this Award Agreement and that the execution and delivery of this Award Agreement constitutes his or her unequivocal acceptance of all of the terms and conditions thereof.

IN WITNESS WHEREOF, the Company, by its officer thereunder duly authorized, and the Participant, have executed this Award Agreement on the day and year first above written, but effective as of [January 1, 2010].

PENN MILLERS HOLDING CORPORATION
By
	Title
PARTICIPANT
[Name]

EX-10.3

Exhibit 10.3

PENN MILLERS STOCK INCENTIVE PLAN

RESTRICTED STOCK AGREEMENT

BETWEEN

PENN MILLERS HOLDING CORPORATION

AND

(the Employee)

Date of Award:

Number of Shares:

1

RESTRICTED STOCK AGREEMENT

AGREEMENT, made as of the 12th day of May, 2010, between PENN MILLERS HOLDING CORPORATION (the “Corporation”), and                      (the “Employee”).

1. Award.

(a) Grant of Restricted Stock. Pursuant to the provisions of the Penn Millers Stock Incentive Plan (the “Plan”),  _____  shares (the “Restricted Shares”) of the Corporation’s common stock, par value $0.01 per share (“Common Stock”), shall be issued as hereinafter provided in the Employee’s name subject to the restrictions described herein.

(b) Issuance of Restricted Shares. The Restricted Shares shall be issued upon acceptance of this Agreement by the Employee and upon satisfaction of the Vesting Schedule as set forth in Section 2(b) herein.

(c) Plan Incorporated by Reference. The Employee acknowledges receipt of a copy of the Plan and agrees that this award shall be subject to all of the terms and conditions set forth in the Plan, including future amendments thereto, if any, pursuant to the terms thereof, which Plan is incorporated herein by reference as a part of this Agreement. Capitalized terms used in this Agreement without definition shall have the meanings assigned to them in the Plan.

2. Terms and Conditions. The Employee hereby accepts the Restricted Shares when issued and agrees as follows:

(a) Restrictions. The potential rights of the Employee to the Restricted Shares may not be assigned, transferred, sold, pledged, hypothecated, or otherwise encumbered or disposed until such time as the Employee receives unrestricted certificates for such shares. Except as provided in Section 2(c) below, in the event of termination of the Employee’s employment with the Corporation or a Subsidiary for any reason prior to vesting in all or any portion of the Restricted Shares, the Employee shall, for no consideration, forfeit to the Corporation all Restricted Shares to the extent then subject to the Restrictions (as hereinafter defined). The prohibition against transfer and the obligation to forfeit and surrender Restricted Shares to the Corporation upon termination of employment prior to satisfaction of the Vesting Schedule (as set forth in Section 2(b)) are referred to herein as the “Restrictions.”

(b) Vesting Schedule. Except as provided in Section 2(c) below, the Restrictions shall lapse and cease to apply to the Restricted Shares provided that the Employee remains in the continuous employ of the Corporation or a Subsidiary for the following periods after the date hereof (“Vesting Schedule”):

	% of Shares			Number of
Vesting Date	Vesting			Shares Vesting
May 12, 2011		25.0	%	______ shares
May 12, 2012		15.0	%	______ shares
May 12, 2013		15.0	%	______ shares
May 12, 2014		15.0	%	______ shares
May 12, 2015		15.0	%	______ shares
May 12, 2016		15.0	%	______ shares

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(c) Acceleration of Vesting. Notwithstanding Section 2(b) above, with respect to any or all Restricted Shares still subject to Restrictions, (i) upon the occurrence of a Change in Control, the Restrictions shall lapse and cease to apply to such Restricted Shares; (ii) if the Employee’s employment with the Corporation or a Subsidiary terminates due to death or Disability on or after the date that the Employee (A) reaches age 55 or (B) has completed 10 years of service with the Corporation or a Subsidiary (including a predecessor of the Corporation or a Subsidiary), the Restrictions shall lapse and cease to apply to such Restricted Shares on a pro-rata basis based on the number of full months that the Employee worked at the Corporation or a Subsidiary during the period beginning on the day after the most recent vesting date set forth in Section 2(b) and ending on the next scheduled vesting date set forth in Section 2(b); and (iii) if the Employee’s employment with the Corporation or a Subsidiary terminates (other than for death, Disability, or by reason of a Termination or Dismissal for Cause) on or after the Employee reaches age 65, the Restrictions shall lapse and cease to apply to such Restricted Shares on a pro-rata basis based on the number of full months that the Employee worked at the Corporation or a Subsidiary during the period beginning on the day after the most recent vesting date set forth in Section 2(b) and ending on the next scheduled vesting date set forth in Section 2(b).

(d) Certificates. One or more share certificates evidencing the Restricted Shares shall be issued by the Corporation in the name of a nominee of the Corporation. The Employee shall not have voting rights and shall not be entitled to receive dividends unless and until the Restricted Shares vest pursuant to the provisions of this Agreement. The certificate shall bear a legend evidencing the nature of the Restricted Shares, and the Corporation may cause the certificate to be delivered upon issuance to the Secretary of the Corporation or to such other depository as may be designated by the Corporation as a depository for safekeeping until the forfeiture occurs pursuant to this award. At the time of award and upon request of the Corporation, the Employee shall deliver to the Corporation a stock power, endorsed in blank, relating to the Restricted Shares. Within 30 days of the vesting of all or part of the Restricted Shares, and upon satisfaction of all other terms and conditions set forth in this Agreement, the Corporation shall cause a new certificate or certificates to be issued without legend in the name of the Employee for the shares that have vested, together with an amount of cash (without interest) equal to the dividends that have been paid, if any, on such shares with respect to record dates occurring on or after the date of this award. Notwithstanding the foregoing, the Restricted Shares may be evidenced by uncertificated shares or otherwise in book entry form in which case the Employee shall receive a statement of holdings evidencing ownership of the Restricted Shares. In addition, notwithstanding any other provisions of this Agreement, the issuance or delivery of any shares of stock (whether vested or unvested) may be postponed for such period as may be required to comply with applicable requirements of any national securities exchange or any requirements under any law or regulation applicable to the issuance or delivery of such shares. The Corporation shall not be obligated to issue or deliver any shares of Common Stock if the issuance or delivery thereof shall constitute a violation of any provision of any law or of any regulation of any governmental authority or any national securities exchange.

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3. Harmful Activity. Notwithstanding anything in this Agreement to the contrary, if the Employee shall engage in any “harmful activity” (as defined herein) while employed by the Corporation or a Subsidiary or during the six-month period thereafter, then (a) any and all Restricted Shares held by the Employee that have vested shall be surrendered to the Corporation, (b) any and all Restricted Shares that have not yet vested shall immediately be forfeited and canceled, and (c) any profits realized upon the sale of any vested Restricted Shares, on or after one year prior to the termination of employment with the Corporation, shall inure to the Corporation. If any vested Restricted Shares are surrendered or any profits realized upon the sale of any vested Restricted Shares inure to the benefit of the Corporation in accordance with the first sentence of this paragraph, the Employee shall surrender all such forfeited Restricted Shares and pay all such profits to the Corporation within 30 days after receiving written notice from the Corporation that the Employee has engaged in a harmful activity. Consistent with the provisions of the Plan, the determination by the Committee as to whether the Employee engaged in “harmful activity” while employed by the Corporation or a Subsidiary or during the six-month period thereafter shall be final and conclusive, unless otherwise determined by a majority of disinterested members of the Board.

A “harmful activity” shall have occurred if the Employee shall do any one or more of the following:

(a) Engage in any fraud or intentional misconduct that is a significant contributing factor to the Corporation having to restate all or a portion of its financial statement(s).

(b) Engage in activities that would constitute grounds for the Corporation or a Subsidiary to terminate the Employee’s employment by reason of a Termination or Dismissal for Cause (as defined in the Plan) or for Cause (as defined in an applicable employment agreement between the Employee and the Corporation and/or a Subsidiary), whether or not the Employee is employed at the time the Employee engages in such activities.

(c) Solicit or hire any employees of the Corporation or a Subsidiary or induce any of such employees to terminate their employment relationship with the Corporation or a Subsidiary.

(d) Solicit, induce, or attempt to solicit or induce any customer, supplier, or other entity doing business with the Corporation of a Subsidiary to cease doing business with the Corporation or a Subsidiary or, in the case of a customer, to place agribusiness insurance, as that term is commonly understood in the industry, with any competitor of the Corporation or a Subsidiary. For purposes of the foregoing provision, the term “customer” shall mean a business that the Corporation or a Subsidiary insures on the date that the Employee’s employment terminates (or has insured during the previous twelve months) and a broker who has placed business with the Corporation or a Subsidiary on the date that the Employee’s employment terminates but only with respect to those clients of the broker for which the broker has placed business with the Corporation or a Subsidiary in the 12-month period preceding the date that the Employee’s employment terminates.

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(e) Directly or indirectly, own, manage, operate, render services for (as a consultant or an advisor), or accept any employment with (i) Nationwide Agribusiness Insurance Company, Michigan Millers Insurance Company, or Westfield Insurance Company, or any of their successors in interest or (ii) the agribusiness insurance business of any other insurance company whose business has, or could reasonably be expected to have, a material adverse effect on the Corporation’s or a Subsidiary’s business insurance business.

(f) Directly or indirectly, own, manage, operate, render services for (as a consultant or an adviser), or accept any employment with, within a 50-mile radius of Wilkes-Barre, Pennsylvania, any other property and casualty insurance or reinsurance line of business to the extent that such ownership, management, operating, rendering of services, or employment (and the activities necessarily incident thereto) have, or could reasonably be expected to have, a material adverse effect on the Corporation’s or a Subsidiary’s business insurance business.

(g) For any reason, in any fashion, form or manner, either directly or indirectly, divulge, disclose or communicate to any person, firm, corporation, or other business entity, in any manner whatsoever, any confidential information or trade secrets concerning the business of the Corporation or a Subsidiary, including, without limiting the generality of the foregoing, any customer lists or other customer identifying information, the techniques, methods or systems of the Corporation’s or a Subsidiary’s operations or management, any information regarding their respective financial matters, or any other material information concerning the business of the Corporation or a Subsidiary, their manner of operation, plan, or other material data. The provisions of this subsection shall not apply to (i) information that is public knowledge other than as result of Employee’s authorized disclosure; (ii) information disseminated by the Corporation or a Subsidiary to third parties in the ordinary course of business; (iii) information lawfully received by the Employee from a third party who, based upon inquiry by the Employee, is not bound by a confidential relationship to the Corporation or a Subsidiary; or (iv) information disclosed under a requirement of law or as directed by applicable legal authority having jurisdiction over the Employee.

4. Withholding of Tax. To the extent that the receipt of the Restricted Shares or the vesting thereof results in income to the Employee for federal or state income tax purposes, the Employee shall deliver to the Corporation at the time of such receipt or expiration, as the case may be, such amount of money or shares of unrestricted Common Stock as the Corporation may require to meet its withholding obligation under applicable tax laws or regulations, and, if the Employee fails to do so, the Corporation is authorized to withhold from any cash or stock remuneration then or thereafter payable to the Employee any tax required to be withheld by reason of such resulting compensation income.

5. Status of Common Stock. The Employee agrees that the Restricted Shares will not be sold or otherwise disposed of in any manner that would constitute a violation of any applicable federal or state securities laws. The Employee also agrees (a) that the certificates representing the Restricted Shares may bear such legend or legends as the Corporation deems appropriate in order to assure compliance with applicable securities laws; (b) that the Corporation may refuse to register the transfer of the Restricted Shares on the stock transfer records of the Corporation if such proposed transfer would, in the opinion of counsel satisfactory to the Corporation, constitute a violation of any applicable securities law; and (c) that the Corporation may give related instructions to its transfer agent, if any, to stop registration of the transfer of the Restricted Shares.

5

6. Employment Relationship. Nothing contained in this Agreement or otherwise shall be construed to confer upon the Employee any right to continue in the employ of the Corporation or any Subsidiary of the Corporation or limit in any respect the right of the Corporation or of any Subsidiary of the Corporation to terminate the Employee’s employment at any time and for any reason. Any question as to whether and when there has been a termination of such employment, and the cause of such termination, shall be determined by the Corporation and its determination shall be final.

7. Corporation’s Powers. No provision contained in this Agreement shall in any way terminate, modify, or alter, or be construed or interpreted as terminating, modifying, or altering any of the powers, rights or authority vested in the Corporation or, to the extent delegated, in its delegate including, without limitation, the right to make certain determinations and elections with respect to the Restricted Shares.

8. Binding Effect. This Agreement shall be binding upon and inure to the benefit of any successors to the Corporation and all persons lawfully claiming under the Employee.

9. Notices. All notices and other communications provided for herein shall be in writing and shall be delivered by hand or sent by certified or registered mail (or by such other method as the Committee may from time to time deem appropriate), return receipt requested, postage prepaid, and addressed, if to the Corporation, 72 North Franklin Street, P.O. Box P, Wilkes-Barre, PA 18773-0016; Attention:  _____  (or to such different address as the Corporation may designate in writing) or, if to the Employee, at the Employee’s most recent address as shown in the employment or stock records of the Corporation.

10. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original as against any party whose signature appears thereon, and all of which together shall constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all the parties reflected hereon as the signatories. Copies of such signed counterparts may be used in lieu of the originals for any purpose.

11. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the Commonwealth of Pennsylvania.

IN WITNESS WHEREOF, the Corporation has caused this Agreement to be duly executed by an officer thereunto duly authorized, and the Employee has executed this Agreement, all as of the date first above written.

PENN MILLERS HOLDING CORPORATION		EMPLOYEE
By
	Douglas A. Gaudet	(Signature)
	President and Chief Executive Officer

6

EX-10.4

Exhibit 10.4

PENN MILLERS STOCK INCENTIVE PLAN

RESTRICTED STOCK UNIT AGREEMENT

BETWEEN

PENN MILLERS HOLDING CORPORATION

AND

(the Employee)

Date of Award:

Number of Units:

1

RESTRICTED STOCK UNIT AGREEMENT

AGREEMENT, made as of the  _____  day of                     , 2009, between PENN MILLERS HOLDING CORPORATION (the “Corporation”), and                      (the “Employee”).

1. Award.

(a) Grant of Restricted Stock Units. Subject to the provisions of this Agreement and pursuant to the provisions of the Penn Millers Stock Incentive Plan (the “Plan”), the Corporation hereby awards to the Employee the number of Restricted Stock Units set forth in Section 2(a) (the “Award”). The Corporation shall credit to a bookkeeping account (the “Account”) maintained by the Corporation, or a third-party on behalf of the Corporation, for the Employee’s benefit, the Restricted Stock Units, each of which shall be deemed to be the equivalent of one share of the Corporation’s common stock (the “Common Stock”), par value $0.01 per share.

(b) Plan Incorporated by Reference. The Employee acknowledges receipt of a copy of the Plan and agrees that this Award shall be subject to all of the terms and conditions set forth in the Plan, including future amendments thereto, if any, pursuant to the terms thereof, which Plan is incorporated herein by reference as a part of this Agreement. Capitalized terms used in this Agreement without definition shall have the meanings assigned to them in the Plan.

2. Terms and Conditions. The Employee hereby accepts the Restricted Stock Units when issued and agrees as follows:

(a) Stage I Vesting Criteria. Except as provided in Section 2(b), the Employee shall satisfy the Stage I Vesting Criteria with respect to the Restricted Stock Units only if (i) the Employee remains in the continuous employ of the Corporation or a Subsidiary from the date hereof through                      (the “Service Requirement”) and (ii) the Corporation achieves the following Performance Goals:

	Number of
Performance Goal and Level	Units Vesting
___________ (“Maximum Level”)
___________ (“Target Level”)
___________ (“Threshold Level”)

(b) Acceleration of Vesting. Notwithstanding Section 2(a) above, with respect to unvested Restricted Stock Units then held by the Employee, (i) upon the occurrence of a Change in Control, the Employee shall be deemed to have satisfied the Stage I Vesting Criteria at the Target Level; (ii) if the Employee’s employment with the Corporation or a Subsidiary terminates due to death or Disability on or after the date that the Employee (A) reaches age 55 or (B) has completed 10 years of service with the Corporation or a Subsidiary (including a predecessor of the Corporation or a Subsidiary), the Employee shall be deemed to have satisfied the Stage I Vesting Criteria on a pro-rata basis at the Target Level based on the number of full months that

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the Employee worked at the Corporation or a Subsidiary from the date hereof through the date of such termination of employment; and (iii) if the Employee’s employment with the Corporation or a Subsidiary terminates (other than for death, Disability, or by reason of a Termination or Dismissal for Cause) on or after the Employee reaches age 65, the Employee shall be deemed to have satisfied the Service Requirement and the Award shall be payable on a pro-rata basis based on the number of full months that the Employee worked at the Corporation or a Subsidiary from the date hereof through the date of such termination of employment if and to the extent that the Performance Goals are satisfied.

(c) Settlement of Restricted Stock Units. As soon as practicable following the date that the Committee certifies that the Employee has satisfied the Stage I Vesting Criteria with respect to all or a portion of the Restricted Stock Units, the Corporation shall transfer to the Employee one share of Common Stock for each Restricted Stock Unit, if any, that becomes vested with respect to the Stage I Vesting Criteria; provided, however, that, except with respect to Restricted Stock Units that vest through the application of Sections 2(b)(i) or (ii), in the sole discretion of the Corporation, the Committee may settle all or a portion of such vested Restricted Stock Units in cash, based on the fair market value of the shares on the settlement date.

(d) Stage II Vesting Criteria. Except as provided in Section 2(b), shares of Common Stock issued under this Award by reason of the satisfaction of the Stage I Vesting Criteria may not be sold, assigned, transferred, pledged, or otherwise encumbered, whether voluntarily or involuntarily, by operation of law or otherwise, until the earlier of (i) three years from the date the Committee certifies that the Employee has satisfied the Stage I Vesting Criteria or (ii) the date that the Employee reaches age 65. Such period is referred to herein as the “Stage II Vesting Criteria.” In the event that the Employee voluntarily terminates employment or the Corporation or a Subsidiary terminates the Employee’s employment by reason of a Termination or Dismissal for Cause before satisfaction of the Stage II Vesting Criteria, the Employee shall forfeit all such shares of Common Stock. Neither (i) shares of Common Stock sold by the Employee or withheld by the Corporation to cover applicable tax withholdings (as required by the terms of the Plan and Section 5 hereof) nor (ii) shares of Common Stock that the Employee acquires through the application of Section 2(b) shall be subject to the Stage II Vesting Criteria. Any Common Stock issued pursuant to this Award shall be endorsed with such legends as the Committee may determine in order to enforce the provisions of this Section 2(d). The Employee agrees to enter into any such other arrangements, including placing the shares in escrow, as the Committee may determine reasonably necessary to enforce the provisions of this Section 2(d).

3. Harmful Activity. Notwithstanding anything in this Agreement to the contrary, if the Employee shall engage in any “harmful activity” (as defined herein) while employed by the Corporation or a Subsidiary or during the six-month period thereafter, then (a) all amounts of cash or Common Stock received by the Employee in connection with the vesting of this Award shall inure to the benefit of the Corporation and (b) any and all Restricted Stock Units or shares of Common Stock held by the Employee pursuant to this Award that have not yet vested or become unrestricted, as applicable, shall immediately be forfeited. If any cash or Common Stock inures to the benefit of the Corporation under this Section, the Employee shall pay cash or return such shares to the Corporation within 30 days after receiving written notice from the Corporation that the Employee has engaged in a harmful activity. The determination by the Committee as to whether the Employee engaged in “harmful activity” while employed by the Corporation or a Subsidiary or during the six-month period thereafter shall be final and conclusive, unless otherwise determined by a majority of disinterested members of the Board.

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A “harmful activity” shall have occurred if the Employee shall do any one or more of the following:

(a) Engage in any fraud or intentional misconduct that is a significant contributing factor to the Corporation having to restate all or a portion of its financial statement(s).

(b) Engage in activities that would constitute grounds for the Corporation or a Subsidiary to terminate the Employee’s employment by reason of a Termination or Dismissal for Cause (as defined in the Plan) or for Cause (as defined in an applicable employment agreement between the Employee and the Corporation and/or a Subsidiary), whether or not the Employee is employed at the time the Employee engages in such activities.

(c) Solicit or hire any employees of the Corporation or a Subsidiary or induce any of such employees to terminate their employment relationship with the Corporation or a Subsidiary.

(d) Solicit, induce, or attempt to solicit or induce any customer, supplier, or other entity doing business with the Corporation of a Subsidiary to cease doing business with the Corporation or a Subsidiary or, in the case of a customer, to place agribusiness insurance, as that term is commonly understood in the industry, with any competitor of the Corporation or a Subsidiary. For purposes of the foregoing provision, the term “customer” shall mean a business that the Corporation or a Subsidiary insures on the date that the Employee’s employment terminates (or has insured during the previous twelve months) and a broker who has placed business with the Corporation or a Subsidiary on the date that the Employee’s employment terminates but only with respect to those clients of the broker for which the broker has placed business with the Corporation or a Subsidiary in the 12-month period preceding the date that the Employee’s employment terminates.

(e) Directly or indirectly, own, manage, operate, render services for (as a consultant or an advisor), or accept any employment with (i) Nationwide Agribusiness Insurance Company, Michigan Millers Insurance Company, or Westfield Insurance Company, or any of their successors in interest or (ii) the agribusiness insurance business of any other insurance company whose business has, or could reasonably be expected to have, a material adverse effect on the Corporation’s or a Subsidiary’s business insurance business.

(f) Directly or indirectly, own, manage, operate, render services for (as a consultant or an adviser), or accept any employment with, within a 50-mile radius of Wilkes-Barre, Pennsylvania, any other property and casualty insurance or reinsurance line of business to the extent that such ownership, management, operating, rendering of services, or employment (and the activities necessarily incident thereto) have, or could reasonably be expected to have, a material adverse effect on the Corporation’s or a Subsidiary’s business insurance business.

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(g) For any reason, in any fashion, form or manner, either directly or indirectly, divulge, disclose or communicate to any person, firm, corporation, or other business entity, in any manner whatsoever, any confidential information or trade secrets concerning the business of the Corporation or a Subsidiary, including, without limiting the generality of the foregoing, any customer lists or other customer identifying information, the techniques, methods or systems of the Corporation’s or a Subsidiary’s operations or management, any information regarding their respective financial matters, or any other material information concerning the business of the Corporation or a Subsidiary, their manner of operation, plan, or other material data. The provisions of this subsection shall not apply to (i) information that is public knowledge other than as result of Employee’s authorized disclosure; (ii) information disseminated by the Corporation or a Subsidiary to third parties in the ordinary course of business; (iii) information lawfully received by the Employee from a third party who, based upon inquiry by the Employee, is not bound by a confidential relationship to the Corporation or a Subsidiary; or (iv) information disclosed under a requirement of law or as directed by applicable legal authority having jurisdiction over the Employee.

4. Voting Rights and Dividends. Except as provided in Section 11 of the Plan, the Employee shall be entitled to receive dividends and shall have vesting rights with respect to Common Stock received upon the satisfaction of the Stage I Vesting Criteria pursuant to this Award.

5. Withholding of Tax. This Award is subject to the withholding of all applicable taxes. The Corporation may withhold, or permit the Employee to remit to the Corporation, any federal, state, or local taxes applicable to the grant, vesting, or other event giving rise to tax liability with respect to this Award. If the Employee has not remitted the full amount of applicable withholding taxes to the Corporation by the date the Corporation is required to pay such withholding to the appropriate taxing authority (or such earlier date that the Corporation may specify to assist it in timely meeting its withholding obligations), the Corporation shall have the unilateral right to withhold Common Stock relating to this Award in the amount it determines is sufficient to satisfy the minimum tax withholding required by law. State taxes shall be withheld at the appropriate rate set by the state in which the Employee is employed or were last employed by the Corporation. The Employee may elect to surrender previously acquired Common Stock or to have the Corporation withhold Common Stock relating to this Award in an amount sufficient to satisfy all or a portion of the minimum tax withholding required by law.

6. Status of Restricted Stock Units and Common Stock. This Award shall create no fiduciary duty of the Corporation to the Employee, and this Agreement creates only a contractual obligation on the part of the Corporation to deliver shares of the Corporation’s Common Stock (or cash, in the discretion of the Committee), subject to vesting and the other terms and conditions hereof, as provided in the Agreement. The Restricted Stock Units shall not be treated as property or as a trust fund of any kind. No assets have been secured or set aside by the Corporation with respect to this Award and, if any amounts become payable to the Employee pursuant to this Agreement, the Employee’s rights with respect to such amounts shall be no greater than the rights of any general unsecured creditor of the Corporation.

7. Securities Laws. The Employee agrees that the Common Stock acquired pursuant to this Award will not be sold or otherwise disposed of in any manner that would constitute a violation of any applicable federal or state securities laws. The Employee also agrees that, (a) in addition to any legend that the Committee may require under Section 2 herein, the certificate(s)

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representing the Common Stock issued pursuant to this Agreement may bear such legend or legends as the Committee deems appropriate in order to assure compliance with applicable securities laws, (b) the Corporation may refuse to register the transfer of shares of such Common Stock if such proposed transfer would, in the opinion of counsel satisfactory to the Corporation, constitute a violation of any applicable securities law, and (c) that the Corporation may give related instructions to its transfer agent, if any, to stop registration of the transfer of such Common Stock.

8. Employment Relationship. Nothing contained in this Agreement or otherwise shall be construed to confer upon the Employee any right to continue in the employ of the Corporation or any Subsidiary or limit in any respect the right of the Corporation or of any Subsidiary to terminate the Employee’s employment at any time and for any reason. Any question as to whether and when there has been a termination of such employment, and the cause of such termination, shall be determined by the Corporation and its determination shall be final.

9. Tax Treatment. This Award is not intended to provide a deferral of compensation under Code Section 409A, and this Agreement shall be so construed and administered. The Corporation intends to report as includible in the Employee’s gross income for any taxable year an amount equal to the fair market value (determined in accordance with Section 6.3 of the Plan) of the Common Stock covered by the Restricted Stock Units that are no longer subject to a substantial risk of forfeiture. In the event that the Corporation reasonably determines that any compensation or benefits payable under this Agreement may be subject to taxation under Code Section 409A, the Committee may adopt, prospectively or retroactively, such amendments to this Agreement or to take any other actions it determines necessary or appropriate to (a) exempt the compensation and benefits payable under this Agreement from Code Section 409A or (b) comply with the requirements of Code Section 409A. In no event, however, shall this section or any other provisions of this Agreement be construed to require the Corporation to provide any gross-up for the tax consequences of any provisions of, or payments under, this Agreement and the Corporation shall have no responsibility for tax consequences to Employee (or his or her beneficiary) resulting from the terms or operation of this Agreement.

10. Binding Effect. This Agreement shall be binding upon and inure to the benefit of any successors to the Corporation and all persons lawfully claiming under the Employee.

11. Notices. All notices and other communications provided for herein shall be in writing and shall be delivered by hand or sent by certified or registered mail (or by such other method as the Committee may from time to time deem appropriate), return receipt requested, postage prepaid, and addressed, if to the Corporation, 72 North Franklin Street, P.O. Box P, Wilkes-Barre, PA 18773-0016; Attention:                      (or to such different address as the Corporation may designate in writing) or, if to the Employee, at the Employee’s most recent address as shown in the employment or stock records of the Corporation.

12. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original as against any party whose signature appears thereon, and all of which together shall constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all the parties reflected hereon as the signatories. Copies of such signed counterparts may be used in lieu of the originals for any purpose.

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13. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the Commonwealth of Pennsylvania.

IN WITNESS WHEREOF, the Corporation has caused this Agreement to be duly executed by an officer thereunto duly authorized, and the Employee has executed this Agreement, all as of the date first above written.

PENN MILLERS HOLDING CORPORATION		EMPLOYEE
By
	Douglas A. Gaudet President and Chief Executive Officer	(Signature)

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EX-10.5

Exhibit 10.5

PENN MILLERS STOCK INCENTIVE PLAN

STOCK OPTION AGREEMENT FOR

INCENTIVE STOCK OPTION

BETWEEN

PENN MILLERS HOLDING CORPORATION

AND

(the Optionholder)

Date of Award:

Number of Shares:

Exercise Price:

Option Expiration Date:

INCENTIVE STOCK OPTION AGREEMENT

Number of shares subject to option: ______ shares (the “Option”).

This Agreement dated ______ , 2009, between Penn Millers Holding Corporation (the “Corporation”) and __________________ (the “Optionholder”).

WITNESSETH:

1. Award of Option

Pursuant to the provisions of the Penn Millers Stock Incentive Plan (the “Plan”) the Corporation hereby awards to the Optionholder, subject to the terms and conditions of the Plan and subject further to the terms and conditions herein set forth, the right and option to purchase from the Corporation all or any part of an aggregate of ______ shares of common stock (par value $0.01 per share) of the Corporation (“Common Stock”) at the exercise price of $  per share; such option to be exercised as hereinafter provided.

2. Terms and Conditions

It is understood and agreed that the Option evidenced hereby is subject to the following terms and conditions:

(a)	Expiration Date. Subject to the provisions of Paragraph 2(d) hereof, the Option awarded hereby shall expire on ______ [7 years from the date of grant].
(b)	Exercise of Option. Except as may be provided below, no part of this Option may be exercised until the Optionholder has remained in the continuous employ of the Corporation or of a Subsidiary for the following periods after the date hereof:

	% of Shares		Number of
Vesting Date	Vesting		Shares Vesting
		(20.0%) -	______ shares
		(20.0%) -	______ shares
		(20.0%) -	______ shares
		(20.0%) -	______ shares
		(20.0%) -	______ shares

This Option may be exercised in whole at any time, or from time to time in part, to the extent vested, prior to the expiration date specified in Paragraph 2(a) hereof. Any exercise shall be accompanied by a written notice to the Corporation specifying the number of shares as to which the Option is being exercised. Notwithstanding the foregoing:

(1) upon the occurrence of a Change in Control, all unvested Options then held by the Optionholder shall vest and become immediately excisable;

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(2)

if the Optionholder’s employment with the Corporation or a Subsidiary terminates due to death or Disability on or after the date in which the Optionholder (A) reaches age 55 or (B) has completed 10 years of service with the Corporation or a Subsidiary (including a predecessor of the Corporation or a Subsidiary), unvested Options then held by the Optionholder shall vest and become immediately exercisable on a pro-rata basis based on the number of full months that the Optionholder worked at the Corporation or a Subsidiary during the period beginning on the day after the most recent vesting date set forth in Section 2(b) and ending on the next scheduled vesting date set forth in Section 2(b); and

(3)

if the Optionholder’s employment with the Corporation or a Subsidiary terminates (other than for death, Disability, or by reason of a Termination or Dismissal for Cause) on or after the Optionholder reaches age 65, unvested Options then held by the Optionholder shall vest and become immediately exercisable on a pro-rata basis based on the number of full months that the Optionholder worked at the Corporation or a Subsidiary during the period beginning on the day after the most recent vesting date set forth in Section 2(b) and ending on the next scheduled vesting date set forth in Section 2(b).

(c)	Payment of Exercise Price Upon Exercise. At the time of any exercise, the exercise price of the shares as to which this Option may be exercised shall be paid in cash or, subject to the conditions and limitations described in the Plan, by one of the methods of payment set forth in the Plan for the exercise of an incentive stock option.
(d)	Exercise Upon Death, Being Disabled, or Other Termination of Employment.

(1)	In the event of the termination of the Optionholder’s employment as an employee of the Corporation or of a Subsidiary by reason of death or Disability, this Option may be exercised, to the extent that the Optionholder was entitled to do so at the date of termination of employment due to such cause, in whole at any time, or from time to time in part, within one year after the Optionholder’s death or permanent and total disability, but in no event later than the expiration date specified in Paragraph 2(a) hereof.
(2)	If the Corporation or a Subsidiary terminates the employment of the Optionholder (other than if the termination is a Termination or Dismissal for Cause), this Option may be exercised, to the extent that the Optionholder was entitled to do so at the date of termination of employment, in whole at any time, or from time to time in part, within three months after the date of such termination, but in no event later than the expiration date specified in Paragraph 2(a) hereof.
(3)	If the Optionholder’s employment with the Corporation or a Subsidiary is voluntarily terminated by the Optionholder, then the option shall lapse on the date of such termination of employment; provided, however, that if the Optionholder (A) terminates for “Good Reason” (as such term is defined in an employment or similar agreement applicable to the Optionholder) following a Change in Control or (B) terminates on or after reaching age 65, this Option may be exercised, to the

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	extent that the Optionholder was entitled to do so at the date of termination of employment, in whole at any time, or from time to time in part, within three months after the date of such termination, but in no event later than the expiration date specified in Paragraph 2(a) hereof.
(4)	Notwithstanding anything herein to the contrary, if the Optionholder’s employment termination of employment is a Termination or Dismissal for Cause, all rights to exercise this Option shall lapse on the date of such termination of employment.

(e)	Nontransferability. This Option shall not be transferable other than by will or by the laws of descent and distribution. During the lifetime of the Optionholder, this Option shall be exercisable only by the Optionholder.
(f)	Adjustments. In the event that the shares of Common Stock, as presently constituted, shall be changed into or exchanged for a different number or kind of shares of stock or other securities of the Corporation, or if the number of such shares of Common Stock shall be changed through the payment of a stock dividend, stock split, or reverse stock split, then the shares of Common Stock then subject to this Option and the exercise price thereof shall be increased, decreased, or otherwise changed to such extent and in such manner as may be necessary or appropriate to reflect any of the foregoing events. If there shall be any other change in the number or kind of the outstanding shares of the Common Stock, or of any stock or other securities into which such Common Stock shall have been changed, or for which it shall have been exchanged, and if a majority of the disinterested members of the Board shall, in its sole discretion, determine that such change equitably requires an adjustment to the terms of this Option, then such adjustment shall be made in accordance with such determination. Any adjustment so made shall be final and binding upon the Optionholder.
(g)	No Rights as Shareholder. The Optionholder shall have no rights as a shareholder with respect to any shares of Common Stock subject to this Option prior to the date of issuance of a certificate or certificates for such shares.
(h)	No Right To Continued Employment. This Option shall not confer upon the Optionholder any right to continue in the employ of the Corporation or any Subsidiary, nor shall it interfere in any way with the right of the Corporation or any Subsidiary to terminate the Optionholder’s employment at any time and for any reason.
(i)	Compliance with Law and Regulations. This Option and the obligation of the Corporation to sell and deliver shares hereunder shall be subject to all applicable federal and state laws, rules, and regulations and to such approvals by any government or regulatory agency as may be required. The Corporation shall not be required to issue or deliver any certificates for shares of Common Stock prior to (1) the listing of such shares on any stock exchange on which the Common Stock may then be listed and (2) the completion of any registration or qualification of such shares under any federal or state law, or any rule or regulation of any government body which the Corporation shall, in its sole discretion, determine to be necessary or advisable.

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(j) Harmful Activity. Notwithstanding anything in this Agreement to the contrary, if the Optionholder shall engage in any “harmful activity” while employed by the Corporation or a Subsidiary or during the six-month period thereafter, then (i) this Option, to the extent then unexercised and whether vested or unvested, shall immediately be forfeited and canceled and (ii) any Profits realized upon the exercise of this Option shall inure to the Corporation. If any Profits realized upon the exercise of this Option inure to the benefit of the Corporation in accordance with this Section, the Optionholder shall pay all such Profits to the Corporation within 30 days after receiving written notice from the Corporation that the Optionholder has engaged in a harmful activity. Consistent with the provisions of the Plan, the determination by the Committee as to whether the Optionholder engaged in “harmful activity” while employed by the Corporation or a Subsidiary or during the six-month period thereafter shall be final and conclusive, unless otherwise determined by a majority of disinterested members of the Board. For purposes of this Section 2(j), “Profits” shall mean, with respect to this Option, the spread between the fair market value of a share of Common Stock on the date of exercise and the exercise price, multiplied by the number of shares exercised under this Option.

A “harmful activity” shall have occurred if the Optionholder shall do any one or more of the following:

(1) Engage in any fraud or intentional misconduct that is a significant contributing factor to the Corporation having to restate all or a portion of its financial statement(s).

(2) Engage in activities that would constitute grounds for the Corporation or a Subsidiary to terminate the Optionholder’s employment by reason of a Termination or Dismissal for Cause (as defined in the Plan) or for Cause (as defined in an applicable employment agreement between the Optionholder and the Corporation and/or a Subsidiary), whether or not the Optionholder is employed at the time the Optionholder engages in such activities.

(3) Solicit or hire any employees of the Corporation or a Subsidiary or induce any of such employees to terminate their employment relationship with the Corporation or a Subsidiary.

(4) Solicit, induce, or attempt to solicit or induce any customer, supplier, or other entity doing business with the Corporation of a Subsidiary to cease doing business with the Corporation or a Subsidiary or, in the case of a customer, to place agribusiness insurance, as that term is commonly understood in the industry, with any competitor of the Corporation or a Subsidiary. For purposes of the foregoing provision, the term “customer” shall mean a business that the Corporation or a Subsidiary insures on the date that the Optionholder’s employment terminates (or has insured during the previous twelve months) and a broker who has placed business with the Corporation or a Subsidiary on the date that the Optionholder’s employment terminates but only with respect to those clients of the broker for which the broker has placed business with the Corporation or a Subsidiary in the 12-month period preceding the date that the Optionholder’s employment terminates.

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(5) Directly or indirectly, own, manage, operate, render services for (as a consultant or an advisor), or accept any employment with (i) Nationwide Agribusiness Insurance Company, Michigan Millers Insurance Company, or Westfield Insurance Company, or any of their successors in interest or (ii) the agribusiness insurance business of any other insurance company whose business has, or could reasonably be expected to have, a material adverse effect on the Corporation’s or a Subsidiary’s business insurance business.

(6) Directly or indirectly, own, manage, operate, render services for (as a consultant or an adviser), or accept any employment with, within a 50-mile radius of Wilkes-Barre, Pennsylvania, any other property and casualty insurance or reinsurance line of business to the extent that such ownership, management, operating, rendering of services, or employment (and the activities necessarily incident thereto) have, or could reasonably be expected to have, a material adverse effect on the Corporation’s or a Subsidiary’s business insurance business.

(7) For any reason, in any fashion, form or manner, either directly or indirectly, divulge, disclose or communicate to any person, firm, corporation, or other business entity, in any manner whatsoever, any confidential information or trade secrets concerning the business of the Corporation or a Subsidiary, including, without limiting the generality of the foregoing, any customer lists or other customer identifying information, the techniques, methods or systems of the Corporation’s or a Subsidiary’s operations or management, any information regarding their respective financial matters, or any other material information concerning the business of the Corporation or a Subsidiary, their manner of operation, plan, or other material data. The provisions of this subsection shall not apply to (i) information that is public knowledge other than as result of Optionholder’s authorized disclosure; (ii) information disseminated by the Corporation or a Subsidiary to third parties in the ordinary course of business; (iii) information lawfully received by the Optionholder from a third party who, based upon inquiry by the Optionholder, is not bound by a confidential relationship to the Corporation or a Subsidiary; or (iv) information disclosed under a requirement of law or as directed by applicable legal authority having jurisdiction over the Optionholder.

3. Investment Representation

The Corporation may require the Optionholder to furnish to the Corporation, prior to the issuance of any shares upon the exercise of all or any part of this Option, an agreement (in such form as the Corporation may specify) in which the Optionholder represents that the shares acquired upon exercise are being acquired for investment and not with a view to the sale or distribution thereof.

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4. Optionholder Bound by Plan

The Optionholder acknowledges receipt of a copy of the Plan and agrees that this Award shall be subject to all of the terms and conditions set forth in the Plan, including future amendments thereto, if any, pursuant to the terms thereof, which Plan is incorporated herein by reference as a part of this Agreement. Capitalized terms used in this Agreement without definition shall have the meanings assigned to them in the Plan.

5. Withholding of Taxes

The Corporation will require that, as a condition precedent to the exercise of this Option, appropriate arrangements be made for the withholding of any applicable taxes. The obligation of the Optionholder under this paragraph to provide for the payment of withholding taxes may be satisfied, subject to the provisions of Section 7.2 of the Plan, by electing to have the Corporation withhold certain of the shares that would otherwise be issuable pursuant to the exercise of the Option awarded hereby.

6. Notices

Any notice hereunder to the Corporation shall be addressed to it at its office, 72 North Franklin Street, P.O. Box P, Wilkes-Barre, PA 18773-0016; Attention:  __________, (or to such different address as the Corporation may designate in writing) and any notice hereunder to Optionholder shall be addressed to him or her at the most recent address as shown in the employment or stock records of the Corporation.

IN WITNESS WHEREOF, Penn Millers Holding Corporation has caused this Agreement to be executed by a duly authorized officer and the Optionholder has executed this Agreement, both as of the day and year first above written.

PENN MILLERS HOLDING CORPORATION		OPTIONHOLDER
By
	Douglas A. Gaudet	(Signature)
	President and Chief Executive Officer

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EX-10.6

Exhibit 10.6

PENN MILLERS STOCK INCENTIVE PLAN

STOCK OPTION AGREEMENT FOR

NONQUALIFIED STOCK OPTION

FOR NON-MANAGEMENT DIRECTORS

BETWEEN

PENN MILLERS HOLDING CORPORATION

AND

(the Optionholder)

Date of Award:

Number of Shares:

Exercise Price:

Option Expiration Date:

NONQUALIFIED STOCK OPTION AGREEMENT

Number of shares subject to option:                      shares (the “Option”).

This Agreement dated                     , 2010, between Penn Millers Holding Corporation (the “Corporation”) and                                          (the “Optionholder”).

WITNESSETH:

1. Award of Option

Pursuant to the provisions of the Penn Millers Stock Incentive Plan (the “Plan”) the Corporation hereby awards to the Optionholder, subject to the terms and conditions of the Plan and subject further to the terms and conditions herein set forth, the right and option to purchase from the Corporation, all or any part of an aggregate of  _____  shares of common stock (par value $0.01 per share) of the Corporation (the “Common Stock”) at the exercise price of $_____ per share; such option to be exercised as hereinafter provided.

2. Terms and Conditions

It is understood and agreed that the Option evidenced hereby is subject to the following terms and conditions:

(a)	Expiration Date. Subject to the provisions of Paragraph 2(d), the Option awarded hereby shall expire on                     .
(b)	Exercise of Option. Except as may be provided below, no part of this Option may be exercised until the Optionholder has remained in the continuous service as a non-employee director of the Corporation or of a Subsidiary for the following periods after date hereof:

Vesting Date	% of Shares Vesting			Number of Shares Vesting
		20	%
		20	%
		20	%
		20	%
		20	%

This Option may be exercised in whole at any time, or from time to time in part, to the extent vested, prior to the expiration date specified in Paragraph 2(a) hereof. Any exercise shall be accompanied by a written notice to the Corporation specifying the number of shares as to which the Option is being exercised. Notwithstanding the foregoing:

(1) upon the occurrence of a Change in Control, all unvested Options then held by the Optionholder shall vest and become immediately exercisable;

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(2) if the Optionholder’s service with the Corporation or a Subsidiary terminates due to death or Disability on or after the date in which the Optionholder (A) reaches age 55 or (B) has completed 10 years of service with the Corporation or a Subsidiary (including a predecessor of the Corporation or a Subsidiary), unvested Options then held by the Optionholder shall vest and become immediately exercisable on a pro-rata basis based on the number of full months that the Optionholder provided services to the Corporation or a Subsidiary during the period beginning on the day after the most recent vesting date set forth in Section 2(b) and ending on the next scheduled vesting date set forth in Section 2(b); and

(3) if the Optionholder’s service with the Corporation or a Subsidiary terminates (other than for death, Disability, or by reason of a Termination or Dismissal for Cause) on or after the Optionholder reaches age 65, unvested Options then held by the Optionholder shall vest and become immediately exercisable on a pro-rata basis based on the number of full months that the Optionholder provided services to the Corporation or a Subsidiary during the period beginning on the day after the most recent vesting date set forth in Section 2(b) and ending on the next scheduled vesting date set forth in Section 2(b).

(c)	Payment of Exercise Price upon Exercise. At the time of any exercise, the exercise price of the shares as to which this Option may be exercised shall be paid in cash or, subject to the conditions and limitations described in the Plan, by one of the methods of payment set forth in the Plan for the exercise of a Nonqualified Stock Option.
(d)	Exercise upon Death, Being Disabled or other Termination of Service.

(1) In the event of the termination of the Optionholder’s service by reason of death or Disability, this Option may be exercised, to the extent that the Optionholder was entitled to do so at the date of termination of service due to such cause, in whole at any time, or from time to time in part, within 12 months after the Optionholder’s death or Disability, but in no event later than the expiration date specified in Paragraph 2(a) hereof.

(2) In the event the Corporation or a Subsidiary terminates the service of the Optionholder (other than if the termination is a Termination or Dismissal for Cause), this Option may be exercised, to the extent that the Optionholder was entitled to do so at the date of termination of service due to such cause, in whole at any time, or from time to time in part, within 12 months after the date of such termination, but in no event later than the expiration date specified in Paragraph 2(a) hereof.

(3) In the event the Optionholder’s service is voluntarily terminated by the Optionholder, this Option will expire upon such termination of service; provided, however, that if the Optionholder terminates on or after reaching age 65, this Option may be exercised, to the extent that the Optionholder was

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entitled to do so at the date of termination of service, in whole at any time, or from time to time in part, within 12 months after the date of such termination, but in no event later than the expiration date specified in Paragraph 2(a) hereof.

(4) Notwithstanding anything herein to the contrary, in the event the Optionholder’s termination of service is a Termination or Dismissal for Cause, all rights to exercise this Option shall lapse upon the date of such termination of service.

(e)	Nontransferability. This Option shall not be transferable other than by will or by the laws of descent and distribution. During the lifetime of the Optionholder, this Option shall be exercisable only by the Optionholder.
(f)	Adjustments. In the event that the shares of Common Stock, as presently constituted, shall be changed into or exchanged for a different number or kind of shares of stock or other securities of the Corporation, or if the number of such shares of Common Stock shall be changed through the payment of a stock dividend, stock split, or reverse stock split, then the shares of Common Stock then subject to this Option and the exercise price thereof shall be increased, decreased, or otherwise changed to such extent and in such manner as may be necessary or appropriate to reflect any of the foregoing events. If there shall be any other change in the number or kind of the outstanding shares of the Common Stock, or of any stock or other securities into which such Common Stock shall have been changed, or for which it shall have been exchanged, and if a majority of the disinterested members of the Board shall, in its sole discretion, determine that such change equitably requires an adjustment to the terms of this Option, then such adjustment shall be made in accordance with such determination. Any adjustment so made shall be final and binding upon the Optionholder.
(g)	No Rights as Shareholder. The Optionholder shall have no rights as a shareholder with respect to any shares of Common Stock subject to this Option prior to the date of issuance of a certificate or certificates for such shares.
(h)	No Right to Continued Service. This Option shall not confer upon the Optionholder any right to continue in the service, nor shall it interfere in any way with the right of the Corporation or any Subsidiary to terminate the Optionholder’s service at any time and for any reason.
(i)	Compliance with Law and Regulations. This Option and the obligation of the Corporation to sell and deliver shares hereunder shall be subject to all applicable federal and state laws, rules, and regulations and to such approvals by any government or regulatory agency as may be required. The Corporation shall not be required to issue or deliver any certificates for shares of Common Stock prior to (1) the listing of such shares on any stock exchange on which the Common Stock may then be listed and (2) the completion of any registration or qualification of such shares under any federal or state law, or any rule or regulation of any government body which the Corporation shall, in its sole discretion, determine to be necessary or advisable.

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3. Investment Representation

The Corporation may require the Optionholder to furnish to the Corporation, prior to the issuance of any shares upon the exercise of all or any part of this Option, an agreement (in such form as the Corporation may specify) in which the Optionholder represents that the shares acquired upon exercise are being acquired for investment and not with a view to the sale or distribution thereof.

4. Optionholder Bound by Plan

The Optionholder acknowledges receipt of a copy of the Plan and agrees that this award shall be subject to all of the terms and conditions set forth in the Plan, including future amendments thereto, if any, pursuant to the terms thereof, which Plan is incorporated herein by reference as a part of this Agreement. Capitalized terms used in this Agreement without definition shall have the meanings assigned to them in the Plan.

5. Notices

Any notice hereunder to the Corporation shall be addressed to it at its office, 72 North Franklin Street, P.O. Box P, Wilkes Barre, PA 18773 0016; Attention: Chief Financial Officer, (or to such different address as the Corporation may designate in writing) and any notice hereunder to Optionholder shall be addressed to him or her at the most recent address as shown in the stock records of the Corporation.

IN WITNESS WHEREOF, Penn Millers Holding Corporation has caused this Agreement to be executed by a duly authorized officer and the Optionholder has executed this Agreement, both as of the day and year first above written.

PENN MILLERS
HOLDING CORPORATION		OPTIONHOLDER
By
	Douglas A. Gaudet	(Signature)
	President and Chief Executive Officer
		(Print Address)

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EX-10.7

Exhibit 10.7

PENN MILLERS STOCK INCENTIVE PLAN

STOCK OPTION AGREEMENT FOR

NONQUALIFIED STOCK OPTION

FOR EMPLOYEES

BETWEEN

PENN MILLERS HOLDING CORPORATION

AND

(the Optionholder)

Date of Award:

Number of Shares:

Exercise Price:

Option Expiration Date:

NONQUALIFIED STOCK OPTION AGREEMENT

Number of shares subject to option:                      shares (the “Option”).

This Agreement dated                     , 2010, between Penn Millers Holding Corporation (the “Corporation”) and                                          (the “Optionholder”).

WITNESSETH:

1. Award of Option

Pursuant to the provisions of the Penn Millers Stock Incentive Plan (the “Plan”) the Corporation hereby awards to the Optionholder, subject to the terms and conditions of the Plan and subject further to the terms and conditions herein set forth, the right and option to purchase from the Corporation all or any part of an aggregate of                      shares of common stock (par value $0.01 per share) of the Corporation (“Common Stock”) at the exercise price of $                     per share; such option to be exercised as hereinafter provided.

2. Terms and Conditions

It is understood and agreed that the Option evidenced hereby is subject to the following terms and conditions:

(a)	Expiration Date. Subject to the provisions of Paragraph 2(d) hereof, the Option awarded hereby shall expire on                      [7 years from the date of grant].
(b)	Exercise of Option. Except as may be provided below, no part of this Option may be exercised until the Optionholder has remained in the continuous employ of the Corporation or of a Subsidiary for the following periods after the date hereof:

	% of Shares			Number of
Vesting Date	Vesting			Shares Vesting
		20.0	%	______ shares
		20.0	%	______ shares
		20.0	%	______ shares
		20.0	%	______ shares
		20.0	%	______ shares

This Option may be exercised in whole at any time, or from time to time in part, to the extent vested, prior to the expiration date specified in Paragraph 2(a) hereof. Any exercise shall be accompanied by a written notice to the Corporation specifying the number of shares as to which the Option is being exercised. Notwithstanding the foregoing:

(1) upon the occurrence of a Change in Control, all unvested Options then held by the Optionholder shall vest and become immediately exercisable;

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(2)

if the Optionholder’s employment with the Corporation or a Subsidiary terminates due to death or Disability on or after the date in which the Optionholder (A) reaches age 55 or (B) has completed 10 years of service with the Corporation or a Subsidiary (including a predecessor of the Corporation or a Subsidiary), unvested Options then held by the Optionholder shall vest and become immediately exercisable on a pro-rata basis based on the number of full months that the Optionholder worked at the Corporation or a Subsidiary during the period beginning on the day after the most recent vesting date set forth in Section 2(b) and ending on the next scheduled vesting date set forth in Section 2(b); and

(3)

if the Optionholder’s employment with the Corporation or a Subsidiary terminates (other than for death, Disability, or by reason of a Termination or Dismissal for Cause) on or after the Optionholder reaches age 65, unvested Options then held by the Optionholder shall vest and become immediately exercisable on a pro-rata basis based on the number of full months that the Optionholder worked at the Corporation or a Subsidiary during the period beginning on the day after the most recent vesting date set forth in Section 2(b) and ending on the next scheduled vesting date set forth in Section 2(b).

(c)	Payment of Exercise Price Upon Exercise. At the time of any exercise, the exercise price of the shares as to which this Option may be exercised shall be paid in cash or, subject to the conditions and limitations described in the Plan, by one of the methods of payment set forth in the Plan for the exercise of a Nonqualified Stock Option.
(d)	Exercise Upon Death, Being Disabled, or Other Termination of Employment.

(1)	In the event of the termination of the Optionholder’s employment as an employee of the Corporation or of a Subsidiary by reason of death or Disability, this Option may be exercised, to the extent that the Optionholder was entitled to do so at the date of termination of employment due to such cause, in whole at any time, or from time to time in part, within one year after the Optionholder’s death or permanent and total disability, but in no event later than the expiration date specified in Paragraph 2(a) hereof.
(2)	If the Corporation or a Subsidiary terminates the employment of the Optionholder (other than if the termination is a Termination or Dismissal for Cause), this Option may be exercised, to the extent that the Optionholder was entitled to do so at the date of termination of employment, in whole at any time, or from time to time in part, within 12 months after the date of such termination, but in no event later than the expiration date specified in Paragraph 2(a) hereof.
(3)	If the Optionholder’s employment with the Corporation or a Subsidiary is voluntarily terminated by the Optionholder, then the option shall lapse on the date of such termination of employment; provided, however, that if the Optionholder (A) terminates for “Good Reason” (as such term is defined in an employment or similar agreement applicable to the Optionholder) following a Change in Control or (B) terminates on or after reaching age 65, this Option may be exercised, to the

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extent that the Optionholder was entitled to do so at the date of termination of employment, in whole at any time, or from time to time in part, within 12 months after the date of such termination, but in no event later than the expiration date specified in Paragraph 2(a) hereof.

(4) Notwithstanding anything herein to the contrary, if the Optionholder’s employment termination of employment is a Termination or Dismissal for Cause, all rights to exercise this Option shall lapse on the date of such termination of employment.

(e)	Nontransferability. This Option shall not be transferable other than by will or by the laws of descent and distribution. During the lifetime of the Optionholder, this Option shall be exercisable only by the Optionholder.
(f)	Adjustments. In the event that the shares of Common Stock, as presently constituted, shall be changed into or exchanged for a different number or kind of shares of stock or other securities of the Corporation, or if the number of such shares of Common Stock shall be changed through the payment of a stock dividend, stock split, or reverse stock split, then the shares of Common Stock then subject to this Option and the exercise price thereof shall be increased, decreased, or otherwise changed to such extent and in such manner as may be necessary or appropriate to reflect any of the foregoing events. If there shall be any other change in the number or kind of the outstanding shares of the Common Stock, or of any stock or other securities into which such Common Stock shall have been changed, or for which it shall have been exchanged, and if a majority of the disinterested members of the Board shall, in its sole discretion, determine that such change equitably requires an adjustment to the terms of this Option, then such adjustment shall be made in accordance with such determination. Any adjustment so made shall be final and binding upon the Optionholder.
(g)	No Rights as Shareholder. The Optionholder shall have no rights as a shareholder with respect to any shares of Common Stock subject to this Option prior to the date of issuance of a certificate or certificates for such shares.
(h)	No Right To Continued Employment. This Option shall not confer upon the Optionholder any right to continue in the employ of the Corporation or any Subsidiary, nor shall it interfere in any way with the right of the Corporation or any Subsidiary to terminate the Optionholder’s employment at any time and for any reason.
(i)	Compliance with Law and Regulations. This Option and the obligation of the Corporation to sell and deliver shares hereunder shall be subject to all applicable federal and state laws, rules, and regulations and to such approvals by any government or regulatory agency as may be required. The Corporation shall not be required to issue or deliver any certificates for shares of Common Stock prior to (1) the listing of such shares on any stock exchange on which the Common Stock may then be listed and (2) the completion of any registration or qualification of such shares under any federal or state law, or any rule or regulation of any government body which the Corporation shall, in its sole discretion, determine to be necessary or advisable.

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(j) Harmful Activity. Notwithstanding anything in this Agreement to the contrary, if the Optionholder shall engage in any “harmful activity” while employed by the Corporation or a Subsidiary or during the six-month period thereafter, then (i) this Option, to the extent then unexercised and whether vested or unvested, shall immediately be forfeited and canceled and (ii) any Profits realized upon the exercise of this Option shall inure to the Corporation. If any Profits realized upon the exercise of this Option inure to the benefit of the Corporation in accordance with this Section, the Optionholder shall pay all such Profits to the Corporation within 30 days after receiving written notice from the Corporation that the Optionholder has engaged in a harmful activity. Consistent with the provisions of the Plan, the determination by the Committee as to whether the Optionholder engaged in “harmful activity” while employed by the Corporation or a Subsidiary or during the six-month period thereafter shall be final and conclusive, unless otherwise determined by a majority of disinterested members of the Board. For purposes of this Section 2(j), “Profits” shall mean, with respect to this Option, the spread between the fair market value of a share of Common Stock on the date of exercise and the exercise price, multiplied by the number of shares exercised under this Option.

A “harmful activity” shall have occurred if the Optionholder shall do any one or more of the following:

(1) Engage in any fraud or intentional misconduct that is a significant contributing factor to the Corporation having to restate all or a portion of its financial statement(s).

(2) Engage in activities that would constitute grounds for the Corporation or a Subsidiary to terminate the Optionholder’s employment by reason of a Termination or Dismissal for Cause (as defined in the Plan) or for Cause (as defined in an applicable employment agreement between the Optionholder and the Corporation and/or a Subsidiary), whether or not the Optionholder is employed at the time the Optionholder engages in such activities.

(3) Solicit or hire any employees of the Corporation or a Subsidiary or induce any of such employees to terminate their employment relationship with the Corporation or a Subsidiary.

(4) Solicit, induce, or attempt to solicit or induce any customer, supplier, or other entity doing business with the Corporation of a Subsidiary to cease doing business with the Corporation or a Subsidiary or, in the case of a customer, to place agribusiness insurance, as that term is commonly understood in the industry, with any competitor of the Corporation or a Subsidiary. For purposes of the foregoing provision, the term “customer” shall mean a business that the Corporation or a Subsidiary insures on the date that the Optionholder’s employment terminates (or has insured during the previous twelve months) and a broker who has placed business with the Corporation or a Subsidiary on the date that the Optionholder’s employment terminates but only with respect to those clients of the broker for which the broker has placed business with the Corporation or a Subsidiary in the 12-month period preceding the date that the Optionholder’s employment terminates.

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(5) Directly or indirectly, own, manage, operate, render services for (as a consultant or an advisor), or accept any employment with (i) Nationwide Agribusiness Insurance Company, Michigan Millers Insurance Company, or Westfield Insurance Company, or any of their successors in interest or (ii) the agribusiness insurance business of any other insurance company whose business has, or could reasonably be expected to have, a material adverse effect on the Corporation’s or a Subsidiary’s business insurance business.

(6) Directly or indirectly, own, manage, operate, render services for (as a consultant or an adviser), or accept any employment with, within a 50-mile radius of Wilkes-Barre, Pennsylvania, any other property and casualty insurance or reinsurance line of business to the extent that such ownership, management, operating, rendering of services, or employment (and the activities necessarily incident thereto) have, or could reasonably be expected to have, a material adverse effect on the Corporation’s or a Subsidiary’s business insurance business.

(7) For any reason, in any fashion, form or manner, either directly or indirectly, divulge, disclose or communicate to any person, firm, corporation, or other business entity, in any manner whatsoever, any confidential information or trade secrets concerning the business of the Corporation or a Subsidiary, including, without limiting the generality of the foregoing, any customer lists or other customer identifying information, the techniques, methods or systems of the Corporation’s or a Subsidiary’s operations or management, any information regarding their respective financial matters, or any other material information concerning the business of the Corporation or a Subsidiary, their manner of operation, plan, or other material data. The provisions of this subsection shall not apply to (i) information that is public knowledge other than as result of Optionholder’s authorized disclosure; (ii) information disseminated by the Corporation or a Subsidiary to third parties in the ordinary course of business; (iii) information lawfully received by the Optionholder from a third party who, based upon inquiry by the Optionholder, is not bound by a confidential relationship to the Corporation or a Subsidiary; or (iv) information disclosed under a requirement of law or as directed by applicable legal authority having jurisdiction over the Optionholder.

3. Investment Representation

The Corporation may require the Optionholder to furnish to the Corporation, prior to the issuance of any shares upon the exercise of all or any part of this Option, an agreement (in such form as the Corporation may specify) in which the Optionholder represents that the shares acquired upon exercise are being acquired for investment and not with a view to the sale or distribution thereof.

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4. Optionholder Bound by Plan

The Optionholder acknowledges receipt of a copy of the Plan and agrees that this Award shall be subject to all of the terms and conditions set forth in the Plan, including future amendments thereto, if any, pursuant to the terms thereof, which Plan is incorporated herein by reference as a part of this Agreement. Capitalized terms used in this Agreement without definition shall have the meanings assigned to them in the Plan.

5. Withholding of Taxes

The Corporation will require that, as a condition precedent to the exercise of this Option, appropriate arrangements be made for the withholding of any applicable taxes. The obligation of the Optionholder under this paragraph to provide for the payment of withholding taxes may be satisfied, subject to the provisions of Section 7.2 of the Plan, by electing to have the Corporation withhold certain of the shares that would otherwise be issuable pursuant to the exercise of the Option awarded hereby.

6. Notices

Any notice hereunder to the Corporation shall be addressed to it at its office, 72 North Franklin Street, P.O. Box P, Wilkes-Barre, PA 18773-0016; Attention: , (or to such different address as the Corporation may designate in writing) and any notice hereunder to Optionholder shall be addressed to him or her at the most recent address as shown in the employment or stock records of the Corporation.

IN WITNESS WHEREOF, Penn Millers Holding Corporation has caused this Agreement to be executed by a duly authorized officer and the Optionholder has executed this Agreement, both as of the day and year first above written.

PENN MILLERS HOLDING CORPORATION		OPTIONHOLDER
By
	Douglas A. Gaudet President and Chief Executive Officer	(Signature)

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