Exhibit 10.4

 

 

EMPLOYEE BENEFITS AGREEMENT

 

DATED AS OF SEPTEMBER 9, 2005

 

 

BETWEEN

 

 

FOREST OIL CORPORATION

 

 

AND

 

 

SML WELLHEAD CORPORATION

 

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TABLE OF CONTENTS

 

ARTICLE I

DEFINITIONS

 

 

 

Section 1.1

General

1

 

 

 

ARTICLE II

EMPLOYEES; ASSUMPTION OF LIABILITIES

 

 

 

Section 2.1

Employees

3

Section 2.2

Assumption of Liabilities

4

 

 

 

ARTICLE III

FOREST STOCK OPTIONS

 

 

 

Section 3.1

Vested Options

5

Section 3.2

Unvested Options

5

 

 

 

ARTICLE IV

GENERAL

 

 

 

Section 4.1

Sharing of Employee Information

6

Section 4.2

Non-Solicitation of Employees

6

Section 4.3

Effect if Distribution Does Not Occur

6

Section 4.4

Relationship of Parties

6

Section 4.5

Indemnification

6

Section 4.6

Survival

8

Section 4.7

Notices

8

Section 4.8

Interpretation

8

Section 4.9

Governing Law

9

Section 4.10

No Assignment

9

Section 4.11

Third Party Beneficiary

9

Section 4.12

Amendment

9

Section 4.13

Termination

9

Section 4.14

Counterparts

9

 

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EMPLOYEE BENEFITS AGREEMENT

 

This EMPLOYEE BENEFITS AGREEMENT (this “Agreement”) is dated as of September 9,
2005 by and between Forest Oil Corporation, a New York corporation (“Forest”),
and SML Wellhead Corporation, a Delaware corporation and a wholly owned
subsidiary of Forest (“Spinco”).

 

RECITALS

 

WHEREAS, Forest intends to transfer or cause to be transferred to Spinco the
Spinco Assets (as defined below) and certain associated liabilities (the
“Contribution”) in exchange for cash and shares of Spinco Common Stock (as
defined below);

 

WHEREAS, subsequent to the Contribution, all of the issued and outstanding
shares of common stock of Spinco will be distributed on a pro rata basis to the
holders of the outstanding common stock of Forest (the “Distribution”);

 

WHEREAS, following the Distribution, pursuant to the terms of the Agreement and
Plan of Merger dated as of September 9, 2005 (the “Merger Agreement”) by and
between Forest, Spinco, Mariner Energy, Inc., a Delaware corporation (the
“Company”), and MEI Sub, Inc., a Delaware corporation and a wholly owned
subsidiary of the Company (“Merger Sub”), Merger Sub will merge with and into
Spinco, with Spinco being the surviving corporation;

 

WHEREAS, Forest and Spinco have entered into a Distribution Agreement dated as
of the date hereof (the “Distribution Agreement”) and certain other agreements
that will govern matters relating to the Distribution and the relationship of
Forest and Spinco following the Distribution;

 

WHEREAS, pursuant to the Distribution Agreement, Forest and Spinco have agreed
to enter into this Agreement for purposes of allocating employees whose primary
responsibilities include activities necessary to carry out or support the Spinco
Business (as defined below) and assets, liabilities, and responsibilities with
respect to employee compensation, benefits and other matters.

 

NOW, THEREFORE, in consideration of the mutual promises contained herein and in
the Distribution Agreement, the parties hereto hereby agree as follows:

 

ARTICLE I
DEFINITIONS

 

Section 1.1                                      General.  As used in this
Agreement, the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):

 

Affiliate:  has the meaning given in the Distribution Agreement.

 

Agreement:  means this Employee Benefits Agreement, and all exhibits and
schedules hereto.

 

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Company:  has the meaning given in the third recital of this Agreement.

 

Company Savings Plan:  has the meaning given in the Merger Agreement.

 

Distribution:  has the meaning given in the second recital of this Agreement.

 

Distribution Agreement:  has the meaning given in the fourth recital of this
Agreement.

 

Distribution Date:  has the meaning given in the Distribution Agreement.

 

Forest:  has the meaning given in the first paragraph of this Agreement.

 

Forest Common Stock:  has the meaning given in the Distribution Agreement.

 

Forest Educational Assistance Plan:  means the Forest educational assistance
plan.

 

Forest Incentive Plans: means (a) the Forest Stock Incentive Plan; (b) the
Forcenergy Inc. 1999 Stock Plan; and (c) the Forest 2001 Stock Incentive Plan.

 

Forest Indemnitees:  has the meaning given in the Distribution Agreement.

 

Forest Plans:  means the Forest Savings Plan, the Forest Educational Assistance
Plan,  the Forest Vacation Policy, the Forest Incentive Plans and all other
employee benefit plans, policies, agreements and arrangements of Forest.

 

Forest Savings Plan:  means Forest’s Retirement Savings Plan.

 

Forest Stock Option:  means an option to acquire Forest Common Stock granted
pursuant to a Forest Incentive Plan.

 

Forest Vacation Policy:  means the Forest vacation policy.

 

Group: has the meaning given in the Distribution Agreement.

 

Indemnifiable Losses: has the meaning given in the Distribution Agreement.

 

Indemnifying Party: has the meaning given in the Distribution Agreement.

 

Indemnitee: has the meaning given in the Distribution Agreement.

 

Measurement Date:  has the meaning given in the Distribution Agreement.

 

Merger Agreement:  has the meaning given in the third recital of this Agreement.

 

Retained Employee:  means any individual (a) who, as of the close of business on
the Distribution Date, is actively employed by, or on an approved leave of
absence or layoff with right of recall from, Forest or any individual who was at
any time on or prior to the Distribution Date employed by Forest or any of its
Affiliates and (b) who is not a Spinco Employee.

 

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Retained Employee Liabilities:  has the meaning given in Section 2.2(b).

 

Spinco:  has the meaning given in the first paragraph of this Agreement.

 

Spinco Assets:  has the meaning given in the Distribution Agreement.

 

Spinco Business:  has the meaning given in the Distribution Agreement.

 

Spinco Common Stock:  has the meaning given in the Distribution Agreement.

 

Spinco Employee:  means (a) any individual listed on Schedule A attached hereto
and (b) any other individual identified by Forest whose transfer to Spinco was
approved by the Company (whether a specific approval of an individual employee
or an approval of a reasonably identifiable and limited class of employees),
such approval not to be unreasonably withheld, and in either case, who, as of
the close of the Distribution Date, is actively employed by, or on an approved
leave of absence or layoff with right of recall from, Spinco.

 

Spinco Employee Liabilities:  has the meaning given in Section 2.2(a).

 

Spinco Indemnitees:  has the meaning given in the Distribution Agreement.

 

Third-Party Claim:  has the meaning given in the Distribution Agreement.

 

Transaction Agreement: has the meaning given in the Merger Agreement.

 

Unvested Forest Stock Option:  means the portion of a Forest Stock Option
representing the shares of Forest Common Stock for which such option is not
exercisable as of the Distribution Date.

 

Vested Forest Stock Option:  means the portion of a Forest Stock Option
representing the shares of Forest Common Stock for which such option is
exercisable as of the Distribution Date.

 

ARTICLE II
EMPLOYEES; ASSUMPTION OF LIABILITIES

 

Section 2.1             Employees.

 

(A)                                  GENERAL.  EFFECTIVE AS OF THE DISTRIBUTION
DATE, SPINCO EMPLOYEES SHALL BE EMPLOYEES OF SPINCO AND RETAINED EMPLOYEES SHALL
BE EMPLOYEES OF FOREST.  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN OR AS
REQUIRED BY APPLICABLE LAW, EFFECTIVE AS OF THE DISTRIBUTION DATE EACH SPINCO
EMPLOYEE SHALL BE CONSIDERED TO HAVE INCURRED A TERMINATION OF EMPLOYMENT FOR
PURPOSES OF ALL FOREST PLANS.  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, NO
PROVISION OF THIS AGREEMENT OR THE DISTRIBUTION AGREEMENT SHALL BE CONSTRUED TO
CREATE ANY RIGHT, OR ACCELERATE ENTITLEMENT, TO ANY COMPENSATION OR BENEFIT
WHATSOEVER ON THE PART OF ANY SPINCO EMPLOYEE OR OTHER FUTURE, PRESENT, OR
FORMER EMPLOYEE OF FOREST OR SPINCO UNDER ANY FOREST PLAN OR OTHERWISE.

 

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(B)                                 NO RIGHT TO CONTINUED EMPLOYMENT.  NOTHING
CONTAINED IN THIS AGREEMENT SHALL CONFER ON ANY SPINCO EMPLOYEE OR FOREST
EMPLOYEE ANY RIGHT TO CONTINUED EMPLOYMENT.

 

(C)                                  FOREST SAVINGS PLAN.  AT THE DISTRIBUTION
DATE, TO THE EXTENT DOING SO WILL NOT ADVERSELY AFFECT THE TAX-QUALIFIED STATUS
OF THE FOREST SAVINGS PLAN, SPINCO EMPLOYEES WHO ARE NOT 100% VESTED IN THEIR
BENEFITS IN THE FOREST SAVINGS PLAN WILL BE 100% VESTED IN THEIR BENEFITS
ACCRUED AS OF SUCH DATE.  EFFECTIVE AS OF THE DISTRIBUTION DATE, SPINCO
EMPLOYEES SHALL BE CONSIDERED TO HAVE INCURRED A TERMINATION OF EMPLOYMENT FOR
PURPOSES OF THE FOREST SAVINGS PLAN; PROVIDED, HOWEVER, THAT, DUE TO THE PENDING
TRANSFER OF ASSETS AND LIABILITIES WITH RESPECT TO THE SPINCO EMPLOYEES FROM THE
FOREST SAVINGS PLAN TO THE COMPANY SAVINGS PLAN AS CONTEMPLATED IN SECTION 6.8
OF THE MERGER AGREEMENT, A SPINCO EMPLOYEE SHALL BE DEEMED TO HAVE NOT INCURRED
A TERMINATION OF EMPLOYMENT (UNLESS SUCH EMPLOYEE HAS ALSO TERMINATED EMPLOYMENT
AFTER THE DISTRIBUTION DATE WITH SPINCO, THE COMPANY AND THEIR SUBSIDIARIES) FOR
PURPOSES OF (I) OUTSTANDING LOANS UNDER THE FOREST SAVINGS PLAN AS OF THE
DISTRIBUTION DATE, (II) THE RIGHT TO MAKE IN-SERVICE WITHDRAWALS UNDER THE
FOREST SAVINGS PLAN, AND (III) THE ENTITLEMENT TO DISTRIBUTIONS UPON TERMINATION
OF EMPLOYMENT UNDER THE FOREST SAVINGS PLAN.

 

(D)                                 FOREST EDUCATIONAL ASSISTANCE PLAN.
EFFECTIVE AS OF THE DISTRIBUTION DATE, SPINCO SHALL ASSUME THE LIABILITY UNDER
THE FOREST EDUCATIONAL ASSISTANCE PLAN FOR ANY AND ALL EDUCATIONAL ASSISTANCE
BENEFITS PAYABLE ON AND AFTER THE DISTRIBUTION DATE WITH RESPECT TO ANY SPINCO
EMPLOYEE WHO IS ENROLLED IN ONE OR MORE CLASSES ON THE DISTRIBUTION DATE AND WHO
MAY BECOME ELIGIBLE FOR BENEFITS UNDER THE FOREST EDUCATIONAL ASSISTANCE PLAN
WITH RESPECT TO SUCH CLASS OR CLASSES; PROVIDED, HOWEVER, THAT SPINCO SHALL NOT
BE REQUIRED TO ASSUME ANY SUCH LIABILITY TO THE EXTENT RELATED TO A SEMESTER
BEGINNING AFTER THE SEMESTER DURING WHICH THE DISTRIBUTION DATE OCCURS.  THE
AMOUNT OF, AND ELIGIBILITY OF ANY SUCH SPINCO EMPLOYEE FOR, SUCH BENEFITS SHALL
BE DETERMINED BY SPINCO IN ACCORDANCE WITH THE TERMS OF THE FOREST EDUCATIONAL
ASSISTANCE PLAN AS IN EFFECT ON THE DISTRIBUTION DATE.  AFTER THE SEMESTER
DURING WHICH THE DISTRIBUTION DATE OCCURS, SPINCO SHALL CAUSE THE SPINCO
EMPLOYEES WHO ARE EMPLOYED BY SPINCO, THE COMPANY OR ANY OF THEIR AFFILIATES TO
BE ELIGIBLE FOR PARTICIPATION IN THE COMPANY’S EDUCATIONAL ASSISTANCE PLAN.

 

(E)                                  FOREST VACATION POLICY.  EFFECTIVE AS OF
THE DISTRIBUTION DATE, SPINCO SHALL ASSUME ALL LIABILITY WITH RESPECT TO ANY
VACATION WHICH HAS ACCRUED, IN RESPECT OF THE CALENDAR YEAR IN WHICH THE
DISTRIBUTION DATE OCCURS, FOR THE BENEFIT OF ANY SPINCO EMPLOYEE AS OF THE
DISTRIBUTION DATE UNDER THE FOREST VACATION POLICY.

 

(F)                                    FOREST AND SPINCO HEREBY AGREE TO USE
COMMERCIALLY REASONABLE EFFORTS TO IMPLEMENT THE ALTERNATE PROCEDURE DESCRIBED
IN SECTION 5 OF REVENUE PROCEDURE 2004-53.

 

Section 2.2             Assumption of Liabilities.

 

(A)                                  ASSUMPTION BY SPINCO.  SUBJECT TO
SATISFACTION BY FOREST OF ITS OBLIGATIONS HEREUNDER, SPINCO AND ITS AFFILIATES
HEREBY ASSUME AND AGREE TO PAY, PERFORM, FULFILL AND DISCHARGE, IN ACCORDANCE
WITH THEIR RESPECTIVE TERMS, AS SUCH RELATE TO THE SPINCO EMPLOYEES, (I) ALL OF
THE  LIABILITIES RELATING TO, ARISING OUT OF, OR RESULTING FROM OBLIGATIONS,
LIABILITIES, AND RESPONSIBILITIES EXPRESSLY ASSUMED OR RETAINED BY SPINCO
PURSUANT TO THIS AGREEMENT, REGARDLESS OF WHEN OR WHERE SUCH LIABILITIES AROSE
OR ARISE OR WERE OR ARE INCURRED, (II) ALL OF THE LIABILITIES

 

4

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RELATING TO OR ARISING FROM THE SPINCO EMPLOYEES TO THE EXTENT ARISING FROM AND
AFTER THE MEASUREMENT DATE AND ATTRIBUTABLE DIRECTLY TO THE CONDUCT OF THE
COMPANY, AND (III) ALL OF THE LIABILITIES OF FOREST OR ANY OF ITS AFFILIATES
RELATING TO OR ARISING FROM THE SPINCO EMPLOYEES TO THE EXTENT ARISING FROM AND
AFTER THE DISTRIBUTION DATE AND ATTRIBUTABLE TO THE CONDUCT OF THE SPINCO
BUSINESS AFTER THE DISTRIBUTION DATE (OTHER THAN ANY SUCH LIABILITIES RELATING
TO BENEFITS UNDER THE FOREST PLANS THAT ARE NOT ASSUMED BY SPINCO PURSUANT TO
THE EXPRESS TERMS OF THIS AGREEMENT, THE DISTRIBUTION AGREEMENT OR THE MERGER
AGREEMENT) (COLLECTIVELY, THE “SPINCO EMPLOYEE LIABILITIES”).

 

(B)                                 ASSUMPTION BY FOREST.  ALL LIABILITIES
RELATING TO OR ARISING FROM (I) THE SPINCO EMPLOYEES TO THE EXTENT ARISING PRIOR
TO THE DISTRIBUTION DATE OR ATTRIBUTABLE TO THE CONDUCT OF THE SPINCO BUSINESS
PRIOR TO THE DISTRIBUTION DATE (OTHER THAN ANY SUCH LIABILITIES RELATING TO,
ARISING OUT OF, OR RESULTING FROM OBLIGATIONS, LIABILITIES, OR RESPONSIBILITIES
EXPRESSLY ASSUMED OR RETAINED BY SPINCO PURSUANT TO THIS AGREEMENT, THE
DISTRIBUTION AGREEMENT OR THE MERGER AGREEMENT, REGARDLESS OF WHEN OR WHERE SUCH
LIABILITIES AROSE OR ARISE OR WERE OR ARE INCURRED) AND (II) THE RETAINED
EMPLOYEES, SHALL BE ASSUMED AND RETAINED BY FOREST, AND FOREST AGREES TO PAY,
PERFORM, FULFILL, AND DISCHARGE IN ACCORDANCE WITH THEIR RESPECTIVE TERMS ALL OF
SUCH LIABILITIES, REGARDLESS OF WHEN OR WHERE SUCH LIABILITIES AROSE OR ARISE OR
WERE OR ARE INCURRED (“RETAINED EMPLOYEE LIABILITIES”).

 

ARTICLE III
FOREST STOCK OPTIONS

 

Section 3.1                                      Vested Options.  Effective as
of the Distribution Date, each Forest Stock Option held by a Spinco Employee who
is eligible for retirement as of the Distribution Date under the terms of the
Forest Stock Option agreement evidencing such option shall be 100% exercisable
and such option shall be a Vested Forest Stock Option for purposes hereof.  In
addition, effective as of the Distribution Date, each Spinco Employee shall be
considered to have terminated employment for a reason other than death,
disability, retirement or cause (as described in the applicable Forest Stock
Option agreement) with respect to each Vested Forest Stock Option held by such
employee (and the applicable Forest Incentive Plan as it relates to such
option); provided, however, that if such employee is eligible for retirement as
of the Distribution Date under the terms of the Forest Stock Option agreement
evidencing any such option, such employee shall be treated as having terminated
employment as of the Distribution Date due to retirement for purposes of such
option.  The exercise of a Vested Forest Stock Option on or after the
Distribution Date shall be subject to the terms of the Forest Stock Option
agreement evidencing such option after giving effect to the foregoing provisions
of this Section 3.1.  Not later than immediately before the Distribution, Forest
shall have taken such actions as may be required to effect this Section 3.1.

 

Section 3.2                                      Unvested Options.  Effective as
of the Distribution Date, (a) each Spinco Employee shall not be considered to
have terminated employment with respect to each Unvested Forest Stock Option
held by such employee (and the applicable Forest Incentive Plan as it relates to
such option) and (b) each Unvested Forest Stock Option held by such employee
shall be subject to adjustment as provided in the Merger Agreement.

 

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ARTICLE IV
GENERAL

 

Section 4.1                                      Sharing of Employee
Information.  Forest and Spinco and their respective authorized agents shall,
subject to applicable laws on confidentiality, be given reasonable and timely
access to, and may make copies of, all information relating to the subjects of
this Agreement in the custody of the other party, to the extent necessary for
implementation of this Agreement.

 

Section 4.2                                      Non-Solicitation of Employees. 
For a period of two years from the close of the Distribution Date, Spinco, the
Company and their respective Affiliates will not, without the prior written
consent of Forest, and Forest and its Affiliates will not, without the prior
written consent of Spinco or the Company, whether directly or indirectly,
solicit (in writing or orally) for employment or other services, whether as an
employee, officer, director, agent, consultant or independent contractor, any
person who or which is at the time of such solicitation an employee, agent,
representative, officer or director of the other party or its Affiliates;
provided, however, that this covenant shall not (a) apply to any individual
whose employment, agency, representative, officer, director or consultant
relationship with the other party has terminated or (b) prohibit a general
solicitation by advertisement or otherwise (and  from thereafter soliciting or
hiring any individual who responds to such general solicitation).

 

Section 4.3                                      Effect if Distribution Does Not
Occur.  If the Distribution does not occur, then all actions and events that
are, under this Agreement, to be taken or occur effective as of the Distribution
Date, after the Distribution Date, or otherwise in connection with the
Distribution, shall not be taken or occur except to the extent specifically
agreed by Forest and Spinco.

 

Section 4.4                                      Relationship of Parties. 
Nothing in this Agreement shall be deemed or construed by the parties or any
third party as creating the relationship of principal and agent, partnership or
joint venture between the parties, it being understood and agreed that no
provision contained herein, and no act of the parties, shall be deemed to create
any relationship between the parties other than the relationship set forth
herein.

 

Section 4.5                                      Indemnification.

 

(a)                                  Except as specifically otherwise provided
in the other Transaction Agreements, Spinco shall indemnify, defend and hold
harmless the Forest Indemnitees from and against all Indemnifiable Losses
arising out of or relating to any Spinco Employee Liability.  Except as
specifically otherwise provided in the other Transaction Agreements, Forest
shall indemnify, defend and hold harmless the Spinco Indemnitees from and
against all Indemnifiable Losses arising out of or relating to any Retained
Employee Liability.

 

(B)                                 INDEMNIFICATION FOR MATTERS SUBJECT TO THE
TAX SHARING AGREEMENT IS GOVERNED BY THE TERMS, PROVISIONS AND PROCEDURES OF THE
TAX SHARING AGREEMENT AND NOT BY THIS SECTION 4.5.

 

(C)                                  FOREST SHALL, AND SHALL CAUSE THE OTHER
FOREST INDEMNITEES TO, NOTIFY SPINCO IN WRITING PROMPTLY AFTER LEARNING OF ANY
THIRD-PARTY CLAIM FOR WHICH ANY FOREST INDEMNITEE INTENDS TO SEEK
INDEMNIFICATION FROM SPINCO UNDER THIS AGREEMENT.  SPINCO SHALL, AND SHALL CAUSE
THE OTHER SPINCO INDEMNITEES TO, NOTIFY FOREST IN WRITING PROMPTLY AFTER
LEARNING OF ANY THIRD-

 

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PARTY CLAIM FOR WHICH ANY SPINCO INDEMNITEE INTENDS TO SEEK INDEMNIFICATION FROM
FOREST UNDER THIS AGREEMENT.  THE FAILURE OF ANY INDEMNITEE TO GIVE SUCH NOTICE
SHALL NOT RELIEVE ANY INDEMNIFYING PARTY OF ITS OBLIGATIONS UNDER THIS
SECTION 4.5 EXCEPT TO THE EXTENT THAT SUCH INDEMNIFYING PARTY IS ACTUALLY
PREJUDICED BY SUCH FAILURE TO GIVE NOTICE.  SUCH NOTICE SHALL DESCRIBE SUCH
THIRD-PARTY CLAIM IN REASONABLE DETAIL AND SHALL INDICATE THE AMOUNT (ESTIMATED
IF NECESSARY) OF THE INDEMNIFIABLE LOSS THAT HAS BEEN CLAIMED AGAINST OR MAY BE
SUSTAINED BY SUCH INDEMNITEE.

 

(D)                                 EXCEPT AS OTHERWISE PROVIDED IN
PARAGRAPH (E) OF THIS SECTION 4.5, AN INDEMNIFYING PARTY MAY, BY NOTICE TO THE
INDEMNITEE AND TO FOREST, IF SPINCO IS THE INDEMNIFYING PARTY, OR TO THE
INDEMNITEE AND SPINCO, IF FOREST IS THE INDEMNIFYING PARTY, AT ANY TIME AFTER
RECEIPT BY SUCH INDEMNIFYING PARTY OF SUCH INDEMNITEE’S NOTICE OF A THIRD-PARTY
CLAIM, UNDERTAKE (ITSELF OR THROUGH ANOTHER MEMBER OF THE GROUP OF WHICH THE
INDEMNIFYING PARTY IS A MEMBER) THE DEFENSE OR SETTLEMENT OF SUCH THIRD-PARTY
CLAIM, AT SUCH INDEMNIFYING PARTY’S OWN EXPENSE AND BY COUNSEL REASONABLY
SATISFACTORY TO THE INDEMNITEE.  IF AN INDEMNIFYING PARTY UNDERTAKES THE DEFENSE
OF ANY THIRD-PARTY CLAIM, SUCH INDEMNIFYING PARTY SHALL CONTROL THE
INVESTIGATION AND DEFENSE OR SETTLEMENT THEREOF, AND THE INDEMNITEE MAY NOT
SETTLE OR COMPROMISE SUCH THIRD-PARTY CLAIM, EXCEPT THAT SUCH INDEMNIFYING PARTY
SHALL NOT (I) REQUIRE ANY INDEMNITEE, WITHOUT ITS PRIOR WRITTEN CONSENT, TO TAKE
OR REFRAIN FROM TAKING ANY ACTION IN CONNECTION WITH SUCH THIRD-PARTY CLAIM, OR
MAKE ANY PUBLIC STATEMENT, WHICH SUCH INDEMNITEE REASONABLY CONSIDERS TO BE
AGAINST ITS INTERESTS, OR (II) WITHOUT THE PRIOR WRITTEN CONSENT OF THE
INDEMNITEE AND OF FOREST, IF THE INDEMNITEE IS A FOREST INDEMNITEE, OR THE
INDEMNITEE AND OF SPINCO, IF THE INDEMNITEE IS A SPINCO INDEMNITEE, CONSENT TO
ANY SETTLEMENT THAT DOES NOT INCLUDE AS A PART THEREOF AN UNCONDITIONAL RELEASE
OF THE RELEVANT INDEMNITEES FROM LIABILITY WITH RESPECT TO SUCH THIRD-PARTY
CLAIM OR THAT REQUIRES THE INDEMNITEE OR ANY OF ITS REPRESENTATIVES OR
AFFILIATES TO MAKE ANY PAYMENT THAT IS NOT FULLY INDEMNIFIED UNDER THIS
AGREEMENT OR TO BE SUBJECT TO ANY NON-MONETARY REMEDY.  SUBJECT TO THE
INDEMNIFYING PARTY’S CONTROL RIGHTS, AS SPECIFIED HEREIN, THE INDEMNITEES MAY
PARTICIPATE IN SUCH INVESTIGATION AND DEFENSE, AT THEIR OWN EXPENSE.  FOLLOWING
THE PROVISION OF NOTICES TO THE INDEMNIFYING PARTY, UNTIL SUCH TIME AS AN
INDEMNIFYING PARTY HAS UNDERTAKEN THE DEFENSE OF ANY THIRD-PARTY CLAIM AS
PROVIDED HEREIN, SUCH INDEMNITEE SHALL CONTROL THE INVESTIGATION AND DEFENSE OR
SETTLEMENT THEREOF, WITHOUT PREJUDICE TO ITS RIGHT TO SEEK INDEMNIFICATION
HEREUNDER.

 

(E)                                  IF AN INDEMNITEE REASONABLY DETERMINES THAT
THERE MAY BE LEGAL DEFENSES AVAILABLE TO IT THAT ARE DIFFERENT FROM OR IN
ADDITION TO THOSE AVAILABLE TO ITS INDEMNIFYING PARTY WHICH MAKE IT
INAPPROPRIATE FOR THE INDEMNIFYING PARTY TO UNDERTAKE THE DEFENSE OR SETTLEMENT
THEREOF, THEN SUCH INDEMNIFYING PARTY SHALL NOT BE ENTITLED TO UNDERTAKE THE
DEFENSE OR SETTLEMENT OF SUCH THIRD-PARTY CLAIM; AND COUNSEL FOR THE
INDEMNIFYING PARTY SHALL BE ENTITLED TO CONDUCT THE DEFENSE OF SUCH INDEMNIFYING
PARTY AND COUNSEL FOR THE INDEMNITEE (SELECTED BY THE INDEMNITEE) SHALL BE
ENTITLED TO CONDUCT THE DEFENSE OF SUCH INDEMNITEE, IN WHICH CASE THE REASONABLE
FEES, COSTS AND EXPENSES OF SUCH COUNSEL FOR THE INDEMNITEE (BUT NOT MORE THAN
ONE COUNSEL REASONABLY SATISFACTORY TO THE INDEMNIFYING PARTY) SHALL BE PAID BY
SUCH INDEMNIFYING PARTY, IT BEING UNDERSTOOD THAT BOTH SUCH COUNSEL SHALL
COOPERATE WITH EACH OTHER TO CONDUCT THE DEFENSE OR SETTLEMENT OF SUCH ACTION AS
EFFICIENTLY AS POSSIBLE.

 

(F)                                    IN NO EVENT SHALL AN INDEMNIFYING PARTY
BE LIABLE FOR THE FEES AND EXPENSES OF MORE THAN ONE COUNSEL FOR ALL INDEMNITEES
(IN ADDITION TO LOCAL COUNSEL AND ITS OWN COUNSEL, IF

 

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ANY) IN CONNECTION WITH ANY ONE ACTION, OR SEPARATE BUT SIMILAR OR RELATED
ACTIONS, IN THE SAME JURISDICTION ARISING OUT OF THE SAME GENERAL ALLEGATIONS OR
CIRCUMSTANCES.

 

(G)                                 IF THE INDEMNIFYING PARTY UNDERTAKES THE
DEFENSE OR SETTLEMENT OF A THIRD-PARTY CLAIM, THE INDEMNITEE SHALL MAKE
AVAILABLE TO THE INDEMNIFYING PARTY AND ITS COUNSEL ALL INFORMATION AND
DOCUMENTS REASONABLY AVAILABLE TO IT WHICH RELATE TO ANY THIRD-PARTY CLAIM, AND
OTHERWISE COOPERATE AS MAY REASONABLY BE REQUIRED IN CONNECTION WITH THE
INVESTIGATION, DEFENSE AND SETTLEMENT THEREOF, SUBJECT TO THE TERMS AND
CONDITIONS OF A MUTUALLY ACCEPTABLE JOINT DEFENSE AGREEMENT.

 

(H)                                 THE AMOUNT THAT ANY INDEMNIFYING PARTY IS OR
MAY BE REQUIRED TO PAY TO ANY INDEMNITEE PURSUANT TO THIS SECTION 4.5 SHALL BE
REDUCED (RETROACTIVELY OR PROSPECTIVELY) BY ANY INSURANCE PROCEEDS OR OTHER
AMOUNTS ACTUALLY RECOVERED FROM THIRD PARTIES BY OR ON BEHALF OF SUCH INDEMNITEE
IN RESPECT OF THE RELATED INDEMNIFIABLE LOSSES.  THE EXISTENCE OF A CLAIM BY AN
INDEMNITEE FOR INSURANCE OR AGAINST A THIRD PARTY IN RESPECT OF ANY
INDEMNIFIABLE LOSS SHALL NOT, HOWEVER, DELAY OR REDUCE ANY PAYMENT PURSUANT TO
THE INDEMNIFICATION PROVISIONS CONTAINED HEREIN AND OTHERWISE DETERMINED TO BE
DUE AND OWING BY AN INDEMNIFYING PARTY.  RATHER THE INDEMNIFYING PARTY SHALL
MAKE PAYMENT IN FULL OF SUCH AMOUNT SO DETERMINED TO BE DUE AND OWING BY IT AND,
IF, AND TO THE EXTENT THAT, THERE EXISTS A CLAIM AGAINST ANY THIRD PARTY (OTHER
THAN AN INSURER) IN RESPECT OF SUCH INDEMNIFIABLE LOSS, THE INDEMNITEE SHALL
ASSIGN SUCH CLAIM AGAINST SUCH THIRD PARTY TO THE INDEMNIFYING PARTY. 
NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS AGREEMENT, IT IS THE INTENTION OF
THE PARTIES HERETO THAT NO INSURER OR ANY OTHER THIRD PARTY SHALL BE
(I) ENTITLED TO A BENEFIT IT WOULD NOT BE ENTITLED TO RECEIVE IN THE ABSENCE OF
THE FOREGOING INDEMNIFICATION PROVISIONS OR (II) RELIEVED OF THE RESPONSIBILITY
TO PAY ANY CLAIMS FOR WHICH IT IS OBLIGATED.  IF AN INDEMNITEE SHALL HAVE
RECEIVED THE PAYMENT REQUIRED BY THIS AGREEMENT FROM AN INDEMNIFYING PARTY IN
RESPECT OF ANY INDEMNIFIABLE LOSSES AND SHALL SUBSEQUENTLY ACTUALLY RECEIVE
INSURANCE PROCEEDS OR OTHER AMOUNTS IN RESPECT OF SUCH INDEMNIFIABLE LOSSES,
THEN SUCH INDEMNITEE SHALL HOLD SUCH INSURANCE PROCEEDS IN TRUST FOR THE BENEFIT
OF SUCH INDEMNIFYING PARTY AND SHALL PAY TO SUCH INDEMNIFYING PARTY A SUM EQUAL
TO THE AMOUNT OF SUCH INSURANCE PROCEEDS OR OTHER AMOUNTS ACTUALLY RECEIVED, UP
TO THE AGGREGATE AMOUNT OF ANY PAYMENTS RECEIVED FROM SUCH INDEMNIFYING PARTY
PURSUANT TO THIS AGREEMENT IN RESPECT OF SUCH INDEMNIFIABLE LOSSES.

 

(I)                                     THE REMEDIES PROVIDED IN THIS
SECTION 4.5 SHALL BE CUMULATIVE AND SHALL NOT PRECLUDE ASSERTION BY ANY
INDEMNITEE OF ANY OTHER RIGHTS OR THE SEEKING OF ANY OTHER REMEDIES AGAINST ANY
INDEMNIFYING PARTY.  HOWEVER, THE PROCEDURES SET FORTH IN THIS SECTION 4.5 SHALL
BE THE EXCLUSIVE PROCEDURES GOVERNING ANY INDEMNITY ACTION BROUGHT UNDER THIS
AGREEMENT, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN ANY OF THE OTHER
TRANSACTION AGREEMENTS.

 

Section 4.6                                      Survival.  This Agreement shall
survive the Distribution Date.

 

Section 4.7                                      Notices.  Any notice, demand,
claim, or other communication under this Agreement shall be in writing and shall
be given in accordance with the provisions for giving notice under the
Distribution Agreement.

 

Section 4.8                                      Interpretation.  Words in the
singular shall be held to include the plural and vice versa and words of one
gender shall be held to include the other genders as the context requires.  The
terms “hereof,” “herein” and “herewith” and other words of similar import shall,

 

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unless otherwise stated, be construed to refer to this Agreement as a whole
(including all schedules and any other exhibits hereto) and not to any
particular provision of this Agreement.  The word “including” and the words “of
similar import” when used in this Agreement shall mean “including, without
limitation,” unless the context otherwise requires or unless otherwise
specified.  The word “or” shall not be exclusive.

 

Section 4.9                                      Governing Law.  This Agreement
shall be governed by and construed in accordance with the laws of the State of
Delaware, without reference to principles of conflict of laws.

 

Section 4.10                                No Assignment.  This Agreement may
not be assigned by either party (except by operation of law) without the written
consent of the other, and shall bind and inure to the benefit of the parties
hereto and their respective successors and permitted assignees.

 

Section 4.11                                Third Party Beneficiary.  The terms
and provisions of this Agreement are intended solely for the benefit of each
party hereto, the Company and their respective successors or permitted
assignees, and it is not the intention of the parties to confer third-party
beneficiary rights upon any other person or entity.  For the avoidance of doubt,
the parties agree that the Company shall be a third party beneficiary of this
Agreement.

 

Section 4.12                                Amendment.  This Agreement may not
be amended or supplemented except by an agreement in writing signed by Forest
and Spinco, with the consent of the Company.

 

Section 4.13                                Termination.  In the event the
Merger Agreement is terminated prior to the consummation of the transactions
contemplated by the Merger Agreement, this Agreement shall terminate without
further action by Forest or Spinco.

 

Section 4.14                                Counterparts.  This Agreement may be
executed in counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.

 

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IN WITNESS WHEREOF, the parties have caused this Employee Benefits Agreement to
be executed as of the day and year first above written.

 

 

FOREST OIL CORPORATION

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

SML WELLHEAD CORPORATION

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

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