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EXHIBIT 10.5
Xx. Xxxxxx X. Xxxxx
North East Insurance Company
000 Xxxxx Xxxx, X.X. Xxx 0000
Xxxxxxxxxxx, XX 00000-0000
RE: EMPLOYMENT AGREEMENT
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Dear Xxx:
This letter serves as an interim Employment Agreement under which North
East Insurance Company ("NEIC" or the "Company") will continue to employ you as
its Chief Operating Officer. In the meantime, the Company has retained the firm
of Moon, Moss, XxXxxx & Xxxxxxxxx for the purpose of, among other things,
devising an appropriate longer term employment agreement that offers appropriate
management incentive compensation arrangements. The Board of Directors has
assigned a very high priority to this arrangement, and we presently anticipate
that the Board will be addressing the matter this Fall.
The Company is of the view that certain key executives (including yourself)
should be provided with greater certainty in respect of future changes in
control of the Company. As a result, the Board of Directors has approved for you
an Employment Continuity Agreement in the form attached. Under the Employment
Continuity Agreement, you would be entitled to certain severance benefits upon
the occurrence of a "Change in Control," as defined in that agreement.
The Board of Directors also believes that it is appropriate that,
commencing immediately, you be provided with appropriate compensation and
protections that will encourage you to stay on in your present capacity with
NEIC. I am therefore pleased to outline the following arrangements which have
been approved by the Board of Directors with regard to your continued
employment:
1. Effective as of September 23, 1996, your salary shall be $110,000.00
per year, payable in installments as per the Company's existing
payroll practices, as now in effect.
2. You shall be entitled to participate in all employee welfare and
benefit plans of the Company that from time to time are in effect for
NEIC employees generally. If the Company in the future eliminates or
reduces benefits generally available to employees under its welfare
and benefit plans, the Company will provide you with such supplemental
benefits as may be necessary to assure that the level of your benefits
are not decreased to a level below the level in effect for you today.
3. If you remain in employment with the Company through September 30,
1997, the Company shall pay you a cash bonus of $27,500.00. Such bonus
shall accrue as of September 30, 1997, and shall be paid within thirty
(30) days after such date.
4. If between now and September 30, 1997, the Company terminates your
employment other than for good cause, the Company shall provide you
with: (1) severance payments of $165,500.00 (representing 1.5 times
the salary level provided in this letter), and (2) the cash bonus set
forth in paragraph 3. The severance payments shall be made in four (4)
equal increments of $41,250.00, payable within ten (10) days after the
date of termination and each three (3) months thereafter. The cash
bonus shall be paid at the time provided in Section 3. For purposes of
this letter, termination for "good cause" shall have the same meaning
as set forth in your Employment Continuity Agreement. Additional or
substitute termination severance provisions shall be provided pursuant
to the anticipated employment agreements noted above.
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5. For purposes of this letter, a substantial adverse change in your
duties or title, or the occurrence of other events constituting "Good
Reason" under your Employment Continuity Agreement, will be deemed to
be a constructive termination of your employment for purposes of the
severance arrangements set forth in paragraph 4.
6. If at the time of termination of employment you are entitled to
payments under both Section 4 of this letter and your Employment
Continuity Agreement, you shall be entitled only to the level of
benefits available under whichever one of these agreements you elect.
Such election shall be made by written notice to the Company within
ten (10) days after termination of your employment and shall be
binding upon you and the Company; you shall not be entitled to collect
severance payments under both agreements. This provision applies only
to payments specifically described in Section 4.
Sincerely yours,
/s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
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