Exhibit 10.5


 


AMENDED AND RESTATED
EMPLOYMENT AGREEMENT


 


This Amended and Restated Employment Agreement, dated as of December 31,
2008 (this “Agreement”), is by and between David E. Krupa (the “Executive”)
and Safety Insurance Group, Inc., a Delaware corporation (the “Company”);


 


W  I  T
N  E  S  S  E  T  H:


 


WHEREAS, the Company wishes to obtain the future services of the
Executive for and on behalf of the Companies (as defined in Section 11);


 


WHEREAS, the Executive is willing upon the terms and conditions herein
set forth, to provide services to the Companies hereunder; and


 


WHEREAS, the Company wishes to secure the Executive’s non-interference
with the Companies’ business, upon the terms and conditions herein set forth;


 


WHEREAS, the Executive and the Company entered into an Employment
Agreement, dated November 8, 2004 (the “Prior Employment Agreement”);
and


 


WHEREAS, the Executive and the Company desire to amend and restate the
Prior Employment Agreement.


 


NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:


 


1.                                       Nature of
Employment


 


Subject to Section 3, the Company shall continue to employ
Executive, and Executive shall serve the Company, in accordance with the terms
of this Agreement, during the Term of Employment (as defined in Section 3(a)),
as Vice President of the Company with such duties and responsibilities as are
customarily assigned to an executive in such position and such other duties and
responsibilities not inconsistent therewith as may from time to time reasonably
be assigned to the Executive by the Board of Directors and/or Chairman of the
Board, President and Chief Executive Officer of the Company.  The Executive also agrees to serve without
additional compensation in such capacities (including, without limitation, as
an officer or director) with Company affiliates as the Board of Directors
and/or Chairman of the Board, President and Chief Executive Officer of the
Company may prescribe.  Upon termination
of the Executive’s employment with the Company, the Executive’s employment,
board membership or other service relationship with any Company affiliate shall
automatically terminate unless otherwise agreed to by the parties.


 

















 


2.                                       Extent of
Employment


 


(a)                                  During the Term
of Employment, the Executive shall perform his obligations hereunder faithfully
and to the best of his ability at the principal executive offices of the
Company, under the direction of the Board of Directors and/or Chairman of the
Board, President and Chief Executive Officer of the Company, and shall abide by
the rules, customs and usages from time to time established by the Companies.


 


(b)                                 During the Term
of Employment, the Executive shall devote all of his business time, energy and
skill as may be reasonably necessary for the performance of his duties,
responsibilities and obligations hereunder (except for vacation periods and
reasonable periods of illness or other incapacity), consistent with past
practices and norms in similar positions.


 


(c)                                  Nothing
contained herein shall require Executive to follow any directive or to perform
any act which would violate any laws, ordinances, regulations or rules of
any governmental, regulatory or administrative body, agent or authority, any
court or judicial authority, or any public, private or industry regulatory
authority (collectively, the “Regulations”).  Executive shall act in good faith in
accordance with all Regulations.


 


3.                                       Term of
Employment; Termination


 


(a)                                  The “Term of
Employment” shall commence on November 8, 2004 and shall continue
until December 31, 2007 (the “Initial Term”); provided,
that, (i) such term shall continue for the twelve month period following
such Initial Term, and for each twelve month period thereafter (each, an “Additional
Term”), unless at least 180 days prior to the scheduled expiration date of
the Initial Term or any Additional Term, either the Executive or the Company
notifies the other of its decision not to continue such term and (ii) should
the Executive’s employment by the Company be earlier terminated pursuant to Section 3(b) or
by the Executive pursuant to Section 3(c), the Term of Employment
shall end on the date of such earlier termination.


 


(b)                                 Subject to the
payments contemplated by Sections 3(f) through 3(i), the
Term of Employment may be terminated at any time by the Company:


 


(i)                                     upon the death
of Executive;


 


(ii)                                  in the event
that because of physical or mental disability Executive is unable to perform,
and does not perform, in the view of the Company and as certified in writing by
a competent medical physician, his duties hereunder for a continuous period of
three consecutive months or any sixty working days out of any consecutive six
month period;


 


(iii)                               for Cause (as
defined in Section 3(d)) or Material Breach (as defined in Section 3(e));


 


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(iv)                              upon the
continuous poor or unacceptable performance of the Executive’s duties to the
Companies (other than due to a physical or mental disability), which has
remained uncured for a period of 90 days after delivery of notice by the
Company to the Executive of such dissatisfaction with Executive’s performance,
which notice shall describe in reasonable detail the areas of dissatisfaction;
or


 


(v)                                 for any other
reason or no reason, it being understood that no reason is required.


 


Executive acknowledges that no representations or promises have been
made concerning the grounds for termination or the future operation of the
Companies’ business, and that nothing contained herein or otherwise stated by
or on behalf of any of the Companies modifies or amends the right of the
Company to terminate Executive at any time, with or without Material Breach or
Cause.  Termination shall become
effective upon the delivery by the Company to the Executive of notice
specifying such termination and the reasons therefor (i.e., Section 3
(b)(i)-(v)), subject to the requirements for advance notice and an
opportunity to cure provided in this Agreement, if and to the extent applicable.  Notwithstanding anything to the contrary in
this Agreement, for purposes of this Agreement, any reference to “termination,”
as it relates to a termination of the Executive’s employment, shall refer to a
termination of employment which constitutes a “separation from service” within
the meaning of Section 409A of the Internal Revenue Code of 1986, as
amended and the regulations promulgated thereunder (“Section 409A”).


 


(c)                                  Subject to the
payments contemplated by Section 3(f) and 3(i), the
Term of Employment may be terminated at any time by the Executive:


 


(i)                                     upon the death
of Executive;


 


(ii)                                  as a result of
a material reduction in Executive’s authority, perquisites, position or
responsibilities (other than such a reduction in perquisites which affects all
of the Company’s senior executives on a substantially equal or proportionate
basis), the relocation of the Company’s primary place of business or the
relocation of Executive by any of the Companies to another office more than 75
miles from Boston, Massachusetts, or the Company’s willful, material violation
of its obligations under this Agreement, in each case, after 60 days’ prior
written notice to the Company and its Board of Directors and the Company’s
failure thereafter to cure such reduction or violation; or


 


(iii)                               as a result of
the Company’s willful and material violation of this Agreement, the 2002
Management Omnibus Incentive Plan (the “Incentive Plan”), or any
agreement between Executive and any of the Companies pertaining to awards made
pursuant to the Incentive Plan or the Executive Incentive Compensation Plan, in
each case as such agreements or plans may be amended from time to time.


 


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(d)                                 For the
purposes of this Section 3, “Cause” shall mean any of the
following:


 


(i)                                     Executive’s
commission or conviction of any crime or criminal offense involving monies or
other property or any felony;


 


(ii)                                  Executive’s
commission or conviction of fraud or embezzlement;


 


(iii)                               Executive’s
material and knowing violation of any obligations imposed upon Executive,
personally, as opposed to upon the Company, whether as a stockholder or
otherwise, under this Agreement, the Incentive Plan or any other agreement
between the Executive, on the one hand, and any of the Companies, on the other
hand, the Amended and Restated Certificate of Incorporation, or the By-Laws of
the Company, in each case as may be amended from time to time; provided,
that the Executive has been given written notice describing any such violation
in reasonable detail and fails to cure the violation within 90 days from such
notice; or


 


(iv)                              Executive
engages in egregious misconduct involving serious moral turpitude to the extent
that Executive’s credibility and reputation no longer conform to the standard
of the Company’s executives.


 


(e)                                  For the
purposes of this Section 3, “Material Breach” shall mean
any of the following:


 


(i)                                     Executive’s
breach of any of his fiduciary duties to the Companies or their stockholders or
making of a willful misrepresentation or omission which breach,
misrepresentation or omission would reasonably be expected to materially
adversely affect the business, properties, assets, condition (financial or
other) or prospects of the Companies;


 


(ii)                                  Executive’s
willful, continual and material neglect or failure to discharge his duties,
responsibilities or obligations prescribed by this Agreement or any other
agreement between the Executive and any of the Companies (other than arising
solely due to physical or mental disability);


 


(iii)                               Executive’s
habitual drunkenness or substance abuse which materially interferes with
Executive’s ability to discharge his duties, responsibilities or obligations
prescribed by this Agreement or any other agreement between the Executive and
any of the Companies; and


 


(iv)                              Executive’s
willful and material violation of any non-competition, non-disparagement, or
confidentiality agreement with any of the Companies, including without
limitation, those set forth in Sections 7, 8 and 9 of this
Agreement, or any other agreements with any of the Companies;


 


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in
each case, for purposes of clauses (i) through (iv), after the Company or
the Board of Directors of the Company has provided Executive with 60 days’
written notice describing such circumstances and the possibility of a Material
Breach in reasonable detail, and Executive fails to cure such circumstances and
Material Breach within those 60 days.  No
act or omission shall be deemed willful if done, or omitted to be done, in good
faith by the Executive based upon a resolution duly adopted by the Company’s
Board of Directors.


 


(f)                                    In the event Executive’s
employment is terminated by the Company under any circumstances described in Section 3(b)(v) or
by Executive under the circumstances described in Section 3(c)(ii) or
(iii),


 


(i)                                     the Company
shall pay or cause to be paid to the Executive, (A) within five business
days after the date of termination, any earned but unpaid base salary and,
subject to the provisions of Section 5, any expense reimbursement payments
owed to the Executive, and (B) any earned but unpaid annual bonus payments
relating to the prior year to be paid in accordance with the terms and
conditions of the Safety Insurance Group, Inc. Annual Performance
Incentive Plan, or any successor plan thereto (collectively, the “Accrued
Obligations”);


 


(ii)                                  the Company
shall pay or cause to be paid to the Executive, within thirty business days
after the date of termination, a lump-sum payment equal to the annual base
salary the Executive would have received over the remaining Term of Employment
if his employment had not terminated, assuming for this purpose that a notice
not to extend the Term of Employment was provided on the date of termination
(the “Severance Period”), based on the Executive’s base salary in effect
immediately prior to the date of termination; and


 


(iii)                               subject to the
provisions of Section 5, during the Severance Period, the Company
will provide or cause to be provided to the Executive (and any covered
dependents), with life and health insurance benefits (but not disability
insurance benefits) substantially similar to those the Executive and any
covered dependents were receiving immediately prior to the date of termination
and at the same dollar cost to the Executive as in effect immediately prior to
the termination of employment.  Nothing
in this Section 3(f)(iii) will extend the COBRA continuation
coverage period.


 


(g)                                 In the event
the Executive’s employment is terminated within three years after a Change of
Control (provided the Term of Employment has not already expired) under any
circumstances described in Section 3(b)(v) or by Executive
under the circumstances described in Section 3(c)(ii) or (iii),


 


(i)                                     the Company
shall pay or cause to be paid to the Executive any Accrued Obligations in
accordance with Section 3(f)(i);


 


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(ii)                                  the Company
shall pay or cause to be paid to the Executive, within thirty business days
after the date of termination, a lump-sum payment equal to two (2) times
the sum of (A) the Executive’s annual base salary in effect immediately
prior to the date of termination and (B) the most recent annual bonus paid
to the Executive prior to the Change in Control; and


 


(iii)                               subject to the
provisions of Section 5, for a two (2) year period after the
date of termination, the Company will provide or cause to be provided to the
Executive (and any covered dependents), with life and health insurance benefits
(but not disability insurance benefits) substantially similar to those the
Executive and any covered dependents were receiving immediately prior to the
date of termination and at the same dollar cost to the Executive as in effect
immediately prior to the termination of employment.  Nothing in this Section 3(g)(iii) will
extend the COBRA continuation coverage period.


 


(h)                                 In the event
Executive’s employment is terminated by the Company under the circumstances
described in Section 3(b)(iv),


 


(i)                                     the Company
shall pay or cause to be paid to the Executive any Accrued Obligations in
accordance with Section 3(f)(i);


 


(ii)                                  the Company
shall pay or cause to be paid to the Executive, within thirty business days
after the date of termination, a lump-sum payment equal to three (3) months
base salary, based on the Executive’s base salary in effect immediately prior
to the date of termination; and


 


(iii)                               subject to the
provisions of Section 5, for a three (3) month period after
the date of termination, the Company will provide or cause to be provided to
the Executive (and any covered dependents), with life and health insurance
benefits (but not disability insurance benefits) substantially similar to those
the Executive and any covered dependents were receiving immediately prior to
the date of termination and at the same dollar cost to the Executive as in
effect immediately prior to the termination of employment.  Nothing in this Section 3(h)(iii) will
extend the COBRA continuation coverage period.


 


(i)                                     In the event
Executive’s employment is terminated by the Company under the circumstances
described in Section 3(b)(i) or (ii) or by the
Executive under Section 3(c)(i),


 


(i)                                     the Company
will pay or cause to be paid to the Executive (or the Executive’s estate or
representative, as the case may be) any Accrued Obligations in accordance with Section 3(f)(i);


 


(ii)                                  the Company
will pay or cause to be paid to the Executive (or the Executive’s estate or
representative, as the case may be), within thirty business days after the date
of termination, a lump-sum payment equal to 100% of the 


 


6

















 


Executive’s annual base salary in effect immediately prior to the date
of termination; and


 


(iii)                               subject to the
provisions of Section 5, for a one (1) year period after the date
of termination, the Company will provide or cause to be provided to the
Executive (and any covered dependents), with life and health insurance benefits
(but not disability insurance benefits) substantially similar to those the
Executive and any covered dependents were receiving immediately prior to the
date of termination and at the same dollar cost to the Executive as in effect
immediately prior to the termination of employment.  Nothing in this Section 3(i)(iii) will
extend the COBRA continuation coverage period.


 


(j)                                     In the event
Executive’s employment is terminated by the Company under any circumstances
described in Section 3(b)(iii) or by Executive as a result of
resignation or voluntary termination due to any circumstance other than the
material reductions, relocation or violations described in Section 3(c)(ii) above,
there will be no amounts owed to the Executive under Section 4 or
any other part of this Agreement, from and after the effectiveness of
termination.


 


(k)                                  The payments
and benefits required by Section 3(f), 3(g), 3(h) or 3(i), as
applicable, constitute severance and liquidated damages, and, except for
payments that may be required pursuant to Section 10, the Company
will be obligated to pay or cause to be paid any further amounts to Executive
under this Agreement or otherwise be liable to Executive in connection with any
termination.


 


(l)                                     All
determinations pursuant to this Section 3 shall be made by the
Company’s Board of Directors (not including Executive) in good faith.


 


(m)                               Termination of
the Term of Employment will not terminate Sections 7 through 10
and 12 through 23, or any other provisions not associated
specifically with the Term of Employment.


 


(n)                                 In the event
the Term of Employment is terminated and the Company is obligated to make or
cause to be made payments pursuant to Section 3(f), the Executive
will use his reasonable efforts to seek and obtain alternative employment; provided,
however, that the Executive shall not be required to accept a position
or positions of a substantially different character than the position(s) held
by him under this Agreement; and provided  further, if the
Executive shall become physically or mentally disabled, he will not be under
such duty.  Moreover, in the event that
after the Restricted Period pursuant to Section 8(a), Executive is
employed by or engaged in a Competitive Business as contemplated by Section 8(a)(i),
then the payments under Section 3(f) will thereupon cease.


 


(o)                                 Notwithstanding
any provision herein to the contrary, as a condition to payment of any amounts
or provision of any benefits pursuant to Sections 3(f) through 3(i) or
10 of this Agreement (other than due to the Executive’s death), the
Executive shall 


 


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be
required to have executed a complete release of the Companies and related
parties in such form as is reasonably required by the Company.  Subject to Section 3(p), all
payments and benefits under this Section 3 shall be paid or
commenced on the sixtieth (60th) day following the date of termination of the
Executive’s employment, provided that the release described in the preceding
sentence becomes irrevocable prior to such sixtieth (60th) day.


 


(p)                                 Notwithstanding the foregoing, if the Executive is a “specified employee”
within the meaning of Section 409A at the time of a termination, any
portion of the payments under this Section 3 due hereunder during
the first six months following the date of the Executive’s termination, to
extent that such payments constitute “deferred compensation” under Section 409A,
shall not be paid during such six-month period and instead shall be paid on the
first business day following the expiration of such six-month period.  The remaining portion of the payments due
hereunder shall be paid as provided in the applicable provisions of this Section 3.


 


4.                                       Compensation


 


The Company shall pay or cause to be paid to Executive the following
compensation:


 


(a)                                  During the Term
of Employment, the Company shall pay or cause to be paid to Executive as base
compensation for his services hereunder, in monthly installments, a base salary
at a rate of $185,000 per annum, as increased on an annual basis to reflect the
increase in the United States Cost of Living Index for All Urban Consumer
(CPI-U) for the Boston, Massachusetts area (the “CPI-U Index”). 
The January 2004 CPI-U Index shall provide the basis for calculations of
such increases.  Notwithstanding the
minimum increase set forth above, the Board of Directors of the Company or a
committee thereof may establish a higher compensation level.


 


(b)                                 During the Term
of Employment, the Company shall pay or cause to be paid to Executive an annual
bonus based on Executive’s performance, as determined and approved by the Board
of Directors of the Company or a committee thereof under the Safety Insurance
Group, Inc. Annual Performance Incentive Plan, or any successor
thereto.  Such bonus will be at the full
discretion of the Board of Directors of the Company or a committee thereof, and
may not be paid at all.  Executive acknowledges
that no bonus has been agreed upon or promised.


 


5.                                       Reimbursement
of Expenses


 


During the Term of Employment, the Company shall reimburse or cause
Executive to be reimbursed for documented travel, entertainment and other
expenses reasonably incurred by Executive in connection with the performance of
his duties hereunder and, in each case, in accordance with applicable rules,
customs and usages promulgated by the Companies from time to time in
effect.  All reimbursements and in-kind benefits provided under this Agreement,
shall be made or provided in accordance 


 


8

















 


with the requirements of Section 409A,
including, where applicable, the requirement that (a) any reimbursement
shall be for expenses incurred during a specified period, (b) the amount
of expenses eligible for reimbursement, or in-kind benefits provided, during a
calendar year may not affect the expenses eligible for reimbursement, or
in-kind benefits to be provided, in any other calendar year, (c) the
reimbursement of an eligible expense shall be made on or before the last day of
the calendar year following the year in which the expense is incurred (or such
earlier date if specified in this Agreement), and (d) the right to
reimbursement or in-kind benefits is not subject to liquidation or exchange for
another benefit.


 


6.                                       Benefits


 


During the Term of Employment, the Executive shall be entitled to
perquisites, paid vacations and benefits (including health, short and long term
disability, pension and life insurance benefits consistent with past practice,
or as increased from time to time) established from time to time, by the Board
of Directors of the Company for executives of the Companies, subject to the
policies and procedures in effect regarding participation in such benefits.


 


7.                                       Confidential
Information


 


During and after the Term of Employment, Executive will not, directly
or indirectly in one or a series of transactions, disclose to any person, or
use or otherwise exploit for the Executive’s own benefit or for the benefit of
anyone other than the Companies, any Confidential Information, whether prepared
by Executive or not; provided, however, that any Confidential
Information may be disclosed to officers, representatives, employees and agents
of the Companies who need to know such Confidential Information in order to
perform the services or conduct the operations required or expected of them in
the Business (as defined in Section 11).  Executive shall use his best efforts to
prevent the removal of any Confidential Information from the premises of the
Companies, except as required in his normal course of employment by the
Company.  Executive shall use
commercially reasonable efforts to cause all persons or entities to whom any
Confidential Information shall be disclosed by him hereunder to observe the
terms and conditions set forth herein as though each such person or entity was
bound hereby. Executive shall have no obligation hereunder to keep confidential
any Confidential Information if and to the extent disclosure of any thereof is
specifically required by law;  provided,
however, that in the event disclosure is required by applicable law, the
Executive shall provide the Companies with prompt notice of such requirement,
prior to making any disclosure, so that the Companies may seek an appropriate
protective order.  At the request of the
Companies, Executive agrees to deliver to the Companies, at any time during the
Term of Employment, or thereafter, all Confidential Information which he may
possess or control.  Executive agrees that all Confidential Information of
the Companies (whether now or hereafter existing) conceived, discovered or made
by him during the Term of Employment exclusively belongs to the Companies (and
not to Executive).  Executive will
promptly disclose such Confidential Information to the 


 


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Companies
and perform all actions reasonably requested by the Companies to establish and
confirm such exclusive ownership.


 


8.                                       Non-Interference


 


(a)                                  Executive
acknowledges that the services to be provided give him the opportunity to have
special knowledge of the Companies and their Confidential Information and the
capabilities of individuals employed by or affiliated with the Companies and that
interference in these relationships would cause irreparable injury to the
Companies.  In consideration of this
Agreement, Executive covenants and agrees that:


 


(i)                                     During the
Restricted Period (which shall not be reduced by any period of violation of this
Agreement by Executive or period which is required for litigation to enforce
the rights hereunder), Executive will not, without the express written approval
of the Board of Directors of the Company, anywhere in the Market, directly or
indirectly, in one or a series of transactions, own, manage, operate, control,
invest or acquire an interest in, or otherwise engage or participate in,
whether as a proprietor, partner, stockholder, lender, director, officer,
employee, joint venturer, investor, lessor, supplier, customer, agent,
representative or other participant, in any business which competes, directly
or indirectly, with the Business in the Market (“Competitive Business”)
without regard to (A) whether the Competitive Business has its office,
manufacturing or other business facilities within or without the Market, (B) whether
any of the activities of the Executive referred to above occur or are performed
within or without the Market or (C) whether the Executive resides, or
reports to an office, within or without the Market; provided, however,
that (x) the Executive may, anywhere in the Market, directly or
indirectly, in one or a series of transactions, own, invest or acquire an
interest in up to five percent (5%) of the capital stock of a corporation whose
capital stock is traded publicly, or that (y) Executive may accept
employment with a successor company to the Company.


 


(ii)                                  During the
Restricted Period (which shall not be reduced by any period of violation of
this Agreement by Executive or period which is required for litigation to
enforce the rights hereunder), Executive will not without the express prior
written approval of the Board of Directors of the Company (A) directly or
indirectly, in one or a series of transactions, recruit, solicit or otherwise
induce or influence any proprietor, partner, stockholder, lender, director,
officer, employee, sales agent, joint venturer, investor, lessor, supplier,
customer, agent, representative or any other person which has a business
relationship with the Companies or had a business relationship with the
Companies within the 24 month period preceding the date of the incident in
question, to discontinue, reduce or modify such employment, agency or business
relationship with the Companies, or (B) employ or seek to employ or cause
any Competitive Business to employ or seek to employ any person or agent who is
then (or was at any time within 24 months prior to the date the Executive or
the Competitive Business employs or seeks to employ such person) employed or
retained by the Companies.


 


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Notwithstanding the
foregoing, nothing herein shall prevent the Executive from providing a letter
of recommendation to an employee with respect to a future employment
opportunity.


 


(iii)                               The scope and
term of this Section 8 would not preclude Executive from earning a
living with an entity that is not a Competitive Business.


 


(b)                                 In the event
that Executive breaches his obligations in any material respect under Section 7,
this Section 8 or Section 9, the Company, in addition
to pursuing all available remedies under this Agreement, at law or otherwise,
and without limiting its right to pursue the same shall cease or cause to be
ceased all payments to the Executive under this Agreement or any other
agreement.


 


9.                                       Non-Disparagement


 


During and after the Term of Employment, the Executive agrees that he
shall not make any false, defamatory or disparaging statements about the
Companies or the officers or directors of the Companies.  During and after the Term of Employment, the
Company agrees, on behalf of the Companies that neither the officers nor the
directors of the Companies shall make any false, defamatory or disparaging
statements about the Executive.


 


10.                                 Excise Tax
Gross-up Payments


 


(a)                                  If any payments
or benefits paid or provided or to be paid or provided to the Executive or for
his benefit pursuant to the terms of this Agreement or otherwise in connection
with, or arising out of, his employment with the Company or the termination
thereof (a “Payment”) would be subject to the excise tax (the “Excise
Tax”) imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the “Code”), then the Executive will be entitled to receive an
additional payment (a “Gross-Up Payment”) in an amount such that after
payment by the Executive of all income taxes, employment taxes and any Excise
Tax imposed upon the Gross-Up Payment (including any related interest and
penalties), the Executive retains an amount of the Gross-Up Payment equal to
the Excise Tax (including any related interest and penalties) imposed upon the
Payments.


 


(b)                                 An initial
determination of whether a Gross-Up Payment is required pursuant to this
Agreement, and the amount of such Gross-Up Payment, will be made at the Company’s
expense by an accounting firm selected by the Company.  The accounting firm
will provide its determination, together with detailed supporting calculations
and documentation, to the Company and the Executive within 10 days after the
date of termination of Executive’s employment, or such other time as may be
requested by the Company or the Executive.  If the accounting firm
determines that no Excise Tax is payable by the Executive with respect to a
Payment or Payments, it will furnish the Executive with an opinion to that
effect.  If a Gross-Up Payment becomes payable, such Gross-Up Payment
shall be paid to the Executive within thirty business days of the receipt of
the accounting firm’s determination.  Within 10 days after the accounting
firm 


 


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delivers
its determination to the Executive, the Executive will have the right to
dispute the determination.  The existence
of a dispute will not in any way affect the Executive’s right to receive the
Gross-Up Payment in accordance with the determination.  If there is no dispute, the determination
will be binding, final, and conclusive upon the Company and the Executive.  If there is a dispute, the Company and the
Executive will together select a second accounting firm, which will review the
determination and the Executive’s basis for the dispute and then will render
its own determination, which will be binding, final, and conclusive on the
Company and on the Executive for purposes of determining whether a Gross-Up
Payment is required pursuant to this Section 10(b).  If as a result of any dispute pursuant to
this Section 10(b) additional Gross-Up Payments are made, such
additional Gross-Up Payment will be paid to the Executive within thirty
business days of the receipt of the second accounting firm’s
determination.  The Company will pay or
caused to be paid all costs associated with the second accounting firm’s
determination, unless such determination does not result in additional Gross-Up
Payments to the Executive, in which case all such costs will be borne by the
Executive.  Notwithstanding anything
contained herein to the contrary, any such Gross-Up Payment shall be paid no
later than the end of the Executive’s taxable year next following the Executive’s
taxable year in which the Executive remits the related taxes.


 


(c)                                  For purposes of
determining the amount of the Gross-Up Payment, the Executive will be deemed to
pay federal income taxes at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is to be made and
applicable state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Executive’s residence on the date of
termination of Executive’s employment, net of the maximum reduction in federal
income taxes that would be obtained from deduction of those state and local
taxes.


 


(d)                                 As a result of
the uncertainty in the application of Section 4999 of the Code, it is
possible that Gross-Up Payments which will not have been made should have been
made (“Underpayment”) or Gross-Up Payments are made which should not
have been made (“Overpayment”). 
If it is determined that an Underpayment has occurred, the accounting
firm shall determine the amount of the Underpayment that has occurred and any
such Underpayment (together with interest at the rate provided in Section 1274(b)(2)(B) of
the Code) shall be promptly paid to or for the benefit of Executive.  Notwithstanding anything contained herein to
the contrary, any such Underpayment shall be paid no later than the end of the
Executive’s taxable year next following the Executive’s taxable year in which
the Executive remits the related taxes. 
If the Gross-Up Payment exceeds the amount necessary to reimburse the
Executive for his Excise Tax, the Accounting Firm shall determine the amount of
the Overpayment that has been made and any such Overpayment (together with
interest at the rate provided in Section 1274(b)(2) of the Code)
shall be promptly paid by Executive (to the extent he has received a refund if
the applicable Excise Tax has been paid to the Internal Revenue Service) to or
for the benefit of the Company; provided, however, that if the Company
determines that such repayment obligation would be or result in an unlawful
extension of credit under Section 13(k) of the Securities Exchange
Act, repayment shall not be required. 
The Executive shall cooperate, to the extent his expenses are reimbursed
in 


 


12

















 


accordance
with this Section 10, with any reasonable requests by the Company in
connection with any contest or disputes with the Internal Revenue Service in
connection with the Excise Tax.


 


(e)                                  The Executive
shall notify the Company in writing of any claim by the Internal Revenue
Service that, if successful, would require the payment of an Underpayment.  Such notification shall be given as soon as
practicable but no later than ten (10) business days after the Executive
is informed in writing of such claim and shall apprise the Company of the
nature of such claim and the date on which such claim is requested to be
paid.  The Executive shall not pay such
claim prior to the expiration of the thirty (30) day period following the date
on which he gives such notice to the Company (or such shorter period ending on
the date that any payment of taxes with respect to such claim is due).  If the Company notifies the Executive in
writing prior to the expiration of such period that it desires to contest such
claim, the Executive shall:


 


(i)                                     give the
Company any information reasonably requested by the Company relating to such claim,


 


(ii)                                  take such
action in connection with contesting such claim as the Company shall reasonably
request in writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney reasonably selected
by the Company,


 


(iii)                               cooperate with
the Company in good faith in order effectively to contest such claim, and


 


(iv)                              permit the
Company to participate in any proceeding relating to such claim;


 


provided,
however, that the Company shall pay or cause to be paid all costs and expenses
(including additional interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive harmless, on an after-tax
basis, for any Excise Tax or income tax (including related interest and
penalties) imposed as a result of such representation and payment of costs and
expenses no later than 60 days after the end of the taxable year following the
year in which the Executive incurs such costs and expenses.  Without limitation on the foregoing
provisions of this Section 10(e), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that if the Company
directs the Executive to pay such claim and sue for a refund, such payment shall
be advanced to the Executive, on an interest-free basis and the Executive shall
be indemnified and held harmless, on an after-tax basis, from any 


 


13

















 


Excise
Tax or income tax (including related interest or penalties) imposed with
respect to such advance or with respect to any imputed income with respect to
such advance.  The Company’s control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.


 


(f)                                    If, after the
receipt by the Executive of an amount advanced pursuant to Section 10(e),
the Executive becomes entitled to receive any refund with respect to such
claim, the Executive shall (subject to the Company’s complying with the
requirements of Section 10(e)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon
after taxes applicable thereto).  If,
after the receipt by the Executive of an amount advanced pursuant to Section 10(e) hereof,
a determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of thirty (30) days after such determination, then such advance shall be
forgiven and shall not be required to be repaid.


 


11.                                 Definitions


 


Capitalized terms used in this Agreement but not otherwise defined
shall have the meanings set forth below:


 


“Business” means any business conducted, or engaged in, by the
Companies prior to the date hereof or at any time during the Term of Employment.


 


“Cause” is defined in
Section 3(c).


 


“Change of Control” means any of the following: (i) the
closing of any merger, combination, consolidation or similar business
transaction involving the Company in which the holders of Company Common Stock
immediately prior to such closing are not the holders, directly or indirectly,
of a majority of the ordinary voting securities of the surviving person in such
transaction immediately after such closing, (ii) the closing of any sale
or transfer by the Company of all or substantially all of its assets to an
acquiring person in which the holders of Company Common Stock immediately prior
to such closing are not the holders of a majority of the ordinary voting
securities of the acquiring person immediately after such closings, or (iii) the
closing of any sale by the holders of Company Common Stock of an amount of
Company Common Stock that equals or exceeds a majority of the shares of Company
Common Stock immediately prior to such closing to a person in which the holders
of the Company Common Stock immediately prior to such closing are not the
holders of a majority of the ordinary voting securities of such person
immediately after such closing.


 


“Companies” means the Company and its successors or any of its
direct or indirect parents or direct or indirect subsidiaries, now or hereafter
existing.


 


14

















 


“Company” is defined
in the introduction.


 


“Competitive Business”
is defined in Section 8(a)(i).


 


“Confidential Information” means any confidential information
including, without limitation, any study, data, calculations, software storage
media or other compilation of information, patent, patent application,
copyright, trademark, trade name, service mark, service name, “know-how”, trade
secrets, customer lists, details of client or consultant contracts, pricing
policies, operational methods, marketing plans or strategies, product
development techniques or plans, business acquisition plans or any portion or
phase of any scientific or technical information, ideas, discoveries, designs,
computer programs (including source of object codes), processes, procedures,
formulas, improvements or other proprietary or intellectual property of the
Companies, whether or not in written or tangible form, and whether or not
registered, and including all files, records, manuals, books, catalogues,
memoranda, notes, summaries, plans, reports, records, documents and other
evidence thereof.  The term “Confidential
Information” does not include, and there shall be no obligation hereunder
with respect to, information that becomes generally available to the public
other than as a result of a disclosure by the Executive not permissible
hereunder.


 


“Executive” means
David E. Krupa or his estate, if deceased.


 


“Market” means any state in the United States of America and
each similar jurisdiction in any other country in which the Business was
conducted by or engaged in by the Companies prior to the date hereof or is
conducted or engaged in, or in which the Companies are seeking authorization to
conduct Business at any time during the Term of Employment.


 


“Regulations” is
defined in Section 2(c).


 


“Restricted Period” means the date commencing on the date of
this Agreement and ending on the later of (x) the date of termination of
the Term of Employment or (y) the end of the applicable severance period
provided under Section 3(f); provided, however, that
the “Restricted Period” may be extended, in the sole discretion of the Company,
for an additional period of up to twenty-four (24) months if the Company
continues to pay or to cause to be paid to the Executive (i) the full
amounts to which he would be entitled as base compensation under Section 4(a) and
(ii) customary benefits, in each case during such extended period.


 


“Term of Employment”
is defined in Section 3(a).


 


12.                                 Notice


 


Any notice, request, demand or other communication required or
permitted to be given under this Agreement shall be given in writing and if
delivered personally, or sent 


 


15

















 


by
certified or registered mail, return receipt requested, as follows (or to such
other addressee or address as shall be set forth in a notice given in the same
manner):


 


	
   

  	
  If
  to Executive:

  	
  David
  E. Krupa

  
	
   

  	
   

  	
  c/o
  Safety Insurance Group, Inc.

  
	
   

  	
   

  	
  20
  Custom House Street

  
	
   

  	
   

  	
  Boston,
  Massachusetts 02110

  
	
   

  	
   

  	
   

  
	
   

  	
  If
  to Company:

  	
  Safety
  Insurance Group, Inc.

  
	
   

  	
   

  	
  20
  Custom House Street

  
	
   

  	
   

  	
  Boston,
  Massachusetts 02110

  
	
   

  	
   

  	
  Attention:  David Brussard

  



 


Any
such notices shall be deemed to be given on the date personally delivered or
such return receipt is issued.


 


13.                                 Executive’s
Representation


 


Executive hereby warrants and represents to the Company that Executive
has carefully reviewed this Agreement and has consulted with such advisors as
Executive considers appropriate in connection with this Agreement, and is not
subject to any covenants, agreements or restrictions, including without
limitation any covenants, agreements or restrictions arising out of Executive’s
prior employment which would be breached or violated by Executive’s execution
of this Agreement or by Executive’s performance of his duties hereunder.


 


14.                                 Other Matters


 


(a)                                  Executive
agrees and acknowledges that the obligations owed to Executive under this
Agreement are solely the obligations of the Company, and that none of the
Companies’ stockholders, directors, officers, affiliates, representatives,
agents or lenders will have any obligations or liabilities in respect of this
Agreement and the subject matter hereof.


 


(b)                                 Notwithstanding
anything contained herein to the contrary, the Companies may withhold from any
amounts payable under, or benefits provided pursuant to, this Agreement all
federal, state, local, and foreign taxes that are required to be withheld by
applicable laws or regulations.


 


(c)                                  In addition to
any obligations imposed by law upon any successor to the Company, the Company
will 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 the Company, to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place.


 


16

















 


15.                                 Validity


 


If, for any reason, any provision hereof shall be determined to be
invalid or unenforceable, the validity and effect of the other provisions
hereof shall not be affected thereby.


 


16.                                 Severability


 


Whenever possible, each provision of this Agreement will be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or any other jurisdiction, but this Agreement will be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein.  If any court determines that
any provision of Section 8 or any other provision hereof is
unenforceable and therefore acts to reduce the scope or duration of such
provision, the provision in its reduced form shall then be enforceable.


 


17.                                 Waiver of
Breach; Specific Performance


 


The waiver by the Company or Executive of a breach of any provision of
this Agreement by the other party shall not operate or be construed as a waiver
of any other breach of such other party. 
Each of the parties (and third party beneficiaries) to this Agreement
will be entitled to enforce its respective rights under this Agreement and to
exercise all other rights existing in its favor.  The parties hereto agree and acknowledge that
money damages may not be an adequate remedy for any breach of the provisions of
Sections 7,  8 and 9 of this Agreement and that any party
(and third party beneficiaries) may in its sole discretion apply to any court
of law or equity of competent jurisdiction for specific performance and/or
injunctive relief, including temporary restraining orders, preliminary
injunctions and permanent injunctions in order to enforce or prevent any
violations of the provisions of this Agreement. 
In the event either party takes legal action to enforce any of the terms
or provisions of this Agreement, the nonprevailing party shall pay the
successful party’s costs and expenses, including but not limited to, attorneys’
fees, incurred in such action.  If the
Executive prevails, the Company will reimburse the Executive’s legal fees no
later than 60 days after the end of the taxable year following the year in
which the Executive incurs such the costs and expenses.


 


18.                                 Assignment;
Third Parties


 


Neither the Executive nor the Company may assign, transfer, pledge,
hypothecate, encumber or otherwise dispose of this Agreement or any of his or
its respective rights or obligations hereunder, without the prior written
consent of the other.  The parties agree
and acknowledge that each of the Companies and the stockholders and investors
therein are intended to be third party beneficiaries of, and have rights and
interests in respect of, Executive’s agreements set forth in Sections 7,
8 and 9.


 


17

















 


19.                                 Amendment;
Entire Agreement


 


This Agreement may not be changed orally but only by an agreement in
writing agreed to by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought. 
This Agreement embodies the entire agreement and understanding of the
parties hereto in respect of the subject matter of this Agreement, and
supersedes and replaces all prior agreements, understandings and commitments
with respect to such subject matter, including, without limitation, the Prior Employment
Agreement and that certain Employment Agreement, dated October 16, 2001,
between Executive and Safety Insurance Company.


 


20.                                 Litigation


 


THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, APPLIED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, EXCEPT THAT NO
DOCTRINE OF CHOICE OF LAW SHALL BE USED TO APPLY ANY LAW OTHER THAN THAT OF
MASSACHUSETTS, AND NO DEFENSE, COUNTERCLAIM OR RIGHT OF SET-OFF GIVEN OR
ALLOWED BY THE LAWS OF ANY OTHER STATE OR JURISDICTION, OR ARISING OUT OF THE
ENACTMENT, MODIFICATION OR REPEAL OF ANY LAW, REGULATION, ORDINANCE OR DECREE
OF ANY FOREIGN JURISDICTION, BE INTERPOSED IN ANY ACTION HEREON.  EXECUTIVE AND THE COMPANY AGREE THAT ANY
ACTION OR PROCEEDING TO ENFORCE OR ARISING OUT OF THIS AGREEMENT SHALL BE
COMMENCED IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS LOCATED IN BOSTON,
MASSACHUSETTS OR THE UNITED STATES DISTRICT COURTS IN BOSTON,
MASSACHUSETTS.  EXECUTIVE AND THE COMPANY
CONSENT TO SUCH JURISDICTION, AGREE THAT VENUE WILL BE PROPER IN SUCH COURTS
AND WAIVE ANY OBJECTIONS BASED UPON FORUM NON CONVENIENS.  THE
CHOICE OF FORUM SET FORTH IN THIS SECTION 20 SHALL NOT BE DEEMED TO
PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OBTAINED IN SUCH FORUM OR THE TAKING
OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER JURISDICTION.


 


21.                                 Further Action


 


Executive and the Company agree to perform any further acts and to
execute and deliver any documents which may be reasonable to carry out the
provisions hereof.


 


22.                                 Counterparts


 


This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.


 


18

















 


23.                                 Section 409A


 


To the extent applicable, it is intended that this Plan comply with,
and should be interpreted consistent with, the requirements of Section 409A.


 


IN WITNESS WHEREOF, this Agreement has been executed as of the date
first written above.


 


	
   

  	
  EXECUTIVE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/David
  E. Krupa

  
	
   

  	
  Name: 

  	
  David
  E. Krupa

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SAFETY INSURANCE GROUP, INC.:

  
	
   

  	
   

  
	
   

  	
  /s/David
  F. Brussard

  
	
   

  	
  Name: 

  	
  David
  F. Brussard

  
	
   

  	
  Title: 

  	
  President,CEO
  and Chairman of the 

  
	
   

  	
   

  	
  Board

  
				



 


19