Exhibit 10.3

 

FOREST OIL CORPORATION

PHANTOM STOCK UNIT AGREEMENT

 

THIS PHANTOM STOCK UNIT AGREEMENT (this “Agreement”) is made as of the         
day of                          (the “Date of Grant”), between Forest Oil
Corporation, a New York corporation (the “Company”), and [Employee Name] (the
“Employee”).

 

1.                                      Award.  Pursuant to the FOREST OIL
CORPORATION 2007 STOCK INCENTIVE PLAN, as amended (the “Plan”), the Company
hereby makes a grant of phantom stock units with respect to            shares of
the Company’s common stock, par value $.10 per share (the “Phantom Stock
Units”).  The Employee agrees that this award of Phantom Stock Units constitutes
a Phantom Stock Award under the Plan and shall be subject to all of the terms
and provisions of the Plan, including future amendments thereto, if any, which
is available on the Company’s intranet at the following site: http://corpweb1/.
For paper copies of the Plan and prospectus, the Employee may contact Stock
Administration, 707 Seventeenth Street, Suite 3600, Denver, CO  80202, or call
303.812.1502.  In the event of any conflict between the terms of this Agreement
and the terms of the Plan, the terms of the Plan shall control.

 

2.                                      Definitions.  Capitalized terms used in
this Agreement that are not defined below or in the body of this Agreement shall
have the meanings given to them in the Plan.  In addition to the terms defined
in the body of this Agreement, the following capitalized words and terms shall
have the meanings indicated below:

 

(a)                                 “Corporate Change” shall have the meaning of
the term “Change of Control” as set forth in the Severance Agreement, or if
there is no Severance Agreement or the Severance Agreement contains no such
definition, “Corporate Change” mean the occurrence of any one or more of the
following events:

 

(i)                                     the Company shall not be the surviving
entity in any merger, consolidation or other reorganization (or survives only as
a subsidiary of an entity other than a previously wholly-owned subsidiary of the
Company);

 

(ii)                                  the Company sells, leases or exchanges all
or substantially all of its assets to any other person or entity (other than a
wholly-owned subsidiary of the Company);

 

(iii)                               the Company is to be dissolved and
liquidated;

 

(iv)                              any person or entity, including a “group” as
contemplated by Section 13(d)(3) of the Exchange Act, acquires or gains
ownership or control (including, without limitation, power to vote) of more than
30% of the outstanding shares of the Company’s voting stock (based upon voting
power); or

 

(v)                             as a result of or in connection with a contested
election of directors, the persons who were directors of the Company before such
election shall cease to constitute a majority of the Board.

 

Confidential

 

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Notwithstanding the foregoing, the term “Corporate Change” shall not include any
reorganization, merger or consolidation involving solely the Company and one or
more previously wholly-owned subsidiaries of the Company.

 

(b)                                 “Disability” shall have the meaning set
forth in the Severance Agreement, or if there is no Severance Agreement or the
Severance Agreement contains no such definition, “Disability” shall mean that,
as a result of the Employee’s incapacity due to physical or mental illness, the
Employee shall have been absent from the full-time performance of the Employee’s
duties for six consecutive months, and the Employee shall not have returned to
full-time performance of the Employee’s duties within 30 days after written
notice of termination is given to the Employee by the Company (provided,
however, that such notice may not be given prior to 30 days before the
expiration of such six-month period).

 

(c)                                  “Forfeiture Restrictions” shall have the
meaning set forth in the Severance Agreement, or if there is no Severance
Agreement or the Severance Agreement contains no such definition, “Forfeiture
Restrictions” shall have the meaning specified in Section 3(a) hereof.

 

(d)                                 “Involuntary Termination” shall have the
meaning set forth in the Severance Agreement, or if there is no Severance
Agreement or the Severance Agreement contains no such definition, “Involuntary
Termination” shall mean any termination of the Employee’s employment with the
Company which does not result from a resignation by the Employee; provided,
however, that the term “Involuntary Termination” shall not include a termination
as a result of death, Disability, or a termination of the Employee’s employment
by the Company by reason of the Employee’s unsatisfactory performance of the
Employee’s duties, to be determined by the Company in its sole discretion, or
final conviction of a misdemeanor involving moral turpitude or a felony.

 

(e)                                  “Severance Agreement” shall mean any
Severance Agreement solely between the Employee and the Company in effect as of
the date of this Agreement, as such may be amended or superseded from time to
time.

 

3.                                  Phantom Stock Units.  The Employee hereby
accepts the Phantom Stock Units and agrees with respect thereto as follows:

 

(a)                                 Forfeiture Restrictions.  The Phantom Stock
Units may not be sold, assigned, pledged, exchanged, hypothecated or otherwise
transferred, encumbered or disposed of, and in the event of termination of the
Employee’s employment with the Company for any reason other than death,
Disability, or Involuntary Termination, the Employee shall, for no
consideration, forfeit to the Company all Phantom Stock Units to the extent then
subject to the Forfeiture Restrictions.  The prohibition against transfer and
the obligation to forfeit and surrender Phantom Stock Units to the Company upon
termination of employment as provided in the preceding sentence are herein
referred to as the “Forfeiture Restrictions.”  The Forfeiture Restrictions shall
be binding upon and enforceable against any transferee of Phantom Stock Units.

 

(b)                                 Lapse of Forfeiture Restrictions.  Provided
that the Employee has been continuously employed by the Company from the Date of
Grant through the lapse date described in this sentence, the Forfeiture
Restrictions shall lapse with respect to 100% of the Phantom

 

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Stock Units on the earlier of (i) the third anniversary of the Date of Grant,
(ii) the date upon which a Corporate Change occurs if the successor entity does
not assume, convert or replace the Phantom Stock Units governed by this
Agreement with an equity or equity-based award that is substantially the same in
all material economic respects, (iii) the date upon which the Employee’s
employment with the Company is terminated by reason of death, Disability, or
Involuntary Termination, or (iv) at the Committee’s discretion, the date
determined by the Committee.  Any Phantom Stock Units with respect to which the
Forfeiture Restrictions do not lapse in accordance with the preceding sentence
shall be forfeited to the Company for no consideration as of the date of the
termination of the Employee’s employment with the Company.  For the avoidance of
doubt, if, in connection with a Corporate Change, the successor entity assumes,
converts or replaces this Agreement with an agreement that is substantially the
same in all material economic respects, any Forfeiture Restrictions continuing
after such Corporate Change with respect to such assumed, converted, or replaced
award shall lapse on the earliest to occur of (a) the lapse dates set forth
above or (b) the date of the Employee’s Involuntary Termination following such
Corporate Change.

 

(c)                                  Payments.  Subject to Section 4 hereof, as
soon as reasonably practicable after the lapse of the Forfeiture Restrictions
with respect to any Phantom Stock Units as provided in Section 3(b) hereof (but
in no event later than March 15 of the calendar year following the calendar year
in which the Forfeiture Restrictions so lapse), the Company shall pay to the
Employee with respect to each share of the Company’s common stock covered by
such Phantom Stock Unit an amount in cash equal to the Fair Market Value of one
share of the Company’s common stock determined as of the date the Forfeiture
Restrictions lapse.

 

(d)                                 Corporate Acts.  The existence of the
Phantom Stock Units shall not affect in any way the right or power of the Board
or the shareholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company’s capital
structure or its business, any merger or consolidation of the Company, any issue
of debt or equity securities, the dissolution or liquidation of the Company or
any sale, lease, exchange or other disposition of all or any part of its assets
or business or any other corporate act or proceeding.

 

4.                                      Withholding of Tax.  The Company may
withhold from any payment made pursuant to this Agreement all federal, state,
city and other taxes and withholdings as may be required pursuant to any law or
governmental regulation or ruling and all other customary deductions made with
respect to the Company’s employees generally.  The Employee acknowledges and
agrees that the Company is making no representation or warranty as to the tax
consequences to the Employee as a result of the receipt of the Phantom Stock
Units, the lapse of any Forfeiture Restrictions or the forfeiture of any Phantom
Stock Units pursuant to the Forfeiture Restrictions.

 

5.                                      Rights as Stockholder.  The Phantom
Stock Units represent an unsecured and unfunded right to receive a cash payment,
which right is subject to the terms, conditions and restrictions set forth in
this Agreement and the Plan.  Accordingly, the Employee will have no rights as a
shareholder with respect to any shares covered by Phantom Stock Units granted
under this Agreement.  Without limiting the scope of the preceding sentence, the
Employee will have

 

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no rights to vote or receive dividend equivalents with respect to any shares
covered by Phantom Stock Units granted under this Agreement.

 

6.                                      Employment Relationship.  For purposes
of this Agreement, the Employee shall be considered to be in the employment of
the Company as long as the Employee has not incurred a “separation from service”
with the Company within the meaning of Section 409A(a)(2)(A)(i) of the Code and
applicable administrative guidance issued thereunder.  Nothing in the adoption
of the Plan, nor the award of the Phantom Stock Units thereunder pursuant to
this Agreement, shall confer upon the Employee the right to continued employment
by the Company or affect in any way the right of the Company to terminate such
employment at any time.  Unless otherwise provided in a written employment
agreement or by applicable law, the Employee’s employment by the Company shall
be on an at-will basis, and the employment relationship may be terminated at any
time by either the Employee or the Company for any reason whatsoever or for no
reason, with or without cause or notice.  Any question as to whether and when
there has been a termination of such employment, and the cause of such
termination, shall be determined by the Committee or its delegate, and its
determination shall be final.

 

7.                                      Conditions to Plan Participation and
Receipt of Phantom Stock Units.  In consideration of the grant of the Phantom
Stock Units, and in order to protect the interests of the Company, its
Affiliates, and their respective equity holders and employees, the Employee
acknowledges and agrees that it is a condition precedent to his or her right to
participate in, continue to participate in, and receive benefits under the Plan
(including receipt of the Phantom Stock Units) that (a) the Employee shall at
all times comply with laws (whether domestic or foreign) applicable to the
Employee’s actions on behalf of the Company or any Affiliate, (b) the Employee
shall not commit any action that results in the Employee’s employment being
subject to a termination for cause, and (c) the Employee shall at all times
fully and faithfully comply with all material covenants and agreements set forth
in this Agreement.  By entering into this Agreement, the parties hereto agree
that the conditions to participation in the Plan set forth in this Section are
an essential component of the Plan and this Agreement, and it is their intent
that such conditions not be severed from the other terms and provisions of the
Plan and this Agreement.

 

8.                                      Notices.  Any notices or other
communications provided for in this Agreement shall be sufficient if in
writing.  In the case of the Employee, such notices or communications shall be
effectively delivered if hand delivered to the Employee at the Employee’s
principal place of employment or if sent by registered or certified mail to the
Employee at the last address the Employee has filed with the Company.  In the
case of the Company, such notices or communications shall be effectively
delivered if sent by registered or certified mail to the Company at its
principal executive offices.

 

9.                                      Parachute Payment.  If, in connection
with a Corporate Change, the lapse of Forfeiture Restrictions on one or more of
the Phantom Stock Units pursuant to this Agreement comprises part of any
“parachute payment” as defined in Code Section 280G(a)(2), the number of Phantom
Stock Units to which such accelerated lapse of Forfeiture Restrictions would
otherwise apply may be reduced in accordance with the terms of the Severance
Agreement, to the extent applicable.

 

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10.                               Entire Agreement; Amendment.  This Agreement
replaces and merges all previous agreements and discussions relating to the same
or similar subject matters between the Employee and the Company and constitutes
the entire agreement between the Employee and the Company with respect to the
subject matter of this Agreement.  This Agreement may not be modified in any
respect by any verbal statement, representation or agreement made by any
employee, officer, or representative of the Company or by any written agreement
unless signed by an officer of the Company who is expressly authorized by the
Company to execute such document.

 

11.                               Binding Effect.  This Agreement shall be
binding upon and inure to the benefit of any successors to the Company and all
persons lawfully claiming under the Employee.

 

12.                               Controlling Law.  This Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York, without regard to conflicts of law principles thereof, or, if applicable,
the laws of the United States.

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by
an officer thereunto duly authorized, and the Employee has executed this
Agreement, all as of the date first above written.

 

 

FOREST OIL CORPORATION

 

 

 

 

 

By:

 

 

 

[Name]

 

 

[Title]

 

 

 

 

 

EMPLOYEE

 

 

 

 

 

[Employee Name]

 

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