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                                                                    EXHIBIT 10.5

                              EMPLOYMENT AGREEMENT

            This employment Agreement ("Agreement") made effective as of the 1st
day of October, 1993, by and between North Pointe Financial Services, Inc., a
Michigan corporation, having its principal place of business at 28819 Franklin
Road, Suite 300, Southfield, Michigan 48034, and herein referred to as "NPFS"
and B. Matthew Petcoff, herein referred to as the "Executive."

                                    Recitals

            WHEREAS, the Executive has served in various executive capacities
for NPFS and various affiliates since 1989, including that of Vice President,
Treasurer and as a Director; and

            WHEREAS, NPFS recognizes that the Executive's contribution to the
betterment and continued success of NPFS has been substantial, and NPFS believes
it to be important to its future prosperity and to its general interest to
obtain assurance concerning the continuation of the Executive's employment and
to provide the Executive with reasonable remuneration arrangements; and

            WHEREAS, the parties wish to enter into this written Employment
Agreement to clearly define and clarify the terms of Executive's employment as
Executive Vice President and Chief Operating Officer of NPFS.

            NOW, THEREFORE, the patties agree as follows:

      1.    Employment. NPFS hereby employs the Executive and the Executive
hereby accepts employment as Executive Vice President and Chief Operating
Officer of NPFS on the terms and conditions hereinafter set forth.

      2.    Term of Employment. The term of employment hereunder shall commence
effective as of October 1, 1993 and shall continue for a term of five (5) years.
The term shall be automatically extended for an additional one-year period each
October 1, unless 90 days prior to that date, either the Executive or NPFS gives
written notice to the other that the term is not to be extended. The term during
which this Agreement is in effect may hereinafter be referred to as the
"Contract
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Term." Notwithstanding the foregoing, this Agreement may be terminated prior to
expiration of its term as hereinafter provided in paragraph 6.

      3.    Duties of Executive. The Executive shall, during the Contract Term,
perform those tasks and discharge those duties of his positions set forth in
paragraph 1, as well as similar duties for subsidiaries of NPFS, including North
Pointe Insurance Company. The duties of those positions may be more particularly
set forth from time to time by the Board of Directors and the CEO. The Executive
shall report to the Chairman of the Board.

      4.    Compensation. The Executive initially shall receive an annual base
salary of $132,000 for his services as NPFS's Executive Vice President and Chief
Operating Officer.

            It is agreed by the parties hereto that the Executive's base salary
shall be reviewed by the Board of Directors of NPFS from time to time, but not
less than once each year, and may be increased or decreased based upon
performance, generally prevailing property and casualty insurance industry
compensation practices and other relevant factors deemed reasonable by the Board
of Directors. The Board may also award bonus compensation to the Executive from
time to time, on the basis of performance and profitability of NPFS and its
subsidiaries and other relevant factors, in its sole discretion.

      5.    Benefits. During the Contract Term the Executive shall be entitled
to participate at the highest level in all of NPFS's employee benefit plans or
arrangements (including but not limited to life insurance plans, all surgical,
medical, dental and hospital expense benefit plans, long-term disability plans,
retirement-income plans and profit sharing plans) that are in effect during the
Contract Term and to receive benefits thereunder on a basis consistent with the
overall administration of the plans.

            (a)   Vacation and Sick Leave. The Executive shall be entitled to
vacation and sick leave in accordance with NPFS's policy with respect thereto.


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            (b)   Reimbursement of Business Expenses. It is acknowledged by NPFS
that entertainment of various business associates is of benefit to the company
and is an essential part of Executive's duties and responsibilities. NPFS shall
reimburse the Executive for all reasonable business expenses incurred by the
Executive in conducting the business of NPFS, including expenditures for dining
and athletic clubs, monthly dues for one country club, entertainment, gifts and
travel, provided that the Executive furnishes to NPFS adequate records and other
documentary evidence required by federal and state statutes and regulations
issued by the appropriate taxing authorities for the substantiation of each such
expenditure as an income tax deduction. Notwithstanding any other provisions in
this contract, in the event any of the expenditures described above are not a
proper income tax deduction to NPFS, the cost of such items shall be deemed
additional compensation under this contract and shall not reduce any other
salary or bonus payment hereunder.

            (c)   Perquisites.

                  (i)   Also included in potential reimbursable expenses for
purposes of subparagraph 5(b) are expenditures for travel to seminars, board
meetings, conventions and other similar events, civic clubs and related
expenditures with respect thereto including dues and meals. Amounts reimbursed
to the Executive for such business expenses are not to be considered taxable
compensation to the Executive, but are expenditures by NPFS for the convenience
and benefit of NPFS.

                  (ii)  NPFS shall provide Executive use of an automobile or
make the monthly payments on an Executive-owned or leased automobile not to
exceed $750 per month. NPFS shall also pay for fuel, insurance, maintenance and
repairs with respect to the business use of such automobile. The Executive's
monthly automobile allowance may be increased from time to time as mutually
agreed upon by the parties.

                  (iii) NPPS shall also reimburse the Executive for all fees and
dues related to membership in professional organizations, as from time to time
approved by NPFS's Board of
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Directors, and all expenses related to such memberships.

                  (iv) Other Benefits. NPFS may from time to time provide and
pay other fringe benefits to the Executive and the Executive shall be entitled
to participate during the Contract Term in any other benefit plans that may be
made available to executive personnel of NPFS generally after the commencement
of the Contract Term.

      6.    Termination of Agreement.

            (a)   Automatic Termination. The Agreement shall terminate
immediately on the occurrence of either of the following events:

                  (i)   The death of the Executive.

                  (ii)  The Executive has been adjudicated by a court of
competent jurisdiction to be insane, incompetent and/or unable to manage his
affairs properly.

            (b)   Discretionary Termination. In the event any of the following
occurs, NPFS shall have the right to terminate this Agreement immediately upon
giving the Executive advance written notice of such termination:

                  (i)   The breach of any of the terms of this Agreement by the
Executive.

                  (ii)  The continuous neglect by the Executive of his
employment duties.

                  (iii) The Executive commits any acts of gross negligence;
dishonesty; embezzlement; fraud; misrepresentation; intentional disclosure of
confidential information related to the business of NPFS that would be
detrimental to NPFS if disclosed; or habitual illegal substance abuse or
drunkenness.

            (c)   Suspension of Agreement. In the event the Executive, as a
result of a physical or mental disability, has been unable to perform his duties
under this Agreement on a full time basis for a period of six (6) consecutive
months, NPFS may suspend this Agreement upon giving the Executive thirty (30)
days advance written notice of such suspension unless, prior to expiration of
such

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thirty (30) day period the Executive resumes performance of his duties on a
full time basis. During a period when this Agreement is suspended, NPFS shall
pay Executive one-half (1/2) of his base salary, less any disability payments
from insurance for which NPFS has paid premiums.

            (d)   Compensation Upon Termination. In the event of the termination
of this Agreement for any of the reasons set forth above in subparagraph 6(b),
the Executive shall be entitled to the base salary earned by him prior to the
date of termination as provided for in this Agreement computed pro rata up to
and including the date of termination.

            (e)   Liquidated Damages Upon Termination of Employment by NPFS
Without Cause. Notwithstanding any other provision in this Agreement to the
contrary, NPFS may terminate this Agreement upon giving to the Executive thirty
(30) days advance written notice of such termination. In the event NPFS
terminates this Agreement pursuant to paragraph 6(a) or 6(e), NPFS shall pay to
the Executive or, in the event of the Executive's death or legal incompetence,
to the Executive's estate, a monthly sum equal to the highest monthly rate of
base salary paid to the Executive during the last full prior calendar year
pursuant to paragraph 4 of this Agreement. If such termination shall have
occurred prior to the last day of the Contract Term, such payments shall
continue until the last day of the last full calendar month of the full Contract
Term, or until Executive reaches 70 years of age, whichever occurs first. In
addition, if this Agreement is terminated pursuant to paragraph 6(e), Executive
shall also be entitled to payment in an amount equal to three (3) times his
merit bonus(es) for the last previous full calendar year.

            (f)   Termination by Executive for Cause. In the event NPFS fails to
make any payment of base salary to the Executive within thirty (30) days after
such payment is due, the Executive may terminate this Agreement, upon giving to
NPFS thirty (30) days advance written notice of such termination; provided,
however, the Executive shall not be entitled to terminate this Agreement
pursuant to this subparagraph 6(f) if NPFS makes such overdue payment to the
Executive prior to expiration of

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the thirty day notice period. Any notice given to NPFS pursuant to this
subparagraph 6(f) shall indicate the reason for termination and the amount of
the overdue payment.

            In the event this Agreement is terminated pursuant to this
subparagraph 6(f), the Executive shall be entitled to his base salary as
provided for in this Agreement for the remaining Contract Term plus an amount
equal to three (3) times his merit bonus(es) for the last previous full calendar
year.

      7.    Nondisclosure of Confidential Information. The Executive agrees that
during the Contract Term, and at all times thereafter, any data, figures,
projections, estimates, customer lists, tax records, personnel histories and
records, information regarding sales, information regarding properties and any
other information regarding the business, operations, properties or personnel of
NPFS or its subsidiaries (collectively referred to herein as the "Confidential
Information") disclosed to or acquired by the Executive shall be held in
confidence and treated as proprietary to NPFS, and the Executive agrees not to
use or disclose any Confidential Information without the prior written consent
of NPFS; provided, however, that no such prior written consent shall be required
for the disclosure and use by the Executive of Confidential Information to
promote and advance the business interests of NPFS (including disclosure of
information reasonably requested by underwriters) or in response to any lawful
process of a court or government agency, whether state, federal or local, such
as a subpoena, summons, proceeding, which requires the Executive's response,
whether sworn or unsworn, or when a response is otherwise required by applicable
law.

      8.    Change in Control.

            (a)   In the event (i) NPFS merges into or consolidates with another
entity, or is subject in any way to a transfer of a substantial amount of its
assets, resulting in the assets, business or operations of NPFS being controlled
by an entity or individual other than NPFS (a "Change of Ownership"), or there
occurs any "Change in Control" (as defined below) of NPFS and (ii) there is

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a significant change in the nature and scope of the duties and powers of the
Executive, as outlined in paragraph 3, or the Executive reasonably determines
that, as a result of the occurrence of one or more of the events described in
this subparagraph, he is unable to exercise or perform the powers, functions or
duties as set forth in this Agreement or the Executive has "good reason" to
terminate, as that term is defined in subparagraph 8(c), then the Executive
shall be entitled, upon giving thirty (30) days advance written notice to NPFS,
to terminate this Agreement and shall within ninety (90) days after the
effective date of such termination, receive a lump sum amount equal to his base
salary for thirty-six (36) months at the rate in effect on the date such notice
is given to NPPS. The Executive shall also be entitled to an amount equal to
three (3) times his merit bonus(es) for the last previous full calendar year.

            (b)   A "Change of Control" shall be deemed to have taken place if
(i) a third person. including a group of individuals or entities, becomes the
beneficial owner of shares of NPFS having forty (40%) percent or more of the
total number of votes that may be cast for the election of directors of NPFS, or
(ii) as a result of, or in connection with any cash tender or exchange offer,
merger, consolidation or other business combination, or sale of assets, or any
combination of the foregoing events, the persons who are directors of NPFS
before the occurrence of such event or events cease to constitute fifty (50%)
percent of the Board of Directors of NPFS.

            (c)   For purposes of paragraph 8(a) the Executive shall be deemed
to have "good reason" to terminate his employment with NPFS pursuant to
paragraph 8(a) if any of the following events occur without the Executive's
express written consent:

                  (i)   The assignment to the Executive of any duties materially
inconsistent with the Executive's position, duties, responsibilities, and status
with NPPS or its affiliates immediately prior to the Change in Control or Change
of Ownership;

                  (ii)  A material change in the Executive's reporting
responsibilities, titles or offices as in effect immediately prior to the Change
in Control or Change of Ownership, or any



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removal of the Executive from or any failure to re-elect the Executive to such
office, unless such removal or failure to elect is for cause.

                  (iii) A reduction in base salary under the Executive's wage
and salary program in effect immediately prior to the Change in Control or
Change of Ownership.

                  (iv)  A failure by NPFS to continue any incentive programs for
executives applicable to the Executive immediately prior to the Change in
Control or Change of Ownership, the effect of which failure would be to
materially reduce the incentive compensation which would be payable to the
Executive but for discontinuance of such programs.

                  (v)   The Executive is requested to relocate his office to a
location more than one hundred (100) miles from its location immediately prior
to the Change in Control or Change of Ownership.

                  (vi)  In the event the Executive consents to any relocation of
his office and such relocation necessitates the Executive moving from his then
current residence (the "Prior Residence"), the failure of NPFS to pay or
reimburse the Executive for all reasonable moving expenses incurred with respect
to moving into a new residence and to indemnify the Executive against any loss
incurred by the Executive in the sale of his Prior Residence which loss shall be
the amount, if any, by which the actual sales price of the Prior Residence is
exceeded by the higher of the Executive's aggregate investment in such prior
Residence or the fair market value of the Prior Residence as established by an
independent appraiser designated by the Executive and acceptable to NPFS.

                  (vii) Failure of NPFS to continue in effect any benefit or
compensation plan or arrangement in which the Executive was participating
immediately preceding the Change in Control or Change in Ownership, or the
taking of any action by NPFS not required by law which would adversely affect
the Executive's participation in or materially reduce Executive's benefits from
such a plan.

      9.    Termination Payment Maximum. If any payments under this Agreement,
when

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aggregated with any other NPFS (and subsidiary) payments to the Executive
from other policies, plans and agreements of NPFS (and subsidiaries) that are
deemed to constitute "golden parachute" payments (as defined in Section 280G of
the Internal Revenue Code of 1986, as amended) ("Code") exceed the maximum
amount of golden parachute compensation under Sections 280G and 4999 of the Code
that may be paid without tax penalties to the Executive and the loss or partial
loss of the compensation tax deduction to NPFS (and its affiliates), then the
Executive shall specify which of his NPFS payments shall be reduced until his
aggregate golden parachute compensation reaches the highest amount permissible
without triggering tax penalties to the Executive and the loss or partial loss
of the compensation tax deduction to NPFS under Code Sections 280G and 4999.
Provided, however, that when the Executive designates which of his NPFS golden
parachute payments shall be reduced to meet the limitations under Code Section
280G and 4999, no change in the timing of the payments shall be made without the
consent of NPFS.

      10.   Non-Competition Obligations. NPFS and the Executive covenant and
agree that the Executive shall not, for the longer of (i) 12 months from the
date of termination of this Agreement or (ii) the period during which the
Executive receives payments under this Agreement plus the 12 months immediately
following expiration of such period, engage, directly or indirectly, in the
development of a liquor liability insurance product or service, nor will the
Executive render services similar or reasonably related to those which he
rendered as an employee of NPFS or any of its subsidiaries, as a sole
proprietor, partner, employee, consultant, independent contractor or in any
capacity within any state within which NPFS or any subsidiary thereof sells
property and casualty insurance coverages or services.

      11.   Settlement of Controversy and Expenses.

            (a)   Any dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively by arbitration in Oakland County,
Michigan, in accordance with

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the Arbitration Rules of the American Arbitration Association then in effect.
The arbitrator shall be chosen mutually by the parties and shall not have
jurisdiction or authority to change, add to or subtract from any of the
provisions of this Agreement. The arbitration decision shall be final and
binding and judgment may be entered on the arbitrator's award in any court
having jurisdiction. In the event the parties cannot decide on an arbitrator,
the American Arbitration Association shall empanel three arbitrators as it shall
select in accordance with its then applicable rules who shall hear the
controversy and decide all issues by majority vote.

            (b)   In the event proceedings are brought to enforce any provision
in the Agreement and the Executive prevails, then he shall be entitled to
recover from NPFS his reasonable costs and expenses of the proceeding, including
reasonable fees and disbursement of counsel and what would otherwise be the
Executive's portion of the costs of arbitration. If NPFS prevails, then each
party shall be responsible for his/its respective costs, expenses and attorney
fees and the costs of arbitration shall be divided equally. In the event it is
determined that the Executive is entitled to compensation, legal fees and
expenses hereunder, he also shall be entitled to interest thereon, payable to
him at the prime rate of interest of National Bank of Detroit, as in effect from
time to time during the period from the date such amounts should have been paid
to the date of actual payment. For purposes of determining the date when legal
fees and expenses are payable, such amounts are not due until thirty (30) days
after notification to NPFS of such amounts.

      12.   Successors: Binding Agreement.

            (a)   NPFS shall require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of NPFS, by agreement in form and substance
satisfactory to the Executive, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that NPFS would be required
to perform this Agreement if no such succession had taken place. As used in this
Agreement, "NPFS"


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shall mean NPFS as hereinbefore defined, and any successor to its business
and/or assets as aforesaid, which successor executes and delivers the agreement
provided for in this Section 12 or which otherwise becomes bound by all the
terms and provisions of this Agreement by operation of law.

            (b)   This Agreement and all rights of the Executive hereunder shall
inure to the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.

      13.   Notices. Any notices to be given hereunder by either party to the
other may be effected either by personal delivery in writing or by mail,
registered or certified, postage prepaid with return receipt requested. Mailed
notices shall be addressed to the parties at the following addresses, but each
party may change his address by written notice in accordance with this
paragraph. Notices delivered personally shall be deemed communicated as of
actual receipt; notices mailed by certified or registered mail shall be deemed
communicated as of actual receipt; notices mailed first class shall be deemed
communicated as of two (2) days after mailing:

                      To NPFS:     28819 Franklin Road, Suite 300
                                   Southfield, MI 48034
                                   Attn: Stephen C. June
                                         General Counsel and Secretary


                      To Executive:      B. Matthew Petcoff
                                         1210 Falcon
                                         Troy, MI 48098

      14.   Entire Agreement. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto with respect
to the employment of the Executive by NPFS and contains all of the covenants and
agreements between the parties with respect to such employment in any manner
whatsoever. Each party to this Agreement acknowledges that no representations,
inducements, promises. or agreements, orally or otherwise, have been made by any
party or anyone acting on behalf of any party which are not embodied herein, and
that no other




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agreement, statement or promise not contained in this Agreement shall be valid
or binding. No modification of this Agreement shall be enforceable unless it is
in writing signed by both parties hereto. This Agreement is not assignable by
Executive and shall be governed by and construed in accordance with the laws of
Michigan.

      15.   Opportunity for Review. Executive acknowledges that he has had an
opportunity to consult with counsel separate from that of Company's prior to
execution of this Agreement.

      16.   Partial Invalidity. If any provision in this Agreement is held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall nevertheless continue in full force without being
impaired or invalidated in any way.


            IN WITNESS WHEREOF, the parties have executed this Agreement
effective as of October 1, 1993.

                                      "NPFS"
                                      NORTH POINTE FINANCIAL SERVICES,
                                      INC., a Michigan corporation

                                      By: /s/ Stephen C. June
                                          -------------------------------------
                                          STEPHEN C. JUNE
                                          Secretary

                                      "EXECUTIVE"

                                      /s/ B. Matthew Petcoff
                                      ------------------------------------------
                                      B. MATTHEW PETCOFF











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