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CIO Employment Agreement - Carl Schnaufer

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Exhibit 10.12


EMPLOYMENT AGREEMENT


WHEREAS, Symons International Group, Inc. and its subsidiaries (collectively, the "Company") considers it essential to its best interests and the best interests of its stockholders to foster the continuous employment of its key management personnel and, accordingly, the Company desires to employ Carl F. Schnaufer ("You", "Your"or "Executive"), upon the terms and conditions hereinafter set forth; and


WHEREAS, the Executive desires to continue to be employed by the Company, upon the terms and conditions contained herein.


NOW, THEREFORE, in consideration of the covenants and agreements set forth below, the parties agree as follows:


1. Employment


1.1 Term of Agreement. The Company agrees to employ Executive as Vice President and Chief Information Officer effective as of August 14, 1998 and continuing until August 13, 1999, unless such employment is terminated pursuant to Section 3 below; provided, however, that the term of this Agreement shall automatically be extended without further action of either party for additional one (1) year periods thereafter unless the Company or Executive gives written notice that it or he does not intend to extend this Agreement. Executive shall give to the Company two (2) months written notice prior to the date Executive desires to terminate his employment by the Company. It is expressly understood and agreed that a notice of non-renewal issued by the Company shall not extinguish the Executive's non-competition obligations pursuant to Section 4 herein.


1.2 Terms of Employment. During the Term, You agree to be a full-time employee of the Company serving in the position of Vice President and Chief Information Officer of the Company and further agree to devote substantially all of Your working time and attention to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities associated with Your position as Vice President and Chief Information Officer of the Company and to use Your best efforts to perform faithfully and efficiently such responsibilities. Executive shall perform such duties and responsibilities as may be determined from time to time by the Chairman and/or Chief Executive Officer of the Company of the Company, which duties shall be consistent with the position of Vice President and Chief Information Officer of the Company, which shall grant Executive authority, responsibility, title and standing comparable to that of the vice president and chief information officer of a stock insurance holding company of similar standing. Your primary place of work will be at the company's headquarters in Indianapolis, Indiana, but it is understood and agreed that your duties may require travel. In the event you are relocated to another Company location, the Company agrees to pay for the cost of your move (including temporary lodging expenses) and to facilitate the sale of your Indianapolis area home so that you will be enabled to purchase a new home in your new location that is comparable in price to your existing home and have your family join you at such new location within two (2) months of your transfer or such other period as is reasonable considering market and location. Nothing herein shall prohibit You from


devoting Your time to civic and community activities or managing personal investments, as long as the foregoing do not interfere with the performance of Your duties hereunder.


1.3 Appointment and Responsibility. The Boards of Directors of the Company shall, following the effective date of this Agreement, elect and appoint Executive as Vice President and Chief Information Officer. Consistent with Section 1.2 of this Agreement, Executive shall be primarily responsible for the information systems of the Company.


2. Compensation, Benefits and Prerequisites


2.1 Salary. Company shall pay Executive a salary, in equal bi-weekly installments, equal to an annualized salary rate of $140,000. Executive's salary as payable pursuant to this Agreement may be increased from time to time as mutually agreed upon by Executive and the Company. Notwithstanding any other provision of this Agreement, Executive's salary paid by Company for any year covered by this Agreement shall not be less than such salary paid to Executive for the immediately preceding calendar year. All salary and bonus amounts paid to Executive pursuant to this Agreement shall be in U.S. dollars.


2.2 Bonus. The Company and Executive understand and agree that the Company expects to achieve significant growth during the term of this Agreement and that Executive will make a material contribution to that growth which will require certain personal and familial sacrifices on the part of Executive. Accordingly, it is the desire and intention of the Company to reward Executive for the attainment of that growth through bonus and other means (including, but not limited to, stock options, stock appreciation rights and other forms of incentive compensation). Therefore, the Company will pay Executive a lump-sum bonus (subject to normal withholdings) within sixty (60) business days from receipt by Company of its consolidated, annual audited financial statements in an amount which shall be determined in accordance with the following Bonus Table. All amounts used for calculation purposes in this section shall be based on the audited, consolidated financial statements of Symons International Group, Inc. (or any successor thereto), with such financial statements having been prepared in accordance with applicable Generally Accepted Accounting Principles, applied on a consistent basis with that of prior years.


BONUS TABLE


If Audited Net % of Annual Salary
Income (as a % of Payable to Executive
Budgeted Net Income) Is As Bonus


Less Than 75% -0-
75% or more, but less than 100% 10%
100% or more, but less than 125% 20%
125% or more 30%


-2-


2.3 Employee Benefits. During the term of this Agreement, You shall be entitled to participate in all incentive, savings, and retirement plans, practices, policies, and programs available generally to other employees of the Company. During the term of this Agreement, You and/or Your family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies, and programs available generally to other employees of the Company.


2.4 Additional Prerequisites. During the term of this Agreement, Company shall provide Executive with:


(a) Not less than three(3) weeks paid vacation during each calendar
year.


(b) An automobile allowance of six hundred thirty dollars ($630.00)
per month.


(c) A golfing membership, including initiation and monthly fees,
at a country club as shall be approved by the Chief Executive
Officer of Company, in his sole and absolute discretion.


2.5 Expenses. During the period of his employment hereunder, Executive shall be entitled to receive reimbursement from the Company (in accordance with the policies and procedures in effect for the Company's employees) for all reasonable travel, entertainment and other business expenses incurred by him in connection with his services hereunder.


3. Termination of Executive's Employment


3.1 Termination of Employment and Severance Pay. Executive's employment under this Agreement may be terminated by the Company at any time for any reason; provided, however, that if Executive's employment is terminated for any reason other than for cause prior to February 14, 1999, he shall receive, as severance pay, an amount equal to his salary which would have been otherwise payable from the date of termination of employment to August 13, 1999. If Executive's employment is terminated subsequent to February 13, 1999 for any reason other than for cause, he shall receive, as severance pay, an amount equal to six (6) month's current salary. Further, if Executive shall be terminated without cause, receipt of severance payments are conditioned upon execution by Executive and the Company of that mutual Agreement of Release and Waiver attached hereto as Exhibit A. Further, Executive shall receive severance pay in accordance with this Section 3.1 if Executive shall terminate this Agreement due to a breach thereof by the Company or if Executive is directed by the Company (including, if applicable, any successor) to engage in any act or action constituting fraud or any unlawful conduct relating to the Company or its business as may be determined by application of applicable law. The Chief Executive Officer of the Company may,
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