Document:

EXHIBIT 10.36

Safety Insurance Group, Inc.

ANNUAL PERFORMANCE INCENTIVE PLAN

Section
1.  Establishment and Purpose

Safety Insurance Group, Inc. (hereinafter referred to
as the “Company”) hereby establishes a short-term incentive compensation plan
to be known as the “Safety Insurance Group, Inc. Annual Performance Incentive
Plan” (hereinafter referred to as the “Plan”).

The purpose of the Plan is to provide designated key
executive employees of the Company with meaningful financial rewards for the
accomplishment of financial and strategic objectives of the Company.  Awards payable under the Plan are intended to
constitute “performance-based compensation” under Section 162(m) of the Code
and regulations promulgated thereunder, and the Plan shall be construed consistently
with such intention.

Section
2.  Definitions

Unless
the context requires otherwise, the following words, when capitalized, shall
have the meanings ascribed below:

(a)                                  “Board”
means the Board of Directors of the Company.

(b)                                 “Code”
means the Internal Revenue Code of 1986, as amended.

(c)                                  “Committee”
means the Compensation Committee of the Board of Directors.

(d)                                 “Company”
means Safety Insurance Group, Inc.

(e)                                  “Covered
Employee” shall have the meaning set forth in Section 162(m) of the Code.

(f)                                    “Participant”
means (i) each Covered Employee and (ii) each other executive officer selected
by the Committee to participate in the Plan.

(g)                                 “Performance
Period” means the fiscal year of the Company or such other periods as may be
designated by the Committee.

(h)                                 “Plan”
means the Safety Insurance Group, Inc. Annual Performance Incentive Plan, as
may be amended from time to time.

(i)                                     “Subsidiary”
means any corporation in which the Company owns, directly or indirectly, at
least fifty percent (50%) of the total combined voting power of all classes of
stock, or any other entity (including, but not limited to, partnerships and
joint ventures) in which the Company owns, directly or indirectly, at least
fifty percent (50%) of the combined equity thereof.

Section 3. 
Administration

The Plan shall be administered by the Compensation
Committee of the Board of Directors.  The
Committee shall have responsibility to construe and interpret the Plan;
provided, however, that in no event shall the Plan be interpreted in a manner
which would cause any award to a Covered Employee to fail to qualify as
performance-based compensation under Section 162(m) of the Code.  The Committee shall establish the performance
objectives for any Performance Period in accordance with Section 5 and certify
whether such performance objectives have been achieved.  Any determination made or decision or action
taken or to be taken by the Committee, arising out of or in connection with the
construction, administration, interpretation and effect of the Plan and of its
rules and regulations, shall, to the fullest extent permitted by law (but
subject to the limitations on the discretion of the Committee applicable to
awards intended to qualify as performance-based compensation under Section
162(m) of the Code) be within the Committee’s absolute discretion and shall be
conclusive and binding on all persons, including the Company, its Subsidiaries,
its stockholders, the Participants and their estates and beneficiaries.

The
Committee may employ such legal counsel, consultants and agents (including
counsel or agents who are employees of the Company) as it may deem desirable to
assist with the administration of the Plan and may rely upon any opinion
received from any such counsel, consultant or agent and any computation
received from such consultant or agent. 
All expenses incurred in the administration of the Plan, including,
without limitation, for the engagement of any counsel, consultant or agent,
shall be paid by the Company.  No member
or former member of the Board or the Committee shall be liable for any act,
omission, interpretation, construction or determination made in connection with
the Plan other than as a result of such individual’s willful misconduct.

Section 4. 
Eligibility

Eligibility under the Plan is limited to Participants
designated by the Committee, in its sole and absolute discretion.  In addition to Covered Employees, the
Committee may designate as a Participant in the Plan any “executive officer” of
the Company, as such term is defined in Rule 3b-7 of the Securities Exchange
Act of 1934.  Members of the Board who
are not employees of the Company shall not be eligible to participate in the
Plan.

Section
5.  Determination of Incentive Awards

(a)                                  Designation of Participants, Performance Period and
Performance Criteria.  On or
before the end of the first 90 days of each Performance Period (or such other
date as may be required or permitted under Section 162(m) of the Code), the
Committee shall select the Participants to whom incentive awards shall be
granted, designate the applicable Performance Period, establish the Target
Incentive Bonus for each Participant, and

establish the performance
objective or objectives that must be satisfied in order for a Participant to
receive an incentive award for such Performance Period.  Any such performance objectives will be based
upon the relative or comparative achievement of one or more of the following
criteria, as determined by the Committee:

	
  

  	
  (i)

  	
   

  	
  net income,

  
	
   

  	
  (ii)

  	
   

  	
  earnings before income taxes,

  
	
   

  	
  (iii)

  	
   

  	
  earnings per share,

  
	
   

  	
  (iv)

  	
   

  	
  return on shareholders equity,

  
	
   

  	
  (v)

  	
   

  	
  expense management,

  
	
   

  	
  (vi)

  	
   

  	
  profitability of an identifiable business unit or
  product,

  
	
   

  	
  (vii)

  	
   

  	
  ratio of claims to revenues,

  
	
   

  	
  (viii)

  	
   

  	
  revenue growth,

  
	
   

  	
  (ix)

  	
   

  	
  earnings growth,

  
	
   

  	
  (x)

  	
   

  	
  total shareholder return,

  
	
   

  	
  (xi)

  	
   

  	
  cash flow,

  
	
   

  	
  (xii)

  	
   

  	
  return on assets,

  
	
   

  	
  (xiii)

  	
   

  	
  pretax operating income,

  
	
   

  	
  (xiv)

  	
   

  	
  net economic profit (operating earnings minus a
  charge for capital),

  
	
   

  	
  (xv)

  	
   

  	
  customer satisfaction,

  
	
   

  	
  (xvi)

  	
   

  	
  agency satisfaction,

  
	
   

  	
  (xvii)

  	
   

  	
  employee satisfaction,

  
	
   

  	
  (xviii)

  	
   

  	
  quality of services,

  
	
   

  	
  (xix)

  	
   

  	
  strategic innovation, or

  
	
   

  	
  (xx)

  	
   

  	
  any combination of the foregoing.

  

 

 

(b)           Target Incentive Bonus.  Each Participant will have an incentive award
opportunity (the “Target Incentive Bonus”) that will be based on achieving the
target performance objectives established by the Committee.  The Target Incentive Bonus will be a
percentage of the Participant’s annual salary at the end of the Performance
Period.  If the performance objectives
established by the Committee are met at the target level, the Participant will
receive an incentive award equal to 100% of the Target Incentive Bonus.

(c)           Range of
Incentive Payouts.  The
incentive awards under this Plan can range between 50% and 150% of the Target
Incentive Bonus; provided, however, that the maximum incentive award that may
be paid to a Participant for any calendar year shall not exceed
$1,200,000.  This range will be
associated with the actual performance achieved by the Participant and the
Company as reviewed and approved by the Committee.

(d)           Determination
of Performance.  The
Participant will have a portion of his or her award linked to the financial and
business performance of the Company and a portion linked to his or her
individual performance and/or the performance of his or her corresponding
business unit.  The weighting

and goals will be
established by the Committee pursuant to Section 5(a) above; provided, however,
that except with respect to award opportunities for the Chief Executive Officer
(the “CEO”) of the Company, the Committee may receive input from the CEO with
respect to the foregoing.

(e)           Committee
Certification and Approval of Awards.  As soon as reasonably practicable after the
end of each Performance Period, the Committee will (i) determine whether the
performance objectives for the Performance Period have been satisfied, (ii)
determine the amount of the incentive award to be paid to each Participant for
such Performance Period and (iii) certify such determination in writing.  If the individual or Company does not meet
the minimum performance requirements, the Participant will receive no incentive
award for the specified Performance Period.

(f)            Committee
Discretion.  Notwithstanding
the foregoing, with respect to a Participant who is a Covered Employee, the
Committee retains the discretion to reduce or eliminate the amount of the
incentive award otherwise payable to such Participant under this Section
5.  In addition, with respect to a
Participant who is not a Covered Employee, the Committee retains the discretion
to increase, reduce or eliminate the amount of the incentive award otherwise
payable to such Participant under this Section 5.

(g)           Methodology
for Determinations.  In making
a determination under any part of this Section 5, the Committee shall give
consideration to such factors as it deems appropriate, including, without
limitation, the degree to which the established performance objectives have
been obtained and whether the Participant has materially contributed to the
overall results of the Company.  To
assist in making such determinations, the Committee may seek input from the CEO
(except with respect to the CEO’s own award) and may request such other advice
and recommendations as it deems appropriate.

Section
6.  Payment of Incentive Awards

(a)           General
Rule.  Except as otherwise
expressly provided hereunder, payment of any incentive amount determined under
Section 5 shall be made to each Participant as soon as practicable after the
Committee certifies that one or more of the applicable performance objectives
have been attained.  Any such payments
shall be made in cash or, at the discretion of the Committee, in an equivalent
value of shares of common stock of the Company.

(b)           Voluntary
Deferral.  Notwithstanding
Section 6(a), the Committee may permit a Participant to defer all or a portion
of an incentive award otherwise payable pursuant to the Participant’s timely
and validly made election made in accordance with such terms as the Company,
the Board or committee thereof may determine.

(c)           Change in
Control.  Upon the occurrence
of a Change in Control (as such term is defined in a Participant’s employment
agreement with the Company, or in the absence of such agreement, in the Safety
Insurance Group, Inc. 2002 Management Omnibus Incentive Plan, as amended from
time to time), all performance objectives for the then current Performance
Period shall be deemed to have been achieved at target levels of performance
and the Committee shall cause each Participant to be paid an amount in cash
based on such assumed performance prorated for the Performance Period as soon
as practicable but in no event later than 30 business days following the
occurrence of such Change in Control.

Section
7.  Termination of Employment

Unless otherwise
determined by the Committee, a Participant shall have no right to an incentive
award under the Plan for any Performance Period in which the Participant is not
actively employed by the Company or a Subsidiary on the last day of the
Performance Period to which such award relates.

Section
8. Amendment or Termination of the Plan 

The
Board or the Committee may at any time amend, suspend, discontinue or terminate
the Plan; provided, however, that no such action shall be effective without
approval by the shareholders of the Company to the extent necessary to continue
to qualify the amounts payable to Covered Employees as performance-based
compensation under Section 162(m). 
Notwithstanding the foregoing, no amendment, suspension, discontinuance
or termination of the Plan shall adversely affect the rights of any Participant
or beneficiary in respect of any award that the Committee has determined to be
payable to a Participant in accordance with the terms hereof or as to any
amounts awarded.

Section
9. General Provisions

(a)           Effective
Date and Duration of the Plan.  The
Plan shall be effective with respect to calendar years beginning on or after
January 1, 2006, subject to approval of the Plan by the shareholders of the
Company at the 2006 Annual Meeting.  The
Plan will remain in effect until such time as it shall be terminated by the
Board, pursuant to Section 8 above.

(b)           Designation
of Beneficiary.  Each
Participant may designate a beneficiary or beneficiaries (which beneficiary may
be an entity other than a natural person) to receive any payments which may be
made following the Participants death. 
Such designation may be changed or canceled at any time without the
consent of any such beneficiary.  Any
such designation, change or cancellation must be made in a form approved by the
Committee and shall not be effective until received by the Committee.  If no beneficiary has been named, or the
designated beneficiary or beneficiaries shall have predeceased the Participant,
the beneficiary shall

be the Participant’s
spouse or, if no spouse survives the Participant, the Participant’s
estate.  If a Participant designates more
than one beneficiary, the rights of such beneficiaries shall be payable in
equal shares, unless the Participant has designated otherwise.

(c)           No Right of
Continued Employment. Nothing contained in the Plan shall create any
rights of employment in any Participant or in any way affect the right and
power of the Company to discharge any Participant or otherwise terminate the
Participant’s employment at any time with or without cause or to change the
terms of employment in any way.

(d)           No
Limitations on Corporate Actions. Nothing contained in the Plan
shall be construed to prevent the Company from taking any corporate action
(including, without limitation, making provision for the payment of other
incentive compensation, whether payable in cash or otherwise, or whether
pursuant to a plan or otherwise) which is deemed by it to be appropriate or in
its best interest, whether or not such action would have an adverse effect on
any awards made under the Plan.  No
employee, beneficiary or other person shall have any claim against the Company
as a result of any such action.

(e)           No Right to
Specific Assets.  Nothing
contained in the Plan (including, without limitation, the provisions of Section
6 hereof) shall be construed to create in any Participant or beneficiary any
claim against, right to or lien on any particular assets of the Company or to
require the Company to segregate or otherwise set aside any assets or create
any fund to meet any of its obligations hereunder.

(f)            No
Contractual Right to Incentive. 
Nothing in this Plan shall be construed to give any Participant any
right, whether contractual or otherwise, to receive any incentive with respect
to any Performance Period unless and until the Committee shall have expressly
determined that such a Participant is entitled to receive such an award
pursuant to the terms of the Plan.

(g)           Non-alienation
of Benefits.  Except as
expressly provided herein, no Participant or beneficiary shall have the power
or right to sell, transfer, assign, pledge or otherwise encumber the
Participant’s interest under the Plan.

(h)           Withholding.  Any amount payable to a Participant or a
beneficiary under this Plan shall be subject to any applicable Federal, state
and local income and employment taxes and any other amounts that the Company is
required at law to deduct and withhold from such payment.

(i)            Severability.  If any provision of this Plan is held
unenforceable, the remainder of the Plan shall continue in full force and
effect without regard to such unenforceable provision and shall be applied as
though the unenforceable provision were not contained in the Plan.

(j)            Governing
Law.  To the extent not
preempted by federal law, the Plan shall be construed in accordance with and
governed by the laws of the state of New York, excluding any conflicts or
choice of law rule or principle that might otherwise refer construction or
interpretation of this Plan to the substantive law of another jurisdiction.

(k)           Code Section 409A Compliance.  To the extent applicable, it is intended that
this Plan and any incentive awards granted hereunder comply with the
requirements of Section 409A of the Code and any related regulations or other
guidance promulgated with respect to such Section by the U.S. Department of the
Treasury or the Internal Revenue Service (“Section 409A”).  Any provision that would cause the Plan or
any incentive award granted hereunder to fail to satisfy Section 409A shall
have no force or effect until amended to comply with Section 409A, which
amendment may be retroactive to the extent permitted by Section 409A.Exhibit 4.9

THIS INSTRUMENT AND THE RIGHTS AND OBLIGATIONS EVIDENCED HEREBY ARE
SUBORDINATE IN THE MANNER AND TO THE EXTENT SET FORTH IN THAT CERTAIN
SUBORDINATION AND INTERCREDITOR AGREEMENT (AS THE SAME MAY BE AMENDED OR
OTHERWISE MODIFIED FROM TIME TO TIME PURSUANT TO THE TERMS THEREOF, THE “SUBORDINATION  AGREEMENT”) DATED AS OF JANUARY 30, 2007,
AMONG STORM CAT ENERGY CORPORATION, A BRITISH COLUMBIA CORPORATION (“BORROWER”),
STORM CAT ENERGY (USA) CORPORATION, A COLORADO CORPORATION “STORM CAT (USA)”), JPMORGAN
CHASE BANK, N.A., AS GLOBAL ADMINISTRATIVE AGENT (THE “GLOBAL AGENT”), JPMORGAN
CHASE BANK, N.A., TORONTO BRANCH, AS CANADIAN ADMINISTRATIVE AGENT (THE
“CANADIAN AGENT”), ANY OTHER PERSON OR ENTITY PARTY THERETO AS A “SUBORDINATED
CREDITOR” TO THE INDEBTEDNESS (INCLUDING INTEREST) OWED BY THE COMPANIES TO THE
AGENT AND THE SENIOR LENDERS (AS DEFINED IN THE SUBORDINATION  AGREEMENT) PURSUANT TO THE SENIOR DEBT
DOCUMENTS (AS DEFINED IN THE SUBORDINATION AGREEMENT), INCLUDING WITHOUT LIMITATION,
PURSUANT TO THAT (I) CREDIT AGREEMENT, DATED AS OF JULY 28, 2006, AS AMENDED BY
THE FIRST AMENDMENT TO CREDIT AGREEMENT DATED AS OF AUGUST 29, 2006, AMONG
BORROWER, STORM CAT (USA), VARIOUS FINANCIAL INSTITUTIONS PARTY THERETO AS
LENDERS AND THE GLOBAL AGENT, AND (II) CREDIT AGREEMENT, DATED AS OF JULY 28,
2006, AMONG BORROWER, VARIOUS FINANCIAL INSTITUTIONS PARTY THERETO AS LENDERS,
THE CANADIAN AGENT, AND THE GLOBAL AGENT, AS SUCH CREDIT AGREEMENTS MAY BE
AMENDED, RESTATED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME AS
PERMITTED UNDER THE SUBORDINATION 
AGREEMENT, AND TO INDEBTEDNESS REFINANCING THE INDEBTEDNESS UNDER THAT
AGREEMENT AS PERMITTED BY THE SUBORDINATION 
AGREEMENT; AND EACH HOLDER OF THIS INSTRUMENT, BY ITS ACCEPTANCE HEREOF,
IRREVOCABLY AGREES TO BE BOUND BY THE PROVISIONS OF THE SUBORDINATION  AGREEMENT.

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), AND MAY NOT BE TRANSFERRED
UNLESS (I) SUCH SECURITIES HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE 1933
ACT, OR (II) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO IT
THAT SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER RULE 144
UNDER THE 1933 ACT OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS.

IN CANADA, UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF
THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE                                 
[NOTE: INSERT THE DATE THAT IS 4 MONTHS PLUS ONE (1) DAY AFTER ISSUANCE].

SERIES B
SUBORDINATED CONVERTIBLE NOTE DUE MARCH 31, 2012

	
  US$[                            ]

  	
  March
  [      ], 2007

  

 

FOR VALUE
RECEIVED, the undersigned STORM CAT ENERGY CORPORATION, a company incorporated under the
laws of the Province of British Columbia, Canada (together with its successors and assigns, (the “Company”),
hereby promises to pay to
[                                          ],
or its registered assigns (the “Holder”), the original principal sum of
[                                                            ]
AND NO/100 US DOLLARS
(US$                      ),
with interest thereon and Additional Amounts, if any, on the terms and
conditions set forth in the Purchase Agreement (as defined herein).

Payments of principal of,
interest on and any premium with respect to this Series B Subordinated
Convertible Note are to be made in accordance with Section 3 of the
Purchase Agreement (as defined below) and in lawful money of the United States
of America by check mailed and addressed to the registered Holder hereof by
certified or bank cashier’s check or wire transfer of immediately available
funds, at such address or to such account as such Purchaser specifies in
writing to the Company at least five Business Days before such payment is to be
made.

Notwithstanding any
provision to the contrary in this Series B Subordinated Convertible Note, the
Purchase Agreement or any other agreement, the Company shall not be required to
pay, and the Holder shall not be permitted to contract for, take, reserve,
charge or receive, any compensation which constitutes interest under applicable
law in excess of the maximum amount of interest permitted by law.

This Series B
Subordinated Convertible Note is one of a series of Series B Subordinated Convertible
Notes Due March 31, 2012, issued pursuant to the Series B Note Purchase
Agreement, dated as of January 19, 2007 (as from time to time amended, the “Purchase
Agreement”), among the Company, the other purchasers named therein, and is
entitled to the benefits thereof.  All
terms used herein shall have the meanings ascribed to them in the Purchase
Agreement.  Each Holder of this Series B
Subordinated Convertible Note will be deemed, by its acceptance hereof, to have
agreed to the provisions and to have made the representations and warranties
set forth in Article 6 of the Purchase Agreement.

This Series B
Subordinated Convertible Note is issuable as an instrument in registered form
within the meaning of Section 5f.103-1(c) of the United States Treasury regulations.  This Series B Subordinated Convertible Note
is transferable only by surrender hereof at the principal office of the Company
in Denver, Colorado, duly endorsed or accompanied by a written instrument of
transfer duly executed by the registered Holder of this Series B Subordinated
Convertible Note.

This Series B
Subordinated Convertible Note is also subject to mandatory and optional
conversion, in whole or from time to time in part, at the times and on the
terms specified in the Purchase Agreement, but not otherwise.

If an Event of Default as
defined in the Purchase Agreement occurs and is continuing, the unpaid
principal of this Series B Subordinated Convertible Note may be declared or
otherwise become 

due and payable in the
manner, at the price (including any applicable premium) and with the effect
provided in the Purchase Agreement.

The Company hereby
unconditionally waives any and all right to presentment, demand, protest or
notice of any kind (except as expressly required hereby or by the Purchase
Agreement) and any defenses to payment and/or any rights to setoff payment that
the Company may have against the
Holder or any other person, including any person who assigned this Series
B Subordinated Convertible Note to the
Holder.

Payments of principal,
interest on, Additional Amounts, if any, and any premium with respect to this
Series B Subordinated Convertible Note are not secured.

The
Company shall not effect any conversion of this Series B Subordinated
Convertible Note, and no Holder shall have the right to convert this Series B
Subordinated Convertible Note, to the extent that after giving effect to such
conversion, the beneficial owner of such common shares (together with such
Holder’s affiliates) would have acquired, through conversion of this Series B
Subordinated Convertible Note or otherwise, beneficial ownership of a number of
common shares that exceeds 9.99% (“Maximum
Percentage”) of the number of common shares outstanding immediately
after giving effect to such conversion. 
For purposes of the foregoing, beneficial ownership shall be calculated
as set forth in the Purchase Agreement. By written notice to the Company, the
Holder may from time to time increase or decrease the Maximum Percentage to any
other percentage not in excess of 19.99% nor below 9.99% as specified in such
notice; provided, that (I) any such increase or decrease will not be
effective until the sixty-first (61st) day after such written notice is delivered to
the Company, and (II) any such increase or decrease will apply only to the
Holder providing such written notice and not to any other holder of Series B
Subordinated Convertible Notes.

This Series B
Subordinated Convertible Note shall be governed by, and construed in accordance
with, the internal laws of the State of New York without regard to any
conflicts of law principles that would result in the application of the laws of
any other jurisdiction.  The Company
irrevocably submits to the exclusive jurisdiction of the courts of the State of
New York located in New York County and the United States District Court for
the Southern District of New York for the purpose of any suit, action,
proceeding or judgment relating to or arising out of this Agreement and the
transactions contemplated hereby. 
Service of process in connection with any such suit, action or
proceeding may be served on the Company anywhere in the world by the same
methods as are specified for the giving of notices under the Note Purchase
Agreement.  The Company irrevocably
consents to the jurisdiction of any such court in any such suit, action or
proceeding and to the laying of venue in such court.  The Company irrevocably waives any objection
to the laying of venue of any such suit, action or proceeding brought in such
courts and irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.

[Remainder Of Page Intentionally Blank; Signature Page
Follows]

 

	
  

  	
   

  	
  COMPANY:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  STORM CAT ENERGY CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name: J. Scott Zimmerman

  
	
   

  	
  Title:   President
  and Chief Executive Officer

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