Document:

Exhibit 10.26

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement, dated as of October 1,
2005 (this “Agreement”), is by and between James D. Berry (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, 2008 (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
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

 

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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 Period

 

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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 $ 150,000 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 2005 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.

 

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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 James D. Berry or his estate,
if deceased.

 

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

 

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

 

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

 

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

 

12.                                 Notice

 

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

  	
  James D. Berry

  
	
   

  	
  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.

 

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/James D. Berry

  	
   

  
	
   

  	
  Name: James D. Berry

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SAFETY INSURANCE GROUP, INC.:

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/David F. Brussard

  	
   

  
	
   

  	
  Name: 

  	
  David F. Brussard

  
	
   

  	
  Title:

  	
  President, CEO and Chairman of the Board

  
					

 

17Exhibit 10.27

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement, dated as of October 1,
2005 (this “Agreement”), is by and between George M. Murphy (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, 2008 (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
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 $150,000 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 2005 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,

 

8

 

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 George M. Murphy or his
estate, if deceased.

 

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

 

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

 

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

 

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

 

12.                                 Notice

 

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

  	
  George M. Murphy

  
	
   

  	
  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.

 

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/George M. Murphy

  	
   

  
	
   

  	
  Name: George M. Murphy

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SAFETY INSURANCE GROUP, INC.:

  
	
   

  	
   

  
	
   

  	
  By 

  	
   

  	
  /s/David F. Brussard

  	
   

  
	
   

  	
  Name:

  	
  David F. Brussard

  
	
   

  	
  Title:

  	
  President, CEO and Chairman of the Board

  
					

 

17

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