Document:

Exhibit 10.3

 

EMPLOYMENT
AGREEMENT

 

This Employment Agreement, dated as of November 8,
2004 (this “Agreement”), is by and between Daniel F. Crimmins (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;

 

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 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 the date hereof 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));

 

(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

 

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to the requirements for
advance notice and an opportunity to cure provided in this Agreement, if and to
the extent applicable.

 

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

 

(i)            upon the death of Executive;

 

(ii)           in the event that because of physical
or mental disability the Executive is unable to perform, and does not perform,
in the view of the Company, and as certified 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)          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

 

(iv)          as a result of the Company’s willful
and material violation of this Agreement, the Stockholders 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.

 

(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 Stockholders 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.

 

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(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;

 

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)(iii) or (iv),

 

(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 any expense reimbursement
payments owed to the Executive, and (B) within five business days after the
date of termination or, if later, within 30 days after the issuance of audited
financial statements for the Company for the prior year, any earned but unpaid
annual bonus payments relating to the prior year (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”),

 

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

 

(iii)          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.  If the
Company provides or arranges to provide the Executive and covered dependents
with life and health insurance benefits, those benefits will be reduced to the
extent comparable benefits are received by, or made available to, the Executive
(at no greater cost to the Executive) by another employer during the Severance
Period following the Executive’s date of termination.  The Executive must report to the Company any
such benefits that he receives or that are made available.  In lieu of the benefits described in this Section
3(f)(iii), the Company, in its sole discretion, may elect to pay or cause
to be paid to the Executive a lump sum cash payment equal to the monthly
premiums that would have been paid to provide such benefits to the Executive
for each month such coverage is not provided under this Section 3(f)(iii).  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)(iii) or (iv),

 

(i)            the Company shall pay or cause to be
paid to the Executive any 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 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)          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.  If the Company provides or arranges to
provide the Executive and covered dependents with life and health insurance
benefits, those benefits will be reduced to the extent comparable benefits are
received by, or made available to, the Executive (at no greater cost to the
Executive) by another employer during the two (2) year period following the
Executive’s date of termination.  The
Executive must report to the Company any such benefits that he receives or that
are made available.  In lieu of the
benefits described in this Section 3(g)(iii), the Company, in its sole
discretion, may elect to pay or cause to be paid to the Executive a lump sum
cash

 

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payment equal to the
monthly premiums that would have been paid to provide such benefits to the
Executive for each month such coverage is not provided under this Section
3(g)(iii).  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;

 

(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)          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.  If the Company provides or arranges to
provide the Executive and covered dependents with life and health insurance
benefits, those benefits will be reduced to the extent comparable benefits are
received by, or made available to, the Executive (at no greater cost to the
Executive) by another employer during the three (3) month period following the
Executive’s date of termination.  The
Executive must report to the Company any such benefits that he receives or that
are made available.  In lieu of the
benefits described in this Section 3(h)(iii), the Company, in its sole
discretion, may elect to pay or cause to be paid to the Executive a lump sum
cash payment equal to the monthly premiums that would have been paid to provide
such benefits to the Executive for each month such coverage is not provided
under this Section 3(h)(iii).  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) or (ii),

 

(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;

 

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

 

(iii)          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

 

6

 

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.  If the Company provides or arranges to
provide the Executive and covered dependents with life and health insurance
benefits, those benefits will be reduced to the extent comparable benefits are
received by, or made available to, the Executive (at no greater cost to the
Executive) by another employer during the one (1) year period following the
Executive’s date of termination.  The
Executive must report to the Company any such benefits that he receives or that
are made available.  In lieu of the
benefits described in this Section 3(i)(iii), the Company, in its sole
discretion, may elect to pay or cause to be paid to the Executive a lump sum
cash payment equal to the monthly premiums that would have been paid to provide
such benefits to the Executive for each month such coverage is not provided
under this Section 3(i)(iii).  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)(iii) 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 22,
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.  If Executive thereafter obtains alternative
employment, then if and to the extent Executive obtains such employment, the
payment obligations under Section 3(f), including the obligation to
provide insurance coverage, if any, will be mitigated and reduced by and to the
extent of Executive’s compensation under such alternative employment during the
period for which payments are owed pursuant to Section 3(f).  Moreover, in the event that after the
Restricted

 

7

 

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
be required to have executed a complete release of the Companies and related
parties in such form as is reasonably required by the Company, and any waiting
periods contained in such release shall have expired.

 

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
$245,000 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. 
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.  If the Board of
Directors of the Company or a committee thereof decides to pay a bonus, it is
to be paid within 30 days after the issuance of audited financial statements
for the Company.

 

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.

 

6.             Benefits

 

(a)           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.

 

(b)           In recognition of the use of an
automobile for the efficient and expeditious performance of the Executive’s
duties and obligations on behalf of the Company, the Company,

 

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at its cost, shall supply
to the Executive for such use an automobile of such make and model and upon
such terms and conditions as the Board of Directors shall determine from time
to time.

 

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 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

 

9

 

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.  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.

 

(c)           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

 

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
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.

 

(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

 

11

 

(“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.  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 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.  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

 

12

 

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 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.

 

13

 

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

 

“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 Daniel F. Crimmins 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.

 

“Stockholders Agreement” means the Stockholders
Agreement, dated as of October 16, 2001, by and between Safety Holdings, Inc.
and the stockholders signatory thereto.

 

“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 by certified or

 

14

 

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:

  	
  Daniel F.
  Crimmins

  
	
   

  	
  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
  F. 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.

 

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.

 

15

 

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.

 

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.

 

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, that certain Employment Agreement, dated October 16, 2001,
between Executive and Safety Insurance Company.

 

16

 

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.

 

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

 

	
   

  	
  EXECUTIVE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ DANIEL F. CRIMMINS

  	
   

  
	
   

  	
  Name: 

  	
  Daniel F.
  Crimmins

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SAFETY INSURANCE GROUP, INC.:

  
	
   

  	
   

  
	
   

  	
  /s/ DAVID F. BRUSSARD

  	
   

  
	
   

  	
  Name:

  	
  David F.
  Brussard

  
	
   

  	
  Title:

  	
  President, CEO
  and Chairman of the Board

  
				

 

17Exhibit
10.4

 

EMPLOYMENT
AGREEMENT

 

This Employment Agreement, dated as of November 8,
2004 (this “Agreement”), is by and between Robert J. Kerton (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;

 

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 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 the date hereof 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));

 

(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

 

2

 

to the requirements for
advance notice and an opportunity to cure provided in this Agreement, if and to
the extent applicable.

 

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

 

(i)            upon the death of Executive;

 

(ii)           in the event that because of physical
or mental disability the Executive is unable to perform, and does not perform,
in the view of the Company, and as certified 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)          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

 

(iv)          as a result of the Company’s willful
and material violation of this Agreement, the Stockholders 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.

 

(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 Stockholders 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.

 

3

 

(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;

 

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)(iii) or (iv),

 

(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 any expense reimbursement
payments owed to the Executive, and (B) within five business days after the
date of termination or, if later, within 30 days after the issuance of audited
financial statements for the Company for the prior year, any earned but unpaid
annual bonus payments relating to the prior year (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”),

 

4

 

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

 

(iii)          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.  If the
Company provides or arranges to provide the Executive and covered dependents
with life and health insurance benefits, those benefits will be reduced to the
extent comparable benefits are received by, or made available to, the Executive
(at no greater cost to the Executive) by another employer during the Severance
Period following the Executive’s date of termination.  The Executive must report to the Company any
such benefits that he receives or that are made available.  In lieu of the benefits described in this Section
3(f)(iii), the Company, in its sole discretion, may elect to pay or cause
to be paid to the Executive a lump sum cash payment equal to the monthly
premiums that would have been paid to provide such benefits to the Executive
for each month such coverage is not provided under this Section 3(f)(iii).  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)(iii) or (iv),

 

(i)            the Company shall pay or cause to be
paid to the Executive any 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 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)          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.  If the Company provides or arranges to
provide the Executive and covered dependents with life and health insurance
benefits, those benefits will be reduced to the extent comparable benefits are
received by, or made available to, the Executive (at no greater cost to the
Executive) by another employer during the two (2) year period following the
Executive’s date of termination.  The
Executive must report to the Company any such benefits that he receives or that
are made available.  In lieu of the
benefits described in this Section 3(g)(iii), the Company, in its sole
discretion, may elect to pay or cause to be paid to the Executive a lump sum
cash

 

5

 

payment equal to the
monthly premiums that would have been paid to provide such benefits to the
Executive for each month such coverage is not provided under this Section
3(g)(iii).  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;

 

(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)          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.  If the Company provides or arranges to
provide the Executive and covered dependents with life and health insurance
benefits, those benefits will be reduced to the extent comparable benefits are
received by, or made available to, the Executive (at no greater cost to the
Executive) by another employer during the three (3) month period following the
Executive’s date of termination.  The
Executive must report to the Company any such benefits that he receives or that
are made available.  In lieu of the
benefits described in this Section 3(h)(iii), the Company, in its sole
discretion, may elect to pay or cause to be paid to the Executive a lump sum
cash payment equal to the monthly premiums that would have been paid to provide
such benefits to the Executive for each month such coverage is not provided
under this Section 3(h)(iii).  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) or (ii),

 

(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;

 

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

 

(iii)          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

 

6

 

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.  If the Company provides or arranges to
provide the Executive and covered dependents with life and health insurance
benefits, those benefits will be reduced to the extent comparable benefits are
received by, or made available to, the Executive (at no greater cost to the
Executive) by another employer during the one (1) year period following the
Executive’s date of termination.  The
Executive must report to the Company any such benefits that he receives or that
are made available.  In lieu of the
benefits described in this Section 3(i)(iii), the Company, in its sole
discretion, may elect to pay or cause to be paid to the Executive a lump sum
cash payment equal to the monthly premiums that would have been paid to provide
such benefits to the Executive for each month such coverage is not provided
under this Section 3(i)(iii).  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)(iii) 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 22,
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.  If Executive thereafter obtains alternative
employment, then if and to the extent Executive obtains such employment, the
payment obligations under Section 3(f), including the obligation to
provide insurance coverage, if any, will be mitigated and reduced by and to the
extent of Executive’s compensation under such alternative employment during the
period for which payments are owed pursuant to Section 3(f).  Moreover, in the event that after the
Restricted

 

7

 

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
be required to have executed a complete release of the Companies and related
parties in such form as is reasonably required by the Company, and any waiting
periods contained in such release shall have expired.

 

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
$175,000 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. 
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.  If the Board of
Directors of the Company or a committee thereof decides to pay a bonus, it is
to be paid within 30 days after the issuance of audited financial statements
for the Company.

 

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.

 

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.

 

8

 

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 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)

 

9

 

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.  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

 

10

 

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 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.

 

(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.  If the
Gross-Up Payment exceeds the amount

 

11

 

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 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.  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

 

12

 

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 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.

 

13

 

“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 Robert J. Kerton 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.

 

“Stockholders Agreement” means the Stockholders
Agreement, dated as of October 16, 2001, by and between Safety Holdings, Inc.
and the stockholders signatory thereto.

 

“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 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):

 

14

 

 

	
  If to Executive:

  	
  Robert J. Kerton

  
	
   

  	
  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
  F. 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.

 

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.

 

15

 

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.

 

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.

 

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, that certain Employment Agreement, dated October 16, 2001,
between Executive and Safety Insurance Company.

 

16

 

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.

 

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

 

	
   

  	
  EXECUTIVE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ ROBERT J. KERTON

  	
   

  
	
   

  	
  Name:

  	
  Robert J. Kerton

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SAFETY INSURANCE GROUP, INC.:

  
	
   

  	
   

  
	
   

  	
  /s/ DAVID F. BRUSSARD

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  David F.
  Brussard

  
	
   

  	
  Title:

  	
  President, CEO
  and Chairman of the Board

  
						

 

17

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