Exhibit 10.1
Execution Copy
ASSET PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
INFINITY OIL & GAS OF WYOMING, INC.
(Seller)
AND
FOREST OIL CORPORATION
(Buyer)
Dated Effective October 1, 2007

 

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TABLE OF CONTENTS

         
 
    Page    
ARTICLE 1 PURCHASE AND SALE
    1  
1.1 Purchase and Sale
    1  
1.2 Assets
    1  
1.3 Excluded Properties
    2  
1.4 Effective Time
    3  
ARTICLE 2 PURCHASE PRICE
    3  
2.1 Purchase Price
    3  
2.2 Allocation of the Purchase Price
    3  
2.3 Adjustments to Purchase Price
    3  
ARTICLE 3 BUYER’S INSPECTION
    4  
3.1 Due Diligence Completed
    4  
ARTICLE 4 TITLE MATTERS
    5  
4.1 Existing Title Defects
    5  
4.2 Permitted Encumbrances
    5  
4.3 No Adjustments to Purchase Price
    6  
4.4 Preferential Rights and Consents
    6  
ARTICLE 5 ENVIRONMENTAL MATTERS
    7  
5.1 Definitions
    7  
5.2 Environmental Representation and Warranty
    7  
5.3 Environmental Assessment
    8  
5.4 Waiver of Environmental Defects
    8  
5.5 No Adjustments to Purchase Price
    8  
5.6 Environmental Liabilities and Obligations
    8  
ARTICLE 6 SELLER’S REPRESENTATIONS AND WARRANTIES
    9  
6.1 Status
    9  
6.2 Power/ Noncontravention
    9  
6.3 Authorization of Transaction
    9  
6.4 No Liens
    10  
6.5 Liability for Brokers’ Fees
    10  
6.6 No Bankruptcy
    10  

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TABLE OF CONTENTS
(continued)

         
 
    Page    
6.7 Litigation
    10  
6.8 Audits
    10  
6.9 Judgments
    10  
6.10 Compliance with Law
    10  
6.11 Lease Status/Rentals/Royalties/Taxes
    10  
6.12 Status and Operation of Assets
    10  
6.13 Hedging
    11  
6.14 Full Disclosure
    12  
6.15 Absence of Material Change
    12  
6.16 Taxes
    12  
6.17 Non-Foreign Representation
    12  
6.18 Consents and Preferential Rights
    12  
6.19 Commitments for Expenditures
    12  
6.20 Imbalances
    13  
ARTICLE 7 BUYER’S REPRESENTATIONS AND WARRANTIES
    13  
7.1 Organization and Standing
    13  
7.2 Power/ Noncontravention
    13  
7.3 Authorization
    13  
7.4 Liability for Brokers’ Fees
    13  
7.5 Litigation
    13  
7.6 Financial Resources
    13  
7.7 Buyer’s Evaluation
    14  
ARTICLE 8 COVENANTS AND AGREEMENTS
    14  
8.1 Covenants and Agreements of Seller
    14  
8.2 Covenants and Agreements of the Parties
    15  
ARTICLE 9 TAX MATTERS
    17  
9.1 Definitions
    17  
9.2 Production and Ad Valorem Tax Liability
    17  
9.3 Tax Reports and Returns
    17  

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TABLE OF CONTENTS
(continued)

         
 
    Page    
9.4 Transfer Taxes
    17  
ARTICLE 10 CONDITIONS PRECEDENT TO CLOSING
    18  
10.1 Seller’s Conditions
    18  
10.2 Buyer’s Conditions
    18  
ARTICLE 11 RIGHT OF TERMINATION
    19  
11.1 Termination
    19  
11.2 Termination Pursuant to Section 11.1
    19  
ARTICLE 12 CLOSING
    19  
12.1 Date of Closing
    19  
12.2 Place of Closing
    20  
12.3 Closing Obligations
    20  
ARTICLE 13 POST-CLOSING OBLIGATIONS
    20  
13.1 Post-Closing Adjustments
    20  
13.2 Proceeds and Expenses
    21  
13.3 Records
    21  
13.4 Further Assurances
    22  
ARTICLE 14 ASSUMPTION AND RETENTION OF OBLIGATIONS AND INDEMNIFICATION
    22  
14.1 Buyer’s Assumption of Liabilities and Obligations
    22  
14.2 Seller’s Retention of Liabilities and Obligations
    22  
14.3 Indemnification
    22  
14.4 Procedure
    23  
14.5 No Insurance; Subrogation
    24  
14.6 Reservation as to Non-Parties
    24  
ARTICLE 15 MISCELLANEOUS
    25  
15.1 Schedules
    25  
15.2 Expenses
    25  
15.3 Notices
    25  
15.4 Amendments
    25  

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TABLE OF CONTENTS
(continued)

         
 
    Page    
15.5 Assignment
    26  
15.6 Headings
    26  
15.7 Counterparts/Fax Signatures
    26  
15.8 References
    26  
15.9 Governing Law
    26  
15.10 Entire Agreement
    26  
15.11 Knowledge
    26  
15.12 Binding Effect
    26  
15.13 Survival of Warranties, Representations and Covenants
    26  
15.14 No Third-Party Beneficiaries
    26  
15.15 Arbitration
    26  
15.16 Press Releases
    27  

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Defined Terms

     
AAA
  14.4(c)
Adverse Consequences
  9.1(a)
Agreement
  Opening paragraph
Allocated Value
  2.2
Assets
  1.2
Assumed Environmental Liabilities
  5.3(b)
Assumed Liabilities
  14.1
Background Materials
  7.7
Buyer
  Opening paragraph
Casualty Loss
  8.2(e)
Claim
  14.4(b)
Claim Notice
  14.4(a)
Closing
  12.1
Closing Date
  12.1
Code
  9.1(b)
Condition
  5.1
Contracts
  1.2(d)
Data
  1.2(e)
Effective Time
  1.4
Environmental Assessment Report
  5.3
Environmental Law
  5.1
Excluded Asset
  1.3; 4.2(b)(2)
Excluded Wells
  1.3(b); 5.3
Existing Title Defects
  4.1
Final Purchase Price
  13.1(a)
Final Settlement Date
  13.1(a)
Final Settlement Statement
  13.1(a)
Hydrocarbons
  1.2(a)
Indemnified Party
  14.4(a)
Indemnifying Party
  14.4(a)
Information
  8.2(a)
Knowledge
  15.11
Lands
  1.2(a)
Leases
  1.2(a)
Losses
  14.3
Net Casualty Loss
  8.2(e)
NRI
  4.2(a)
Obligations
  14.1
Permitted Encumbrances
  4.2
Pollutants
  5.1
Preliminary Purchase Price
  2.3
Preliminary Settlement Statement
  2.3
Production Taxes
  9.1(c)
Property Expenses
  2.3
Purchase Price
  2.1

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Defined Terms
(continued)

     
Records
  1.2(f)
Remediate; Remediation
  5.1
Retained Environmental Liabilities
  5.3(a)
Retained Liabilities
  14.2
Seller
  Opening paragraph
Wells
  1.2(b)
WI
  4.2(n)

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List of Schedules

     
1.2(a)
  Leases  
1.2(b)
  Wells  
1.3(b)
  Excluded Wells  
2.1
  Payment Instructions  
2.2
  Allocation Schedule  
6.2
  Conflicts / consents  
6.4
  Liens  
6.7
  Pending or threatened litigation  
6.12(c)
  Shut in wells  
6.13
  Hedging contracts  
6.19
  AFE’s  
12.3(a)(i)
  Form of Assignment, Bill of Sale and Conveyance –Producing and Non-Producing  
12.3(e)
  Form of affidavit of non-foreign status under Section 1445 of the Internal
Revenue Code

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PURCHASE AND SALE AGREEMENT
     This Purchase and Sale Agreement (this “Agreement”), dated the 27th day of
December, 2007, by and between Infinity Oil & Gas of Wyoming, Inc., a Wyoming
corporation (“Seller”), whose address is 633 17th Street, Suite 1800, Denver, CO
80202, and Forest Oil Corporation, a New York corporation (“Buyer”), whose
address is 707 17th Street, Suite 3600, Denver, CO 80202.
RECITALS
     A. Seller owns and desires to sell all of its right, title and interest in
certain oil and gas leases located in Sweetwater County, Wyoming, and Routt
County, Colorado, and associated assets as more fully described in Section 1.2
below upon the terms and conditions set forth in this Agreement.
     B. Buyer desires to purchase from the Seller the Assets on the terms and
subject to the conditions set forth in this Agreement.
AGREEMENT
     In consideration of the mutual promises contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Buyer and Seller agree as follows:
ARTICLE 1
PURCHASE AND SALE
     1.1 Purchase and Sale. Subject to the terms and conditions of this
Agreement, Buyer agrees to purchase from Seller and Seller agrees to sell,
assign and deliver to Buyer, all of Seller’s right, title and interest in the
properties described in Section 1.2 for the consideration specified in
Article 2.
     1.2 Assets. As used herein, the term “Assets” refers to all of Seller’s
right, title and interest in and to the following less the Excluded Properties:
          (a) The oil and gas leases (including all leasehold estates, mineral
interests, royalty interests, overriding royalty interests, net profits
interests, or similar interests) specifically described in Schedule 1.2(a) (the
“Leases”) and the oil, gas and all other hydrocarbons (“Hydrocarbons”)
attributable to the Leases and the lands covered thereby (the “Lands”).
          (b) The oil and gas wells specifically described in Schedule 1.2(b)
(the “Wells”) and all personal property, equipment, fixtures, improvements,
permits, rights-of-way and easements used in connection with the production,
gathering, treatment, processing, storing, sale or disposal of Hydrocarbons
produced from the Leases and Lands described in Subsection 1.2(a).

 

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          (c) The unitization, pooling and communitization agreements,
declarations and orders, and the units created thereby and all other such
agreements relating to the properties and interests described in
Subsections 1.2(a) and (b) and to the production of Hydrocarbons, if any,
attributable to said properties and interests.
          (d) All existing and effective sales, purchase, exchange, gathering,
transportation and processing contracts, operating agreements, development
agreements, balancing agreements, farmout agreements, service agreements and
other contracts, agreements and instruments, insofar as they relate to the
properties and interests described in Subsections 1.2(a) through (c) (the
“Contracts”).
          (e) To the extent transferable, engineering, geologic, geophysical and
seismic data and licenses pertaining to the Leases, Lands and Wells including
proprietary data (the “Data”).
          (f) Copies of all files, records and data relating to the items
described in Subsection 1.2(a) through (e) in the possession of the Seller (the
“Records”).
          (g) All other interests and assets of Seller in any way related to
Seller’s ownership in and operation of the Leases and Lands as of the Effective
Time.
     1.3 Excluded Properties. Seller reserves, excepts and excludes the
following described interests (“Excluded Assets”) from the sale of the
properties described in Section 1.2:
          (a) An undivided 20 percent of Seller’s interest in the Leases only
insofar as the Leases cover Lands lying outside of the governmental quarter
section where each of the Wells is located and the Parties shall enter into a
standard form AAPL 610-1989 Joint Operating Agreement with a 300 percent consent
penalty covering the joint interests.
          (b) the oil and gas wells specifically described in Schedule 1.3(b)
and all related personal property, equipment, fixtures, improvements, permits,
rights-of-way and easements (“Excluded Wells”).
          (c) all trade credits and all accounts, instruments and general
intangibles (as such terms are defined in the Uniform Commercial Code)
attributable to the properties described in Section 1.2 with respect to any
period of time prior to the Effective Time;
          (d) all claims and causes of action of Seller (i) arising from acts,
omissions or events, or damage to or destruction of property occurring and
attributable to times prior to the Effective Time, or (ii) arising under or with
respect to any properties described in Section 1.2 that are attributable to
periods of time prior to the Effective Time (including claims for adjustments or
refunds);
          (e) all rights and interests of Seller (i) under any policy or
agreement of insurance or indemnity, (ii) under any bond, or (iii) to any
insurance or condemnation proceeds or awards arising, in each case, from acts,
omissions or events, or damage to or destruction of property occurring prior to
the Effective Time;

 

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          (f) all oil, gas or other hydrocarbons produced and sold from the
Leases with respect to all periods prior to the Effective Time, together with
all proceeds from or of such substances specifically excluding any inventory
unsold as of the Effective Time;
          (g) claims of Seller for refunds of or loss carry forwards with
respect to (i) production or any other taxes attributable to any period prior to
the Effective Time, or (ii) income or franchise taxes;
          (h) all amounts due or payable to Seller as adjustments to insurance
premiums related to the properties described in Section 1.2 with respect to any
period prior to the Effective Time;
          (i) all of Seller’s proprietary computer software, patents, trade
secrets, copyrights, names, trademarks, logos and other intellectual property;
          (j) all documents and instruments (except title opinions pertaining to
the properties described in Section 1.2) of Seller that are protected by an
attorney-client privilege;
          (k) any geological and geophysical data and information that Seller
does not have the right to transfer or the transfer of which requires the
payment of a fee or a consent, if Buyer does not pay such fee or obtain such
consent; and
          (l) any properties described in Section 1.2 subject to a preferential
right to purchase or similar rights which are not waived or expired as of the
Closing Date.
          1.4 Effective Time. The purchase and sale of the Assets shall be
effective between the parties as of October 1, 2007 at 7:00 a.m. Mountain
Daylight Time (the “Effective Time”).
ARTICLE 2
PURCHASE PRICE
     2.1 Purchase Price. Subject to the other terms and conditions of this
Agreement, the purchase price for the Assets shall be Seventeen Million Four
Hundred Thousand Dollars ($17,400,000.00) (the “Purchase Price”). The Purchase
Price as adjusted pursuant to the terms of the Agreement shall be paid at
Closing to Seller, payable as set forth on Schedule 2.1. After Closing, final
adjustments to the Purchase Price shall be made pursuant to the Final Settlement
Statement to be delivered pursuant to Section 13.1 and payments made by Buyer or
Seller as provided in Section 13.1.
     2.2 Allocation of the Purchase Price. For purposes of this Agreement, the
Purchase Price shall be allocated as provided on Schedule 2.2. The value
allocated to an Asset pursuant to this Section 2.2 is herein referred to as the
“Allocated Value” for that Asset.
     2.3 Adjustments to Purchase Price. The Purchase Price shall be adjusted
according to this Section without duplication. For all adjustments known as of
Closing, the Purchase Price shall be adjusted at Closing pursuant to a
“Preliminary Settlement Statement” approved by Seller and Buyer on or before
Closing. A draft of the Preliminary Settlement Statement will be prepared by
Seller at least three (3) business days prior to Closing. The Preliminary
Settlement

 

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Statement shall set forth the Purchase Price as adjusted as provided in this
Section using the best information available at the Closing Date which amount
shall be paid at Closing (as adjusted, the “Preliminary Purchase Price.”) The
Preliminary Purchase Price shall be paid in the manner provided in Section 2.1
above. After Closing, final adjustments to the Purchase Price shall be made
pursuant to the Final Settlement Statement to be delivered pursuant to
Section 13.1.
     For the purposes of this Agreement, the term “Property Expenses” shall mean
all capital expenses, joint interest billings, lease operating expenses, lease
rental and maintenance costs, royalties, overriding royalties, Production Taxes
(as defined and apportioned as of the Effective Time pursuant to Article 9),
drilling expenses, workover expenses, geological, geophysical and any other
exploration or development expenditures chargeable under applicable operating
agreements or other agreements consistent with the standards established by the
Council of Petroleum Accountant Societies of North America that are attributable
to the maintenance and operation of the Assets during the period in question.
          (a) Upward Adjustments. The Purchase Price shall be adjusted upward by
the following:
               (1) An amount equal to the value, based upon the actual value
received in October, 2007, of Seller’s share of any oil and/or condensate in the
tanks produced from or credited to the Leases and Lands as of the Effective Time
based upon the quantities in the condensate tanks as measured by Seller and
Buyer’s representatives as of the Effective Time.
               (2) An amount equal to all prepaid expenses, including Property
Expenses, attributable to the Assets after the Effective Time that were paid by
Seller prior to the Effective Time (all to be apportioned as of the Effective
Time except as otherwise provided), including without limitation, prepaid
utility charges, prepaid rentals and royalties, including lease rentals, and
prepaid drilling and completion costs (to be apportioned as of the Effective
Time based on drilling days); and
          (b) Downward Adjustments. The Purchase Price shall be adjusted
downward by the following:
               (1) An amount equal to the sum of all Net Casualty Losses under
Section 8.2(e);
               (2) An amount equal to Seller’s pre-Effective Time liability for
Production Taxes, ad valorem taxes and the like.
ARTICLE 3
BUYER’S INSPECTION
     3.1 Due Diligence Completed. Seller has previously made the Records, the
Background Materials described in Section 7.7(a) and the Assets available to
Buyer and its representatives for inspection and review and Buyer and Seller
agree that Buyer’s due diligence review is complete. The results of Buyer’s due
diligence review as to title matters and environmental matters are set forth
below.

 

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ARTICLE 4
TITLE MATTERS
     4.1 Existing Title Defects. Seller has previously made the Records, the
Background Materials described in Section 7.7(a) and the Assets available to
Buyer and its representatives for inspection and review and Buyer has identified
the following title defects (the “Existing Title Defects”) that must be cured to
the satisfaction of Buyer prior to Closing:
          (a) Various leases issued to Seller by RME Land Corp. and its
successor, Anadarko Land Corp. in the Pipeline Prospect, Sweetwater County,
Wyoming, require written consent prior to the assignment of such leases. Such
leases are described on Schedule 6.2. Prior to closing, Seller shall obtain the
consent of Anadarko to assign such leases.
          (b) Various wells in the Pipeline Prospect, Sweetwater County,
Wyoming, which were drilled pursuant to a “Coalbed Methane Gas Lease” issued to
Seller by RME Land Corp. and/or its successor, Anadarko Land Corp. are producing
oil. Such wells are as follows: Pipeline 1-3-18-100; Pipeline 1-4-18-100;
Pipeline 13-1-18-100; and Pipeline 13-4R-18-100. Pursuant to that certain
Coalbed Gas Exploration Agreement dated April 1, 2000, by and between Seller and
Union Pacific Land Resources Corporation, a predecessor to Anadarko, Anadarko is
obligated to issue to Seller a lease covering 100% of its interest in
hydrocarbons other than coalbed gas in the drillsite spacing unit of the
above-described wells. Prior to closing, Seller shall obtain a lease from
Anadarko covering 100% of its interest in hydrocarbons other than coalbed gas in
the drillsite spacing unit of the above-described wells
          (c) Haliburton placed a mechanic’s lien on the Wolf Mtn 15-2-7-87
well, which lien is listed on Schedule 6.4. Prior to closing, Seller shall
obtain a release of this lien.
     4.2 Permitted Encumbrances. The term “Permitted Encumbrances” shall mean:
          (a) lessors’ royalties, overriding royalties, net profits interests,
production payments, reversionary interests and similar burdens if the net
cumulative effect of such burdens does not operate to reduce the net revenue
interest (“NRI”) below those set forth on Schedule 1.2(b);
          (b) statutory liens for Taxes, Production Taxes or assessments not yet
due and delinquent;
          (c) all rights to consent by, required notices to, filings with, or
other actions by federal, state or local governmental bodies, in connection with
the conveyance of the applicable Asset if the same are customarily sought after
such conveyance;
          (d) rights of reassignment contained in any Leases providing for
reassignment upon the surrender or expiration of any Leases;
          (e) easements, rights-of-way, servitudes, permits, surface leases and
other rights with respect to surface operations, on, over or in respect of any
of the Assets or any restriction on access thereto that do not materially
interfere with the operation of the affected Asset as has been conducted in the
past;

 

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          (f) all title defects other than the Existing Title Defects set forth
in Section 4.1;
          (g) statutory materialmen’s, mechanics’, operators’ or other similar
liens arising in the ordinary course of business incidental to operation of the
Assets  if such liens and charges have not been filed pursuant to law and the
time for filing such liens and charges has expired;
          (h) rights reserved to or vested in any federal, state, local, tribal
or foreign governmental body, authority or agency to control or regulate any of
the Assets in any manner; and all applicable laws, rules, regulations and orders
of general applicability in the area of the Assets;
          (i) any preferential rights to purchase and required third party
consents to assignments of Contracts or property and similar agreements
burdening any of the Assets which shall be exclusively dealt with pursuant to
Section 4.4.
          (j) liens arising under operating agreements, unitization and pooling
agreements and production sales contracts securing amounts not yet delinquent;
          (k) the litigation listed on Schedule 6.7;
          (l) all matters of record as of the Effective Time Existing except for
the Title Defects set forth in Section 4.1;
          (m) any defects, irregularities or deficiencies in title to easements,
rights-of-way or other agreements that do not, individually or in the aggregate,
materially and adversely affect the value of any Asset;
          (n) all other liens, charges, encumbrances, contracts, agreements,
instruments, obligations, defects and irregularities affecting the Assets that
do not (or would not upon foreclosure or other enforcement) reduce the NRI set
forth in Schedule 1.2(b) nor prevent the receipt of proceeds of production
therefrom, nor increase the share of costs above the working interest set forth
in Schedule 1.2(b) (“WI”) nor are such as materially to interfere with or
detract from the ownership, operation, value or use of the Assets.
     4.3 No Adjustments to Purchase Price. Except for the Existing Title Defects
set forth in Section 4.1, Buyer shall assert no additional title defects
pertaining to or affecting the Assets Furthermore, no adjustment shall be made
to the Purchase Price for the Existing Title Defects or any other title defect
pertaining to or affecting the Assets, except by mutual agreement of the
Parties.
     4.4 Preferential Rights and Consents. Except for those consents as set
forth on Schedule 6.2, Seller does not reasonably believe that any preferential
rights or consents of third parties are applicable to the transaction
contemplated by this Agreement. Seller, therefore indemnifies and holds harmless
Buyer from any and all claims of rights in the nature of a preferential right to
purchase that may be asserted against any of the Assets.

 

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ARTICLE 5
ENVIRONMENTAL MATTERS
     5.1 Definitions. For the purposes of the Agreement, the following terms
shall have the following meanings:
     “Condition” means any circumstance, status or defect that requires
Remediation in order to comply with all existing Environmental Laws.
     “Environmental Law” shall mean shall mean any federal, tribal, state, local
or foreign law (including common law), statute, rule, regulation, requirement,
ordinance and any writ, decree, bond, authorization, approval, license, permit,
registration, binding criteria, standard, consent decree, settlement agreement,
judgment, order, directive or binding policy issued by or entered into with a
governmental authority pertaining or relating to: (a) pollution or pollution
control, including, without limitation, storm water; (b) protection of human
health from exposure to Pollutants or protection of the environment;
(c) employee safety in the workplace; or (d) the management, presence, use,
generation, processing, extraction, treatment, recycling, refining, reclamation,
labeling, transport, storage, collection, distribution, disposal or release or
threat of release of Pollutants. “Environmental Laws” shall include, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. § 9601 et seq., the Solid Waste Disposal Act (as amended by the
Resource Conservation and Recovery Act), 42 U.S.C. § 6901 et seq., the Hazardous
Materials Transportation Act, 49 U.S.C. § 1801 et seq., the Toxic Substances
Control Act, 15 U.S.C. § 2601 et seq., the Federal Water Pollution Control Act,
33 U.S.C. § 1251 et seq., the Federal Safe Drinking Water Act, 42 U.S.C.
§§ 300f-300, the Federal Air Pollution Control Act, 42 U.S.C. § 7401 et seq.,
the Oil Pollution Act, 33 U.S.C. § 2701 et seq., the Occupational Safety and
Health Act, 29 U.S.C. § 651 et seq., the Endangered Species Act, the Colorado
Water Quality Control Act and the regulations and orders respectively
promulgated thereunder, each as amended, or any equivalent or analogous state or
local statutes, laws or ordinances, any regulation promulgated thereunder and
any amendments thereto.
     “Pollutants” shall mean, without limitation, any hazardous substance or any
other substance, material or waste, regardless of its form or nature, the
management, presence, use, generation, processing, extraction, treatment,
recycling, refining, reclamation, labeling, transport, storage, collection,
distribution, disposal or release or threat of release of which is regulated by
Environmental Laws.
     “Remediation” or “Remediate” means actions taken to correct an
environmental defect or a Condition proximately caused by an environmental
defect and to bring such environmental defect or Condition into compliance with
applicable Environmental Law.
     5.2 Environmental Representation and Warranty. Seller represents and
warrants to Buyer that to Seller’s knowledge (i) the Assets have been operated
in material compliance with all Environmental Laws, (ii) the Assets have been
solely used for oil and gas operation and not used for generation, storage or
disposal of hazardous substances; (iii) all permits necessary for the operation
of the Assets in compliance with all Environmental Laws have been obtained and
maintained; (iv) none of the Assets is identified in a notice nor is proposed to
be identified, on

 

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any list of contaminated properties or other properties which pursuant to
Environmental Laws are the subject of an investigation, cleanup, removal,
remediation or other response action by any governmental authority; (v) the
Assets are not subject to, or the subject of, any claim, complaint, order,
notice of violation, citation, subpoena, request for information or other
written notice or demand issued by a governmental authority concerning any of
the Assets which remains unresolved as of the date hereof, alleging a violation
of any Environmental Law relating to any of the Assets; (vi) the Assets are not
subject to, or the subject of, a written claim or complaint from any person or
governmental authority which is currently unresolved setting forth a cause of
action for personal injury (including death) or property damage, natural
resource damage, contribution or indemnity for response costs, civil or
administrative penalties, criminal fines or penalties or declaratory or
equitable relief arising under any Environmental Law.
     5.3 Environmental Assessment. Buyer has previously conducted a Phase I
Health, Safety and Environmental Assessment covering the Assets and has
furnished a copy of the report of such assessment to Seller (the “Environmental
Assessment Report”). Pursuant to the findings contained in the Environmental
Assessment Report, Seller and Buyer have agreed to exclude the oil and gas wells
described in Schedule 1.3(b) (the “Excluded Wells”). The Excluded Wells shall
not be conveyed to Buyer, but shall be retained by Seller.
     5.4 Waiver of Environmental Defects. Buyer agrees to waive all of the
issues identified in the Environmental Assessment Report, except for those
pertaining to the Excluded Wells, and further agrees to refrain from asserting
and/or waive any other environmental defects pertaining to or affecting the
Assets.
     5.5 No Adjustment to Purchase Price. There shall be no adjustment to the
Purchase Price for the issues identified in the Environmental Assessment Report
or for any other environmental defects pertaining to or affecting the Assets.
     5.6 Environmental Liabilities and Obligations.
          (a) Retained Environmental Liabilities. Upon Closing, Seller agrees to
retain and pay, perform, fulfill and discharge all claims, cost, expenses,
liabilities and obligations accruing or relating to and release Buyer (but no
other third parties) from all Losses (as defined below) (including any civil
fines, penalties, costs of assessment, clean-up, removal and Remediation of
pollution or contamination, and expenses for the modification, repair or
replacement of facilities on the Lands) brought or assessed by any and all
persons and any agency or other body of federal, state or local government, on
account of any personal injury, illness or death, any damage to, destruction or
loss of property, and any contamination or pollution of natural resources
(including soil, air, surface water or groundwater) to the extent any of the
foregoing directly or indirectly is caused by or otherwise involves any
environmental condition of the Assets or Lands, created or attributable to
periods of time prior to the Closing Date, including, but not limited to, the
presence, disposal or release of any material (whether hazardous, extremely
hazardous, toxic or otherwise) of any kind in, on or under the Assets or the
Lands (collectively, “Retained Environmental Liabilities”).
          (b) Assumed Environmental Liabilities. Upon Closing, Buyer agrees to
assume and pay, perform, fulfill and discharge all claims, cost, expenses,
liabilities and

 

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obligations accruing or relating to and release Seller, its stockholders,
directors, officers, employees, agents and representatives, and their respective
successors and assigns (but no other third parties) from all Losses (including
any civil fines, penalties, costs of assessment, clean-up, removal and
Remediation of pollution or contamination, and expenses for the modification,
repair or replacement of facilities on the Lands) brought or assessed by any and
all persons and any agency or other body of federal, state or local government,
on account of any personal injury, illness or death, any damage to, destruction
or loss of property, and any contamination or pollution of natural resources
(including soil, air, surface water or groundwater) to the extent any of the
foregoing directly or indirectly is caused by or otherwise involves any
environmental condition of the Assets or Lands, created or attributable to
periods of time on or after the Closing Date, including, but not limited to, the
presence, disposal or release of any material (whether hazardous, extremely
hazardous, toxic or otherwise) of any kind in, on or under the Assets or the
Lands (collectively, “Assumed Environmental Liabilities”).
ARTICLE 6
SELLER’S REPRESENTATIONS AND WARRANTIES
     Seller makes the following representations and warranties as of Closing and
as of the Effective Time except where otherwise indicated. The term “Knowledge”
or the phrase “best of Seller’s Knowledge” has the meaning set forth in
Section 15.11.
     6.1 Status. Seller is a Wyoming corporation duly organized, validly
existing and in good standing under the laws of the State of Wyoming and is
qualified to carry on its business in such other jurisdictions as may be
necessary.
     6.2 Power/ Noncontravention. Seller has all requisite power and authority
to carry on its business as presently conducted. Except as set forth on
Schedule 6.2 (including therein any third party consents), the execution and
delivery of this Agreement does not, and the fulfillment of and compliance with
the terms and conditions hereof will not (i) violate, or be in conflict with,
any provision of Seller’s governing documents, (ii) conflict with or constitute
(with or without the passage of time or giving of notice) a default under or
breach of any agreement, instrument or obligation to which Seller is a party or
by which it or any of the Assets is bound, or (iii) any judgment, decree, order,
statute, rule or regulation applicable to Seller other than any such events
described in items (ii) or (iii) in this Section 6.2 which would not prevent the
consummation of the transactions contemplated hereby or reasonably be expected
to have a material adverse effect on the Assets.
     6.3 Authorization of Transaction. Seller has full corporate right, power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby, and the execution and delivery of this Agreement and the
performance by Seller of its obligations hereunder have been duly authorized by
all necessary corporate and other action on part of the Seller. This Agreement
constitutes Seller’s legal, valid and binding obligation, enforceable in
accordance with its terms, subject, however, to the effects of bankruptcy,
insolvency, reorganization, moratorium and other laws for the protection of
creditors, as well as to general principles of equity, regardless whether such
enforceability is considered in a proceeding in equity or at law.

 

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     6.4 No Liens. Except as provided on Schedule 6.4, there are no liens or
encumbrances burdening the Assets, except for Permitted Encumbrances. The Assets
will be conveyed to Buyer at closing free and clear of all liens, encumbrances
and adverse claims, except for Permitted Encumbrances, created by, through or
under Seller.
     6.5 Liability for Brokers’ Fees. Seller has not incurred any liability,
contingent or otherwise, for brokers’ or finders’ fees relating to the
transactions contemplated by this Agreement for which Buyer shall have any
responsibility whatsoever.
     6.6 No Bankruptcy. There are no bankruptcy proceedings pending or, to the
Knowledge of Seller, threatened against Seller.
     6.7 Litigation. Except as provided on Schedule 6.7, there are no actions,
suits or proceedings pending or, to the Knowledge of Seller, threatened, nor has
the Seller become aware of facts or circumstances which could result in the
institution of a claim or action against any of the Assets in the future, in any
court or by or before any federal, state, municipal or other governmental agency
that would materially and adversely affect the Assets or impair Seller’s ability
to consummate the transactions contemplated hereby; nor is Seller in default
under any order, writ, injunction, or decree of any court or federal, state,
municipal or other governmental agency.
     6.8 Audits. There are no audits currently being conducted by Seller of the
joint account under any operating agreements nor are there any audits of Seller
currently underway or to Seller’s Knowledge imminent.
     6.9 Judgments. There are no unsatisfied judgments or injunctions issued by
a court of competent jurisdiction or other governmental agency outstanding
against Seller.
     6.10 Compliance with Law. The Assets are currently operated in compliance
with all applicable federal, state and local laws, rules, regulations and
orders, except as would not reasonably be expected to have a material adverse
effect on the Assets. Seller has not received any written notice of a material
violation of any statute, law, ordinance, regulation, rule or order of any
foreign, federal, state or local government or any other governmental department
or agency, or any judgment, decree or order of any court, applicable to the
Assets which would, in the aggregate, have a material adverse effect on the
Assets and that has not been previously cured or satisfied.
     6.11 Lease Status/Rentals/Royalties/Taxes. (i) Each of the Leases are in
full force and effect in accordance with its terms and (ii) all material
obligations under the Leases have been fully performed, including the proper and
timely payment of all royalties, rentals and other payments due under the
Leases. There are currently pending no requests or demands for payments,
adjustments of payments or performance pursuant to obligations under the Leases.
Seller has not received a written notice of default with respect to the payment
or calculation of rentals, royalties and/or Production Taxes attributable to the
Assets.
     6.12 Status and Operation of Assets.
          (a) The Assets have been operated in a good and workmanlike manner.

 

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          (b) The Contracts are in full force and effect in accordance with
their respective terms, and there are no documents or other agreements included
in or pertaining to the Assets which require any further significant action or
expenditure on the part of Seller.
          (c) Every well included in the Assets has been drilled and completed
within the Leases or within the limits otherwise permitted by contract, pooling
or unit agreement and by law and the drilling and completion of all such wells,
and the conduct of all other operations on or affecting the Leases, has been
performed in compliance with all applicable Lease and contract provisions and
applicable laws, ordinances, rules, regulations and permits of any court or
governmental body or agency. No well located on the Assets is subject to
penalties on allowables after the date hereof because of any overproduction or
any other violation of applicable laws, rules, regulations or permits or
judgments, orders or decrees of any court or governmental body or agency, which
would prevent such well from being entitled to its full legal and regular
allowable, from and after the date hereof as prescribed by any court or
governmental body or agency. All producing wells have been drilled and equipped
and all personal property and fixtures have been maintained in all material
respects in a state of repair so as to be adequate for normal operations and are
in all material respects in good working order except as to certain wells
described in Schedule 6.12(c) that are currently shut in.
          (d) Seller has filed all necessary reports with federal, state and
local regulatory agencies and all necessary plans for development, applications,
inspection reports, certificates and other instruments pertaining to operation
of the Assets with the appropriate governmental entities and all permits
necessary for the legal operation of the Assets in full compliance with all
laws, rules, regulations, ordinances and orders, except as would not reasonably
by expected to have a material adverse effect on the Assets. All applications,
reports, certificates and other instruments filed with or furnished to any
Governmental Entity do not (i) contain any untrue statement of material fact or
(ii) omit any statement of material fact necessary to make the statements
therein not misleading.
          (e) Seller has not been advised by the owner of any contiguous
property or by any third party of any objections as to the manner in which
Seller or any occupant has used or presently operates the Assets, or of any
environmental contamination emanating from the Assets, nor has Seller been
advised by any third party of its intention to institute a claim or action
against Seller.
     6.13 Hedging. Except for the agreements set forth on Schedule 6.13 that are
currently in effect but will be closed out on or before Closing, Seller has not
(i) sold forward any Hydrocarbons, (ii) received any material advance,
“take-or-pay” or other similar payments under production sales contracts that
entitle the purchasers to “make up” or otherwise receive deliveries of
Hydrocarbons without paying at such time the contract price therefore or
(iii) except as set forth on Schedule 6.13, taken or received any material
amount of Hydrocarbons under any gas balancing agreements or any similar
arrangements (not accounted for in a specific, written Purchase Price
adjustment) that permit any person thereafter to receive any portion of the
interest of Seller to “balance” any disproportionate allocation of Hydrocarbons.
No Hydrocarbons attributable to the Assets are subject to a sales contract
(other than Contracts terminable on no more than 30 days’ notice) and no person
has any call upon, option to purchase or similar rights with respect to the
production from the Assets, and Seller is not bound by futures, hedge, swap,

 

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collar, put, call, floor, cap, option or other contracts that are intended to
benefit from, relate to or reduce or eliminate the risk of fluctuations in the
price of commodities, including Hydrocarbons, securities, foreign exchange rates
or interest rates.
     6.14 Full Disclosure. The Records have been prepared in the ordinary course
of the oil and gas business in accordance with customary industry practice. To
the best of Seller’s Knowledge, the Records and Background Materials described
in Section 7.7(a) made available to Buyer by Seller (excluding any materials
containing estimates with respect to reserves, the value of Assets, projections
as to future events or other internal analyses or forward looking statements) do
not materially misrepresent, either by commission or omission, the nature and
condition of the Assets.
     6.15 Absence of Material Change. Since the Effective Time,
          (a) The Company has conducted its business in all material respects in
the ordinary course consistent with past practices.
          (b) There has not been a material adverse change in any of the Assets
(other than any reduction in value associated with changes in natural gas
prices).
          (c) There has not been an amendment or termination of a material
Contract except as authorized pursuant to Subsection 8.1(c),
          (d) There has not been a regulatory decision by a governmental entity
regarding any of the Assets that could reasonably be expected to have a material
adverse impact on Seller, the transactions contemplated hereby, or the Assets,
and
          (e) There has not been any damage, destruction or other casualty loss
not covered by insurance affecting the business or Assets of Seller.
     6.16 Taxes. All due and payable ad valorem, real property, personal
property, production, severance, excise and other taxes applicable to the
ownership and operation of the Assets prior to the Effective Time have been duly
and timely paid.
     6.17 Non-Foreign Representation. Seller is not a non-resident alien,
foreign corporation, foreign partnership, foreign trust or foreign estate (as
those terms are defined in Internal Revenue Code and Income Tax Regulations).
     6.18 Consents and Preferential Rights. Except as provided on Schedule 6.2,
all consents required to be obtained by Seller for the assignment of the Assets
to Purchaser have been obtained and are in full force. There are not
preferential purchase rights with respect to the Assets that have not been
waived or have not expired.
     6.19 Commitments for Expenditures. Except as set forth on Schedule 6.19
there are no outstanding authorities for expenditures (AFEs) which Seller has
received from a third party operator, but has not responded to, nor are there
approved and unfunded AFEs that aggregate more than $25,000 affecting any of the
Assets.

 

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     6.20 Imbalances. As of the Effective Time, no Well carried an imbalance
caused by overproduction of Seller’s interest in such Well that would require
compensation to any third party at any time.
ARTICLE 7
BUYER’S REPRESENTATIONS AND WARRANTIES
     Buyer makes the following representations and warranties as of Closing and
as of the Effective Time:
     7.1 Organization and Standing. Buyer is a New York corporation duly
organized, validly existing and in good standing under the laws of New York and
is duly qualified to carry on its business in such other jurisdictions as may be
necessary.
     7.2 Power/ Noncontravention. Buyer has all requisite power and authority to
carry on its business as presently conducted. The execution and delivery of this
Agreement does not, and the fulfillment of and compliance with the terms and
conditions hereof will not (i) violate, or be in conflict with, any provision of
Buyer’s governing documents, (ii) conflict with or constitute (with or without
the passage of time or giving of notice) a default under or breach of any
agreement, instrument or obligation to which Buyer is a party or by which it is
bound, or (iii) any judgment, decree, order, statute, rule or regulation
applicable to Buyer other than any such events described in items (ii) or
(iii) in this Section 7.2 which would not prevent the consummation of the
transactions contemplated hereby or reasonably be expected to have a material
adverse effect on Buyer.
     7.3 Authorization. Buyer has full corporate right, power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby, and the execution and delivery of this Agreement and the performance by
Buyer of its obligations hereunder have been duly authorized by all necessary
corporate and other action on part of the Buyer. This Agreement constitutes
Buyer’s legal, valid and binding obligation, enforceable in accordance with its
terms, subject, however, to the effects of bankruptcy, insolvency,
reorganization, moratorium and other laws for the protection of creditors, as
well as to general principles of equity, regardless whether such enforceability
is considered in a proceeding in equity or at law.
     7.4 Liability for Brokers’ Fees. Buyer has not incurred any liability,
contingent or otherwise, for brokers’ or finders’ fees relating to the
transactions contemplated by this Agreement for which Seller shall have any
responsibility whatsoever.
     7.5 Litigation. There is no action, suit, proceeding, claim or
investigation by any person, entity, administrative agency or governmental body
pending or, to Buyer’s Knowledge, threatened against it before any governmental
authority that impedes or is likely to impede its ability to consummate the
transactions contemplated by this Agreement and to assume the liabilities to be
assumed by it under this Agreement.
     7.6 Financial Resources. Buyer has the financial resources available to
close the transaction contemplated by this Agreement without financing that is
subject to any material contingency.

 

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     7.7 Buyer’s Evaluation.
          (a) Background Materials. Buyer is experienced and knowledgeable in
the oil and gas business and is aware of its risks. Buyer has been afforded the
opportunity to examine the Records and materials made available to it by Seller
in Seller’s offices with respect to the Assets (the “Background Materials”). The
Background Materials include files, or copies thereof, that Seller has used in
its normal course of business and may include other information about the Assets
that Seller has compiled or generated. Buyer acknowledges that Seller has not
made any representations or warranties as to the Background Materials except as
provided in Article 6 and that Buyer may not rely on any of Seller’s estimates
with respect to reserves, the value of Assets, projections as to future events
or other internal analyses or forward looking statements.
          (b) Independent Evaluation. In entering into this Agreement, Buyer
acknowledges and affirms that it has relied and will rely solely on the terms of
this Agreement and upon its independent analysis, evaluation and investigation
of, and judgment with respect to, the business, economic, legal, tax or other
consequences of this transaction including without limitation its own estimate
and appraisal of the extent and value of the Hydrocarbon reserves of the Assets.
ARTICLE 8
COVENANTS AND AGREEMENTS
     8.1 Covenants and Agreements of Seller. Seller covenants and agrees with
Buyer as follows:
          (a) Operations Prior to Closing. Except as otherwise consented to in
writing by Buyer or provided in this Agreement, from the date of execution
hereof to the Closing, Seller will use its best efforts to cause the Assets to
be operated in a good and workmanlike manner consistent with past practices.
From the date of execution of this Agreement to the Closing Date, Seller shall
pay or cause to be paid its proportionate shares of all costs and expenses
incurred in connection with such operations, and Seller will notify Buyer of
ongoing activities and major capital expenditures in excess of $25,000 per
activity conducted on the Assets, and shall consult with Buyer regarding all
such matters and operations involving such expenditures.
          (b) Restriction on Operations. Subject to Section 8.1(a), unless
Seller obtains the prior written consent of Buyer to act otherwise, Seller will
use good-faith efforts within the constraints of the applicable operating
agreements and other applicable agreements not to (i) abandon any part of the
Assets (except in the ordinary course of business or the abandonment of leases
upon the expiration of their respective primary terms or if not capable of
production in paying quantities, provided Seller first notifies Buyer and
obtains consent for the proposed abandonment), (ii)  approve any operations on
the Assets anticipated in any instance to cost the owner of the Assets more than
$25,000 per activity (excepting emergency operations required under presently
existing contractual obligations, ongoing commitments under existing AFEs and
operations undertaken to avoid a monetary penalty or forfeiture provision of any
applicable agreement or order all of which shall be deemed to be approved,
provided Seller immediately notifies Buyer of any emergency operation or
operation to avoid monetary penalty or forfeiture

 

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excepted herein), (iii) convey or dispose of any part of the Assets (other than
replacement of equipment or sale of Hydrocarbons produced from the Assets in the
regular course of business), (iv) enter into any farmout, farmin or other
contract affecting the Assets, (v) consent to letting lapse any insurance now in
force with respect to the Assets, or (vi) materially modify or terminate any
contract material to the operation of the Assets.
          (c) Marketing. Unless Seller obtains the prior written consent of
Buyer to act otherwise, Seller will not alter any existing marketing contracts
currently in existence, or enter into any new marketing contracts or agreements
providing for the sale of Hydrocarbons for a term in excess of one month.
          (d) Consents. For the purposes of obtaining the written consents
required in this Section 8.1, Buyer designates the following contact person:
Western Business Unit Manager
Forest Oil Corporation
707 Seventeenth Street, Suite 3600
Phone 303-812-1400
Fax 303-812-1550
Such consents may be obtained in writing by overnight courier or given by
telecopy, electronic mail or facsimile transmission.
          (e) Notices of Claims. Seller shall promptly notify Buyer, if, between
the date of execution of this Agreement and the Closing Date, Seller receives
written notice of any claim, suit, action or other proceeding relating to the
Assets or written notice of any material default under any contracts affecting
the Assets.
          (f) Compliance with Laws. During the period from the date of execution
of this Agreement to the Closing Date, Seller shall use its best efforts to
cause the Assets to be operated in compliance in all material respects with all
applicable statutes, ordinances, rules, regulations and orders, including
Environmental Laws.
     8.2 Covenants and Agreements of the Parties.
          (a) Confidentiality. All data and information, whether written or
oral, obtained from Seller in connection with the transaction contemplated by
this Agreement, whether before or after the execution of this Agreement, and
data and information generated by Buyer in connection with this transaction
(collectively, the “Information”), is deemed by the parties to be confidential
and proprietary to Seller. Until the Closing (and for a period of two years if
Closing should not occur for any reason), except as required by law, Buyer and
its agents and representatives will hold in strict confidence all Information,
except any Information which: (1) at the time of disclosure to Buyer by Seller
is in the public domain; (2) after disclosure to Buyer by Seller becomes part of
the public domain by publication or otherwise, except by breach of this
commitment by Buyer; (3) Buyer can establish by competent proof was rightfully
in his possession at the time of disclosure to Buyer by Seller; (4) Buyer
rightfully receives from third parties free of any obligation of confidence;
(5) is disclosed to Buyer’s consultants, present and potential investors, and
present and potential lenders who similarly agree to protect the

 

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confidentiality of such Information and agree to use such Information only for
its due diligence evaluation of the Assets and Seller; or (6) is developed
independently by Buyer, provided that the person or persons developing the data
shall not have had access to the Information.
          (b) Communication Between The Parties Regarding Breach. If Buyer or
Seller develops information during its due diligence that leads either party to
believe that the other party has breached a representation or warranty under
this Agreement, the non-breaching party shall inform the alleged breaching party
in writing of such potential breach as soon as possible, but in any event, at or
prior to Closing.
          (c) Cure Period for Breach. If any party to this Agreement believes
the other party has breached the terms of this Agreement, the party who believes
the breach has occurred shall give written notice to the breaching party of the
nature of the breach and give that party two (2) business days to cure.
Notwithstanding the foregoing, this Subsection 8.3(c) shall not apply to breach
of the parties’ obligations at Closing and shall not operate to delay Closing.
          (d) Announcements. Each party is publicly traded in the United States,
and may be obligated to disclose the details of this transaction to U.S.
securities regulators, its stock exchanges, its advisors and potential
investors, and the investing public. Unauthorized or premature disclosure of
this transaction by a party has the potential to compromise the other party’s
ability to proceed with the transaction. Accordingly, except as and to the
extent required by law, until there is a public announcement regarding this
Agreement, neither party will make, directly or indirectly, any public comment,
statement, or communication with respect to, or otherwise disclose or permit the
disclosure of the existence of discussions regarding, a transaction between the
parties or any of the terms, conditions, or other aspects of the acquisition,
without the prior written consent of the other party. If either party is
required by law to make any such disclosure, it must first provide to the other
party the content of the proposed disclosure, the reasons that such disclosure
is required by law, and the time and place that the disclosure will be made and
afford that party a reasonable opportunity to comment upon and request changes
in the disclosure.
          (e) Casualty Loss. Prior to Closing, if a portion of the Assets is
destroyed by fire or other casualty, or if a portion of the Assets is taken or
threatened to be taken in condemnation or under the right of eminent domain
(each such case, a “Casualty Loss”), Buyer shall not be obligated to purchase
such Asset. If Buyer declines to purchase such Asset, the Purchase Price shall
be reduced by the Allocated Value of such Asset. If Buyer elects to purchase
such Asset, the Purchase Price shall be reduced by the estimated cost to repair
such Asset (with equipment of similar utility), less all insurance proceeds
which shall be payable to Buyer, up to the Allocated Value thereof (the
reduction being the “Net Casualty Loss”). Seller, at its sole option, may elect
to cure such Casualty Loss and, in such event, Seller shall be entitled to all
insurance proceeds. If Seller elects to cure such Casualty Loss, Seller may
replace any personal property that is the subject of a Casualty Loss with
equipment of similar grade and utility, or replace any real property with real
property of similar nature and kind if such property is acceptable to Buyer in
its sole discretion. If Seller elects to cure the Casualty Loss, Buyer shall
purchase the affected Asset at Closing for the Allocated Value thereof.

 

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ARTICLE 9
TAX MATTERS
     9.1 Definitions. For the purposes of this Agreement, the following terms
shall have the following meanings:
          (a) “Adverse Consequences” means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
reasonable amounts paid in settlement, liabilities, obligations, taxes, liens,
losses, expenses, and fees, including court costs and reasonable attorneys’ fees
and expenses.
          (b) “Code” shall mean the Internal Revenue Code of 1986, as amended.
          (c) “Production Taxes” shall mean all ad valorem, property,
production, excise, net proceeds, severance, windfall profit and all other taxes
and similar obligations assessed against the Assets or based upon or measured by
the ownership of the Assets or the production of Hydrocarbons or the receipt of
proceeds therefrom, other than income taxes.
     9.2 Production and Ad Valorem Tax Liability. Subject to the treatment of ad
valorem taxes provided below, all Production Taxes shall be prorated between
Buyer and Seller as of the Effective Date for all taxable periods that include
the Effective Date. The Parties acknowledge that ad valorem taxes assessed
against the Assets are measured by the value of the previous years of
production. Ad valorem taxes shall be the responsibility of the Party who owned
the property when the production which is the basis for the tax assessment
occurred. By way of illustration, in Colorado 2007 ad valorem taxes payable in
2008 are based on the value of 2006 production so shall be the liability of and
shall be paid by the Party which owned the Assets in 2006. The Parties shall
prorate the ad valorem taxes between them based upon the ratio of the volume of
production which occurred pre- and post-Effective Date; however a final
settlement for payment of such taxes shall be made at Closing based upon an
estimate of the liability using the actual valuations of production from the
previous year.
     9.3 Tax Reports and Returns. For tax periods in which the Effective Time
occurs, Seller agrees to immediately forward to Buyer copies of any tax reports
and returns received by Seller after Closing and provide Buyer with any
information Seller has that is necessary for Buyer to file any required tax
reports and returns related to the Assets. Buyer agrees to file all tax returns
and reports applicable to the Assets that Buyer is required to file after the
Closing and, subject to the provisions of Section 9.2, to pay all required
Production Taxes payable with respect to the Assets.
     9.4 Transfer Taxes. Buyer shall pay all sales, transfer, use or similar
taxes occasioned by the sale or transfer of the Assets and all documentary,
transfer, filing, licensing, and recording fees required in connection with the
processing, filing, licensing or recording of any assignments, titles or bills
of sale; provided, however, Seller shall pay any and all recording costs arising
from lien releases or other curative documents respecting Title Defects.

 

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ARTICLE 10
CONDITIONS PRECEDENT TO CLOSING
     10.1 Seller’s Conditions. The obligations of Seller at the Closing are
subject, at the option of Seller, to the satisfaction or waiver at or prior to
the Closing of the following conditions precedent:
          (a) All representations and warranties of Buyer contained in this
Agreement are true in all material respects (considering the transaction as a
whole, but without regard to materiality qualifications in any individual
representation or warranty) at and as of the Closing in accordance with its
terms as if such representations and warranties were remade at and as of the
Closing (other than representations and warranties made as of a specified date,
which shall have been true as of such specified date), and Buyer has performed
and satisfied all covenants and agreements required by this Agreement to be
performed and satisfied by Buyer or jointly by Buyer and Seller at or prior to
the Closing in all material respects and Buyer shall deliver a certificate to
Seller confirming the foregoing;
          (b) No order has been entered by any court or governmental agency
having jurisdiction over the parties or the subject matter of this Agreement
that restrains or prohibits the purchase and sale contemplated by this Agreement
and that remains in effect at Closing; and
          (c) Buyer stands ready, willing and able to Close with Seller.
     10.2 Buyer’s Conditions. The obligations of Buyer at the Closing are
subject, at the option of Buyer, to the satisfaction or waiver at or prior to
the Closing of the following conditions precedent:
          (a) All representations and warranties of Seller contained in this
Agreement are true in all material respects (considering the transaction as a
whole, but without regard to materiality qualifications in any individual
representation or warranty) at and as of the Closing in accordance with its
terms as if such representations were remade at and as of the Closing (other
than representations and warranties made as of a specified date, which shall
have been true as of such specified date), and Seller has performed and
satisfied all covenants and agreements required by this Agreement to be
performed and satisfied by Seller or jointly by Buyer or Seller at or prior to
the Closing in all material respects and Seller shall deliver a certificate to
Buyer confirming the foregoing;
          (b) No order has been entered by any court or governmental agency
having jurisdiction over the parties or the subject matter of this Agreement
that restrains or prohibits the purchase and sale contemplated by this Agreement
and that remains in effect at the time of Closing;
          (c) Seller shall have obtained all consents specified on Schedule 6.2;
          (d) Seller shall have obtained a release of the lien(s) described on
Schedule 6.4 and shall have delivered to Buyer evidence satisfactory to Buyer
and its counsel that Seller is able to deliver the Assets free and clear of all
liens and encumbrances, other than Permitted Encumbrances;

 

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          (e) Seller shall have cured each of the Existing Title Defects set
forth in Section 4.1 to the satisfaction of Buyer; and
          (f) Seller stands ready, willing and able to Close with Buyer.
ARTICLE 11
RIGHT OF TERMINATION
     11.1 Termination. This Agreement may be terminated in accordance with the
following provisions:
          (a) by mutual written consent of Buyer and Seller;
          (b) by Seller, if Seller’ s conditions set forth in Section 10.1 are
not satisfied through no fault of Seller, or are not waived by Seller, as of the
Closing Date (as defined in Section 12.1, below);
          (c) by Buyer, if Buyer’s conditions set forth in Section 10.2 are not
satisfied through no fault of Buyer, or are not waived by Buyer, as of the
Closing Date;
          (d) by Seller, if, through no fault of Seller, the Closing does not
occur on or before January 15, 2008;
          (e) by Buyer, if, through no fault of Buyer, the Closing does not
occur on or before January 15, 2008.
          (f)
     11.2 Termination Pursuant to Section 11.1. If Buyer or Seller terminate
this Agreement pursuant to Section 11.1 in the absence of a breach by the other
party, neither Buyer nor Seller shall have any liability to the other party for
termination of this Agreement. If Buyer or Seller terminate this Agreement
pursuant to Section 11.1 and assert that a breach of this Agreement has
occurred, the notice of termination shall include a statement describing the
nature of the alleged breach.
ARTICLE 12
CLOSING
     12.1 Date of Closing. The “Closing” of the transactions contemplated hereby
shall be held on January 7, 2008 or such other date as the parties may agree.
The date the Closing actually occurs is called the “Closing Date.” If Closing
does not occur on January 7, 2008, the parties shall make a good faith effort to
determine a mutually acceptable alternative Closing Date.
     12.2 Place of Closing. The Closing shall be held at the offices of Seller
at 9:00 a.m. or at such other time and place as Buyer and Seller may agree in
writing.

 

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     12.3 Closing Obligations. At Closing, the following events shall occur,
each being a condition precedent to the others and each being deemed to have
occurred simultaneously with the others:
          (a) Seller and Buyer shall execute, acknowledge and deliver to Buyer
(i) an Assignment, Bill of Sale and Conveyance of the Assets effective as of the
Effective Time substantially in the form of Schedule 12.3(a)(i) with a special
warranty of title by, through and under Seller but not otherwise and with no
warranties, express or implied, as to the personal property, fixtures or
condition of the Assets which are conveyed “as is, where is” and (ii) such other
assignments, bills of sale, or deeds necessary to transfer the Assets to Buyer
including without limitation federal and state forms of assignment;
          (b) Seller and Buyer shall execute and deliver the Preliminary
Settlement Statement;
          (c) Buyer shall cause the Preliminary Purchase Price to be paid by
wire transfer in immediately available funds to the applicable account
designated by Seller in writing as provided in Section 2.1 above;
          (d) Seller shall execute and deliver to Buyer an affidavit of
non-foreign status and no requirement for withholding under Section 1445 of the
Code in the form of Schedule 12.3(e); and
          (e) Seller and Buyer shall take such other actions and deliver such
other documents as are contemplated by this Agreement.
ARTICLE 13
POST-CLOSING OBLIGATIONS
     13.1 Post-Closing Adjustments.
          (a) Final Settlement Statements. As soon as practicable after the
Closing, but in no event later than 90 days after Closing or 30 days after the
parties receive any final arbitration decisions pursuant to Sections 4.4 and
5.6, whichever is later, Seller, with the assistance of Buyer’s staff and with
access to such records as necessary, will cause to be prepared and delivered to
Buyer, in accordance with customary industry accounting practices, (i) the final
settlement statement (the “Final Settlement Statement”) setting forth each
adjustment to the Purchase Price in final form in accordance with Section 2.3
and showing the calculation of such adjustments and the resulting final purchase
price (the “Final Purchase Price”). As soon as practicable after receipt of the
Final Settlement Statement, but in no event later than on or before 30 days
after receipt of such statement, Buyer shall deliver to Seller a written report
containing any changes that Buyer proposes to make to the Final Settlement
Statement. Buyer’s failure to deliver to Seller a written report detailing
proposed changes to the Final Settlement Statement by that date shall be deemed
an acceptance by Buyer of the Final Settlement Statement as submitted by Seller.
The parties shall agree with respect to the changes proposed by Buyer, if any,
no later than 60 days after receipt of Seller’s proposed Final Settlement
Statement. The date upon which such agreement is reached or upon which the Final
Purchase Price is established shall be herein called the “Final Settlement
Date.” If the Final Purchase Price is more than the Preliminary

 

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Purchase Price (as defined in Section 2.3), Buyer shall pay to Seller the amount
of such difference by wire transfer in immediately available funds no later than
five (5) days after the Final Settlement Date. If the Final Purchase Price is
less than the Preliminary Purchase Price, Seller shall pay the additional amount
to Buyer by wire transfer in immediately available funds no later than five (5)
days after the Final Settlement Date.
          (b) Dispute Resolution. If the parties are unable to resolve a dispute
as to the Final Purchase Price by 60 days after Buyer’s receipt of Seller’s
proposed Final Settlement Statement, the parties shall submit the dispute to
binding arbitration to be conducted in accordance with the provisions of
Section 15.15. The hearing shall be conducted no later than 30 days after the
arbitration procedure is initiated. The arbitrator shall consider any evidence
and testimony that it determines to be relevant, in accordance with procedures
that it determines to be appropriate. The arbitrator shall render a written
decision specifically establishing the Final Purchase Price within 30 days after
the hearing. Without the consent of both Seller and Buyer, the arbitration shall
not determine any issues other than adjustments to be made pursuant to
Section 2.3 and 13.1; all other disputes shall be handled as otherwise provided
in this Agreement.
     13.2 Proceeds and Expenses.
          (a) From and after the Effective Time, Buyer shall be entitled to all
proceeds received by Seller relating to the Assets and Buyer shall be liable for
all costs and expenses attributable to the Assets for periods after the
Effective Time. At Closing the parties shall execute, acknowledge and deliver
transfer orders or letters in lieu thereof notifying all purchasers of
production of the change in ownership of the Assets and directing all purchases
of production to make payment to Buyer of proceeds attributable to production
from the Assets. Furthermore, Seller shall promptly turn over to Buyer all
proceeds of production relating to the Assets and all reimbursements of expenses
paid by Buyer which are received by Seller after the Effective Time and which
are attributable to the Assets for any period after the Effective Time.
          (b) Buyer shall promptly turn over to Seller all proceeds of
production relating to the Assets and all reimbursements of expenses previously
paid by Seller which are received by Buyer after the date hereof and which are
attributable to the Assets for any period of time prior to the Effective Time.
This obligation shall survive and continue beyond the Final Settlement
Statement.
     13.3 Records.
          (a) Seller agrees to deliver the Records to Buyer on or before
ten (10) days after Closing.
          (b) Seller may retain copies of the Records and Seller shall, for tax
purposes or other purposes related to requests by governmental agencies, have
the right to review and copy the Records during standard business hours upon
reasonable notice for three (3) years following Closing. Buyer agrees that the
Records will be maintained in compliance with all applicable laws governing
document retention. Buyer will not destroy or otherwise dispose of Records for a
period of three years following Closing, unless Buyer first gives Seller
reasonable notice and an opportunity to copy the Records to be destroyed.

 

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     13.4 Further Assurances. From time to time after Closing, Seller and Buyer
shall at the expense of the requesting party each execute, acknowledge and
deliver to the other such further instruments and take such other action as may
be reasonably requested in order to accomplish more effectively the purposes of
the transactions contemplated by this Agreement, including assurances that
Seller and Buyer are financially capable of performing any indemnification
required hereunder.
ARTICLE 14
ASSUMPTION AND RETENTION OF OBLIGATIONS AND INDEMNIFICATION
     14.1 Buyer’s Assumption of Liabilities and Obligations. Upon Closing, and
except for Retained Liabilities, Buyer shall assume and pay, perform, fulfill
and discharge all claims, costs, expenses, liabilities and obligations
(“Obligations”) (i) accruing or relating to the ownership and operation of the
Assets after the Effective Time including the owning, developing, exploring,
operating or maintaining of the Assets or the producing, transporting and
marketing of Hydrocarbons from the Assets, relating to periods after the
Effective Time including, without limitation, the payment of Property Expenses,
the obligation to plug and abandon all wells located on the Lands, except for
the Excluded Wells, and, except for the Excluded Wells, reclaim all well sites
located on the Lands regardless of when the obligations arose, the make-up and
balancing obligations for overproduction of gas from the Wells, all liability
for royalty and overriding royalty payments and Production Taxes made with
respect to the Assets, (ii) the Assumed Environmental Liabilities, and (iii) all
Obligations accruing or relating to the ownership or operation of the Assets
before the Effective Time for which Seller is not liable pursuant to the
provisions of Section 14.2 including those Obligations for which Claims are not
asserted before one (1) year after the Closing Date (collectively, the “Assumed
Liabilities”).
     14.2 Seller’s Retention of Liabilities and Obligations. Upon Closing Seller
shall retain and pay all Obligations of Seller relating to (1) the ownership and
operation of the Assets prior to the Effective Time, but only as to Claims
asserted before one (1) year after the Closing Date, including the owning,
developing, exploring, operating or maintaining of the Assets or the producing,
transporting and marketing of Hydrocarbons from the Assets, relating to periods
prior to the Effective Time including, without limitation, the payment of
Property Expenses, the obligation to plug and abandon all wells located on the
Lands and reclaim all well sites located on the Lands to the extent such
obligations arose prior to the Effective Time, and all liability for royalty and
overriding royalty payments and Taxes made with respect to the Assets; and
(2) the Retained Environmental Liabilities (collectively, the “Retained
Liabilities”).
     14.3 Indemnification. “Losses” shall mean any actual losses, costs,
expenses (including court costs, reasonable fees and expenses of attorneys,
technical experts and expert witnesses and the cost of investigation),
liabilities, damages, demands, suits, claims, and sanctions of every kind and
character (including civil fines) arising from, related to or reasonably
incident to matters indemnified against; excluding however any special,
consequential, punitive or exemplary damages, diminution of value of an Asset,
loss of profits incurred by a party hereto or Loss incurred as a result of the
indemnified party indemnifying a third party.

 

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     After the Closing, Buyer and Seller shall indemnify each other as follows:
          (a) Seller’s Indemnification of Buyer. Seller assumes all risk,
liability, obligation and Losses in connection with, and shall defend,
indemnify, and save and hold harmless Buyer, its officers, directors, employees
and agents, from and against all Losses which arise directly or indirectly from
or in connection with (i) the Retained Liabilities and (ii) subject to the time
limitations in Section 15.13 on survival of representations and warranties, any
breach by Seller of this Agreement.
          (b) Buyer’s Indemnification of Seller. Buyer assumes all risk,
liability, obligation and Losses in connection with, and shall defend,
indemnify, and save and hold harmless Seller, its officers, directors, employees
and agents, from and against all Losses which arise directly or indirectly from
or in connection with (i) the Assumed Liabilities, (ii) any matter for which
Buyer has agreed to indemnify Seller under this Agreement, and (iii) subject to
the time limitations in Section 15.13 on survival of representations and
warranties, any breach by Buyer of this Agreement.
     14.4 Procedure.
          (a) Claim Notice. The party seeking indemnification under the terms of
this Agreement (“Indemnified Party”) shall submit a written “Claim Notice” to
the other party (“Indemnifying Party”) which, to be effective, must state:
(i) the amount of each payment claimed by an Indemnified Party to be owing,
(ii) the basis for such claim, with supporting documentation, and (iii) a list
identifying to the extent reasonably possible each separate item of Loss for
which payment is so claimed. The amount claimed shall be paid by the
Indemnifying Party to the extent required herein within 30 days after receipt of
the Claim Notice, or after the amount of such payment has been finally
established, whichever last occurs.
          (b) Information. Within 60 days after the Indemnified Party receives
notice of a claim or legal action that may result in a Loss for which
indemnification may be sought under this Agreement (a “Claim”), the Indemnified
Party shall give written notice of such Claim to the Indemnifying Party. If the
Indemnifying Party or its counsel so requests, the Indemnified Party shall
furnish the Indemnifying Party with copies of all pleadings and other
information with respect to such Claim. At the election of the Indemnifying
Party made within 60 days after receipt of such notice, the Indemnified Party
shall permit the Indemnifying Party to assume control of such Claim (to the
extent only that such Claim, legal action or other matter relates to a Loss for
which the Indemnifying Party is liable), including the determination of all
appropriate actions, the negotiation of settlements on behalf of the Indemnified
Party, and the conduct of litigation through attorneys of the Indemnifying
Party’s choice; provided, however, that no such settlement can result in any
admission of fault or guilt, or any liability or cost to the Indemnified Party
for which it is entitled to be indemnified hereunder, in any such case, without
its consent. If the Indemnifying Party elects to assume control, (i) any expense
incurred by the Indemnified Party thereafter for investigation or defense of the
matter shall be borne by the Indemnified Party, and (ii) the Indemnified Party
shall give all reasonable information and assistance, other than pecuniary, that
the Indemnifying Party shall deem necessary to the proper defense of such Claim,
legal action, or other matter. In the absence of such an election, the
Indemnified Party will use its best efforts to defend, at the Indemnifying
Party’s expense, any claim, legal action or

 

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other matter to which such other party’s indemnification under this Agreement
applies until the Indemnifying Party assumes such defense, and, if the
Indemnifying Party fails to assume such defense within the time period provided
above, settle the same in the Indemnified Party’s reasonable discretion at the
Indemnifying Party’s expense with the Indemnifying Party’s consent which shall
not be unreasonably withheld. If such a Claim requires immediate action, both
the Indemnified Party and the Indemnifying Party will cooperate in good faith to
take appropriate action so as not to jeopardize defense of such Claim or either
party’s position with respect to such Claim.
          (c) Dispute. If the existence of a valid Claim or amount to be paid by
an Indemnifying Party is in dispute, the parties agree to submit determination
of the existence of a valid Claim or the amount to be paid pursuant to the Claim
Notice to binding arbitration pursuant to the provisions of Section 15.15 except
as otherwise provided in this Section. The arbitration shall be before a single
neutral arbitrator, who shall be either (1) an attorney who has practiced in the
area of oil and gas law for at least ten years; (2) a retired judge at the
Colorado or United States District Court or Appellate Court level; or (3) a
person with at least ten years of oil and gas industry experience as a petroleum
engineer. The American Arbitration Association (“AAA”) shall submit a list of
persons meeting the criteria outlined above for each category of arbitrator, and
the parties shall select the single arbitrator from such lists by mutual
agreement in the manner established by the AAA. The arbitrator shall conduct a
hearing no later than 60 days after submission of the matter to arbitration, and
a written decision shall be rendered by the arbitrator within 30 days of the
hearing. Any payment due pursuant to the arbitration shall be made within
15 days of the arbitrator’s decision.
          (d) Limits on Indemnification Obligations. In no event shall any party
be liable for indemnification under this Agreement unless the Losses incurred by
another party individually or in the aggregate exceed, or are likely to exceed,
$50,000. In no event shall any party’s total liability under this Section 14 for
indemnification exceed the Final Purchase Price, with respect to Losses arising
hereunder.
     14.5 No Insurance; Subrogation. The indemnifications provided in this
Article 14 shall not be construed as a form of insurance. Buyer and Seller
hereby waive for themselves, their successors or assigns, including, without
limitation, any insurers, any rights to subrogation for Losses for which each of
them is respectively liable or against which each respectively indemnifies the
other, and, if required by applicable policies, Buyer and Seller shall obtain
waiver of such subrogation from its respective insurers.
     14.6 Reservation as to Non-Parties. Nothing herein is intended to limit or
otherwise waive any recourse Buyer or Seller may have against any non-party for
any obligations or liabilities that may be incurred with respect to the Assets.
ARTICLE 15
MISCELLANEOUS
     15.1 Schedules. The Schedules to in this Agreement are hereby incorporated
in this Agreement by reference and constitute a part of this Agreement.

 

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     15.2 Expenses. Except as otherwise specifically provided herein, all fees,
costs and expenses incurred by Buyer or Seller in negotiating this Agreement or
in consummating the transactions contemplated by this Agreement shall be paid by
the party incurring the same, including, without limitation, engineering, land,
title, legal and accounting fees, costs and expenses.
     15.3 Notices. All notices and communications required or permitted under
this Agreement shall be in writing and addressed as set forth below. Any
communication or delivery hereunder shall be deemed to have been duly made and
the receiving party charged with notice (i) if personally delivered, when
received, (ii) if sent by telecopy or facsimile transmission, when received
(iii) if mailed, three (3) business days after mailing, certified mail, return
receipt requested, or (iv) if sent by overnight courier, one day after sending.
All notices shall be addressed as follows:
If to Seller:
Infinity Oil & Gas of Wyoming, Inc.
633 17th Street, Suite 1800
Denver, CO 80202
Attn: James Tuell
Phone: 720-932-7800
Facsimile: 720-932-5409
If to Buyer:
Forest Oil Corporation
707 17th Street, Suite 3600
Denver, CO 80202
Attn: Western Business Unit Manager
Phone: 303-812-1400
Facsimile: Fax 303-812-1550
     Any party may, by written notice so delivered to the other parties, change
the address or individual to which delivery shall thereafter be made.
     15.4 Amendments. Except for waivers specifically provided for in this
Agreement, this Agreement may not be amended nor any rights hereunder waived
except by an instrument in writing signed by the party to be charged with such
amendment or waiver and delivered by such party to the party claiming the
benefit of such amendment or waiver.
     15.5 Assignment. Buyer shall not assign all or any portion of its
respective rights or delegate all or any portion of its respective duties
hereunder without the written consent of Seller, which consent shall not be
unreasonably withheld.
     15.6 Headings. The headings of the Articles and Sections of this Agreement
are for guidance and convenience of reference only and shall not limit or
otherwise affect any of the terms or provisions of this Agreement.

 

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     15.7 Counterparts/Fax Signatures. This Agreement may be executed by Buyer
and Seller in any number of counterparts, each of which shall be deemed an
original instrument, but all of which together shall constitute but one and the
same instrument. Fax signatures shall be considered binding.
     15.8 References. References made in this Agreement, including use of a
pronoun, shall be deemed to include where applicable, masculine, feminine,
singular or plural, individuals or entities. As used in this Agreement, “person”
shall mean any natural person, corporation, partnership, trust, limited
liability company, court, agency, government, board, commission, estate or other
entity or authority.
     15.9 Governing Law. This Agreement and the transactions contemplated hereby
and any arbitration or dispute resolution conducted pursuant hereto shall be
construed in accordance with, and governed by, the laws of the State of
Colorado.
     15.10 Entire Agreement. This Agreement constitutes the entire understanding
among the parties, their respective partners, members, trustees, shareholders,
officers, directors and employees with respect to the subject matter hereof,
superseding all negotiations, prior discussions and prior agreements and
understandings relating to such subject matter.
     15.11 Knowledge. The phrases “Knowledge” or “to the best of a party’s
Knowledge” or similar phrases mean (a) the actual knowledge, without independent
investigation, at the time the assertion is made, or (b) knowledge of such
information as would lead a reasonable operator to inquire further and the
corresponding knowledge which would have been obtained from such inquiry.
     15.12 Binding Effect. This Agreement shall be binding upon, and shall inure
to the benefit of, the parties hereto, and their respective successors and
assigns.
     15.13 Survival of Warranties, Representations and Covenants. All
representations and warranties contained in the Agreement shall survive the
Closing and continue with respect to claims made before one (1) year following
the Closing Date. Except as otherwise provided herein, the covenants,
indemnities and agreements contained in the Agreement shall survive the Closing
and continue in accordance with their respective terms.
     15.14 No Third-Party Beneficiaries. This Agreement is intended only to
benefit the parties hereto and their respective permitted successors and
assigns.
     15.15 Arbitration. Other than title disputes to be resolved pursuant to
Section 4.4, environmental disputes to be resolved pursuant to Section 5.6 and
Final Settlement Statement Disputes to be resolved pursuant to Section 13.1(b),
disputes arising under the terms of this Agreement shall be resolved by
arbitration as follows:
          (a) Within ten (10) days after written demand by either party for
arbitration, the parties shall jointly appoint one arbitrator. If the parties
shall fail to appoint an arbitrator within the time stated, the arbitrator shall
be appointed pursuant to the Commercial Arbitration Rules specified by the AAA.
The arbitrator shall have no interest in either of the parties or any affiliated
or associated companies of the parties.

 

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          (b) The arbitration proceeding shall be governed by Colorado law and
shall be conducted in accordance with the Commercial Arbitration Rules of the
AAA with discovery to be conducted in accordance with the Federal Rules of Civil
Procedure, and with any disputes over the scope of discovery to be determined by
the arbitrator.
          (c) Any arbitration hearing shall be conducted in Denver, Colorado at
a location to be mutually selected by the parties.
          (d) At the hearing, the parties shall present such evidence and
witnesses as they may choose, with or without counsel. Adherence to formal rules
of evidence shall not be required but the arbitrator shall consider any evidence
and testimony that it determines to be relevant, in accordance with procedures
that it determines to be appropriate.
          (e) Any award entered in the arbitration shall be made by a written
opinion stating the reasons and basis for the award made.
          (f) The costs incurred in employing the arbitrator, including the
arbitrator’s retention of any independent qualified experts, shall be borne 50%
by the Seller and 50% by Buyer.
     The arbitrator’s award may be filed in any court of competent jurisdiction
and may be enforced by any party as a final judgment of such court.
     15.16 Press Releases. Subject to the provisions of Section 8.2(d)), as soon
as practicable after the execution hereof, the parties shall consult with each
other regarding press releases to be issued after the date of execution of this
Agreement and after the Closing Date.

              SELLER:
 
            INFINITY OIL & GAS OF WYOMING, INC.
 
            /s/ Stanton E. Ross      
 
  By: Stanton E. Ross
 
       
 
  Title:   President
 
            BUYER:
 
            FOREST OIL CORPORATION
 
            /s/ Glen Mizenko      
 
  By: Glen Mizenko
 
       
 
  Title:   Sr. Vice President