**Exhibit 10.1**

** **

**AGREEMENT AND PLAN OF MERGER**

** **

**DATED AS OF SEPTEMBER 9, 2005**

** **

**AMONG**

** **

**FOREST OIL CORPORATION,**

** **

**SML WELLHEAD CORPORATION,**

** **

**MARINER ENERGY, INC.**

** **

**AND**

** **

**MEI SUB, INC.**

 

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**TABLEOF CONTENTS**

** **
| ARTICLE I   |
|-------------|
|        |
| DEFINITIONS |
|        |
| ARTICLE II  |
|        |
| THE MERGER  |

 
|   | Section 2.1  | Distribution and Merger                              | 11     |
|--------|--------------|------------------------------------------------------|--------|
|   | Section 2.2  | Effect on Capital Stock                              | 12     |
|   | Section 2.3  | Cancellation of Stock                                | 12     |
|   | Section 2.4  | Stockholders Meeting                                 | 12     |
|   | Section 2.5  | Closing                                              | 13     |
|   | Section 2.6  | Effective Time                                       | 13     |
|   | Section 2.7  | Closing of Transfer Books                            | 13     |
|   | Section 2.8  | Exchange of Certificates                             | 13     |
|   | Section 2.9  | Certain Stock Options                                | 15     |
|   |         |                                                 |   |
|   |         | ARTICLE  III                                         |   |
|   |         |                                                 |   |
|   |         | REPRESENTATIONS  AND WARRANTIES OF FOREST            |   |
|   |         |                                                 |   |
|   | Section 3.1  | Organization; Qualification                          | 17     |
|   | Section 3.2  | Corporate Authority; No Violation                    | 17     |
|   | Section 3.3  | Information Supplied                                 | 18     |
|   | Section 3.4  | Brokers or Finders                                   | 18     |
|   | Section 3.5  | Forest Rights Plan                                   | 18     |
|   |         |                                                 |   |
|   | ARTICLE IV   |                                                 |
|   |         |                                                 |   |
|   |         | REPRESENTATIONS  AND WARRANTIES OF FOREST AND SPINCO |   |
|   |         |                                                 |   |
|   | Section 4.1  | Organization, Qualification                          | 19     |
|   | Section 4.2  | Capital Stock and Other Matters                      | 19     |
|   | Section 4.3  | Corporate Authority; No Violation                    | 20     |
|   | Section 4.4  | Spinco Financial Statements; Liabilities             | 21     |
|   | Section 4.5  | Absence of Certain Changes or Events                 | 21     |
|   | Section 4.6  | Investigations; Litigation                           | 21     |
|   | Section 4.7  | Licenses; Compliance with Laws                       | 22     |
|   | Section 4.8  | Proxy Statement/Prospectus; Registration Statements  | 22     |
|   | Section 4.9  | Information Supplied                                 | 23     |
|   | Section 4.10 | Environmental Matters                                | 23     |
|   | Section 4.11 | Tax Matters                                          | 24     |
|   | Section 4.12 | Benefit Plans                                        | 25     |
|   | Section 4.13 | Labor Matters                                        | 27     |

 

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|   | Section 4.14 | Intellectual Property Matters                       | 27     |
|--------|--------------|-----------------------------------------------------|--------|
|   | Section 4.15 | Material Contracts                                  | 28     |
|   | Section 4.16 | Brokers or Finders                                  | 29     |
|   | Section 4.17 | Certain Board Findings                              | 29     |
|   | Section 4.18 | Vote Required                                       | 29     |
|   | Section 4.19 | Stockholder Approval                                | 29     |
|   | Section 4.20 | Certain Payments                                    | 29     |
|   | Section 4.21 | Assets                                              | 29     |
|   | Section 4.22 | Loans                                               | 30     |
|   | Section 4.23 | Oil and Gas Reserves                                | 30     |
|   | Section 4.24 | Derivative Transactions                             | 31     |
|   | Section 4.25 | No Other Representations and Warranties             | 31     |
|   |         |                                                |   |
|   |         | ARTICLE V                                           |   |
|   |         |                                                |   |
|   |         | REPRESENTATIONS  AND WARRANTIES OF THE COMPANY      |   |
|   |         |                                                |   |
|   | Section 5.1  | Organization, Qualification                         | 32     |
|   | Section 5.2  | Capital Stock and Other Matters                     | 32     |
|   | Section 5.3  | Corporate Authority; No Violation                   | 33     |
|   | Section 5.4  | Company Financial Statements; Liabilities           | 34     |
|   | Section 5.5  | Absence of Certain Changes or Events                | 34     |
|   | Section 5.6  | Investigations; Litigation                          | 35     |
|   | Section 5.7  | Licenses; Compliance with Laws                      | 35     |
|   | Section 5.8  | Proxy Statement/Prospectus; Registration Statements | 35     |
|   | Section 5.9  | Information Supplied                                | 36     |
|   | Section 5.10 | Environmental Matters                               | 36     |
|   | Section 5.11 | Tax Matters                                         | 37     |
|   | Section 5.12 | Benefit Plans                                       | 38     |
|   | Section 5.13 | Labor Matters                                       | 40     |
|   | Section 5.14 | Intellectual Property Matters                       | 40     |
|   | Section 5.15 | Material Contracts                                  | 41     |
|   | Section 5.16 | Opinion of Company Financial Advisor                | 41     |
|   | Section 5.17 | Brokers or Finders                                  | 41     |
|   | Section 5.18 | Takeover Statutes                                   | 41     |
|   | Section 5.19 | Certain Board Findings                              | 42     |
|   | Section 5.20 | Vote Required                                       | 42     |
|   | Section 5.21 | Certain Payments                                    | 42     |
|   | Section 5.22 | Assets                                              | 42     |
|   | Section 5.23 | Loans                                               | 43     |
|   | Section 5.24 | Oil and Gas Reserves                                | 43     |
|   | Section 5.25 | Derivative Transactions                             | 43     |
|   | Section 5.26 | No Other Representations and Warranties             | 43     |

 

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|   |         | ARTICLE VI                                                                                        |   |
|--------|--------------|---------------------------------------------------------------------------------------------------|--------|
|   |         |                                                                                              |   |
|   |         | COVENANTS AND  AGREEMENTS                                                                         |   |
|   |         |                                                                                              |   |
|   | Section 6.1  | Conduct of Business by the Company Pending the Merger                                             | 44     |
|   | Section 6.2  | Conduct of Business by Spinco and Forest Pending the Merger                                       | 49     |
|   | Section 6.3  | Proxy Statement/Prospectus                                                                        | 53     |
|   | Section 6.4  | Cooperation                                                                                       | 54     |
|   | Section 6.5  | Letter of Spinco’s Accountants                                                               | 55     |
|   | Section 6.6  | Letter of the Company’s Accountants                                                          | 55     |
|   | Section 6.7  | Forest/Spinco Employee Stock Options, Incentive and Benefit Plans                                 | 55     |
|   | Section 6.8  | Employee Benefit Plans                                                                            | 56     |
|   | Section 6.9  | Investigation                                                                                     | 59     |
|   | Section 6.10 | Reasonable Efforts; Further Assurances                                                            | 60     |
|   | Section 6.11 | No Solicitation by the Company                                                                    | 60     |
|   | Section 6.12 | Director and Officer Indemnification; Insurance                                                   | 63     |
|   | Section 6.13 | Rule 145 Affiliates                                                                          | 64     |
|   | Section 6.14 | Public Announcements                                                                              | 65     |
|   | Section 6.15 | Defense of Litigation                                                                             | 65     |
|   | Section 6.16 | Notification                                                                                      | 65     |
|   | Section 6.17 | Obligations of Merger Sub                                                                         | 66     |
|   | Section 6.18 | Accounting Matters                                                                                | 66     |
|   | Section 6.19 | Reorganization Treatment                                                                          | 66     |
|   | Section 6.20 | Performance Bond                                                                                  | 66     |
|   |         |                                                                                              |   |
|   |         | ARTICLE VII                                                                                       |   |
|   |         |                                                                                              |   |
|   |         | CONDITIONS TO  THE MERGER                                                                         |   |
|   |         |                                                                                              |   |
|   | Section 7.1  | Conditions to the Obligations of Spinco, Forest, the Company and Merger  Sub to Effect the Merger | 67     |
|   | Section 7.2  | Additional Conditions to the Obligations of Forest and Spinco                                     | 68     |
|   | Section 7.3  | Additional Conditions to the Obligations of the Company and Merger Sub                            | 68     |
|   |         |                                                                                              |   |
|   |         | ARTICLE VIII                                                                                      |   |
|   |         |                                                                                              |   |
|   |         | TERMINATION,  AMENDMENT AND WAIVERS                                                               |   |
|   |         |                                                                                              |   |
|   | Section 8.1  | Termination                                                                                       | 69     |
|   | Section 8.2  | Effect of Termination                                                                             | 71     |
|   | Section 8.3  | Termination Fee; Expenses                                                                         | 71     |
|   | Section 8.4  | Amendment                                                                                         | 72     |
|   | Section 8.5  | Waivers                                                                                           | 73     |

 

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|      |         | ARTICLE IX                                                              |                                         |
|-----------|--------------|-------------------------------------------------------------------------|----------------------------------------------|
|      |         |                                                                    |                                         |
|      |         | MISCELLANEOUS                                                           |                                         |
|      |         |                                                                    |                                         |
|      | Section 9.1  | Survival of Representations, Warranties and Agreements; Indemnification | 73                                           |
|      | Section 9.2  | Expenses                                                                | 74                                           |
|      | Section 9.3  | Notices                                                                 | 74                                           |
|      | Section 9.4  | Certain Construction Rules                                              | 75                                           |
|      | Section 9.5  | Severability                                                            | 76                                           |
|      | Section 9.6  | Assignment; Binding Effect                                              | 76                                           |
|      | Section 9.7  | No Third Party Beneficiaries                                            | 76                                           |
|      | Section 9.8  | Limited Liability                                                       | 76                                           |
|      | Section 9.9  | Entire Agreement                                                        | 77                                           |
|      | Section 9.10 | Governing Law                                                           | 77                                           |
|      | Section 9.11 | Counterparts                                                            | 77                                           |
|      | Section 9.12 | Specific Performance                                                    | 77                                           |
|      | Section 9.13 | Waiver of Jury Trial                                                    | 77                                           |
|      |         |                                                                    |
| Schedules |         |                                                                    |
|      |         |                                                                    |
| Exhibit A | -            |                                                                    | Distribution  Agreement                      |   |
| Exhibit B | -            |                                                                    | Initial Officers  of the Company             |   |
| Exhibit C | -            |                                                                    | Certificate of  Incorporation of the Company |   |
| Exhibit D | -            |                                                                    | Bylaws of the  Company                       |   |
| Exhibit E | -            |                                                                    | Relocation and  Severance Benefits           |   |
| Exhibit F | -            |                                                                    | Rule 145  Affiliate Agreement           |   |
| Exhibit G | -            |                                                                    | Form of Forest  Officers’ Certificate   |   |
| Exhibit H | -            |                                                                    | Form of Company  Officers’ Certificate  |   |
|           |              |                                                                         |                                              |  |  |

 

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**AGREEMENT AND PLAN OF MERGER**

** **

THIS AGREEMENT AND PLAN OF MERGER, dated as ofSeptember 9, 2005, is among Forest Oil Corporation, a New York corporation (“Forest”),SML Wellhead Corporation, a Delaware corporation and a wholly owned subsidiaryof Forest (“Spinco”), Mariner Energy, Inc., a Delaware corporation (the “Company”),and MEI Sub, Inc., a Delaware corporation and a wholly owned subsidiary of theCompany (“Merger Sub”).

 

WHEREAS, prior to the Distribution Date (as such termand other capitalized terms are defined in Article I hereof), and subjectto the terms and conditions set forth in the Distribution Agreement of evendate herewith by and between Forest and Spinco, in the form attached hereto as *Exhibit A* (the “DistributionAgreement”), Forest intends to transfer or cause to be transferred to Spincoall of the Spinco Assets, and Spinco intends to assume all of the SpincoLiabilities, as contemplated by the Distribution Agreement (such transfer and assumptioncollectively, the “Contribution”);

 

WHEREAS, subject to the conditions set forth in theDistribution Agreement, on the Distribution Date, Forest intends to distributeall of the issued and outstanding shares of Spinco Common Stock on a pro rata basisto the holders as of the Record Date (as defined in the Distribution Agreement)of the outstanding Forest Common Stock (the “Distribution”);

 

WHEREAS, at the Effective Time, the parties intend toeffect a merger of Merger Sub with and into Spinco, with Spinco being thesurviving corporation of the Merger;

 

WHEREAS, the Board of Directors of the Company(i) has determined that the Merger is fair to, and in the best interestsof, the Company and its stockholders and has approved this Agreement and the Merger,and (ii) has recommended the adoption of this Agreement by thestockholders of the Company, and the Company, as the sole stockholder of MergerSub, has adopted this Agreement;

 

WHEREAS, the Board of Directors of Merger Sub hasapproved this Agreement and the transactions contemplated hereby, including theMerger;

 

WHEREAS, the Board of Directors of Forest (i) hasapproved this Agreement and the Distribution Agreement and the transactionscontemplated hereby and thereby, including the Contribution, the Distributionand the Merger, and (ii) has determined that the Merger is fair to, and inthe best interests of, Forest and its shareholders;

 

WHEREAS, the Board of Directors of Spinco (i) hasdetermined that the Merger is fair to, and in the best interests of, Spinco andits stockholder and has approved this Agreement, and Forest, as the solestockholder of Spinco, has adopted this Agreement, and (ii) has approved theDistribution Agreement and the transactions contemplated hereby and thereby,including the Contribution and the Distribution; and

 

WHEREAS, the parties to this Agreement intend that theContribution and the Distribution qualify under Sections 368(a) and 355 of theCode, respectively, and that the Merger qualify as a reorganization underSection 368(a) of the Code, and the parties intend, by executing thisAgreement, to adopt a plan of reorganization within the meaning of Section 368of the Code;

 

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NOW, THEREFORE, in consideration of therepresentations, warranties, covenants and agreements set forth in thisAgreement, and for other good and valuable consideration, the receipt andsufficiency of which are hereby acknowledged, the parties, intending to belegally bound hereby, agree as follows:

 

# **ARTICLE IDEFINITIONS**

# ** **

“2004 Spinco IDC” shall have the meaning specified inSection 6.21.

 

“Acquisition Proposal” shall have the meaningspecified in Section 6.11(g).

 

“Acquisition Group” shall have the meaning specifiedin Section 6.11(g).

 

“Action” shall mean any litigation, claim, action,suit, arbitration, inquiry, proceeding or investigation by or before anyGovernmental Authority.

 

“Affiliate” shall mean, with respect to any specifiedPerson, any other Person that, directly or indirectly, controls, is controlledby or is under common control with, such specified Person.  For purposes of this definition, “control”(including, with correlative meanings, the terms “controlled by” and “undercommon control with”), as used with respect to any Person, shall mean thepossession, directly or indirectly, of the power to direct or cause thedirection of the management or policies of such Person, whether through theownership of voting securities, by contract or otherwise; provided, however,that for purposes of this Agreement, from and after the Distribution Date, nomember of either Group shall be deemed an Affiliate of any member of the otherGroup.

 

“Agreement” shall mean this Agreement and Plan ofMerger.

 

“Approved for Listing” shall mean, with respect toshares of Spinco Common Stock, that such shares have been approved for listingon the NYSE or Nasdaq, subject to official notice of issuance.

 

“Certificate of Merger” shall have the meaningspecified in Section 2.6.

 

“Certificates” shall have the meaning specified inSection 2.3.

 

“Change of Recommendation” shall have the meaningspecified in Section 6.11(d).

 

“Closing” shall have the meaning specified inSection 2.5.

 

“Code” shall mean the Internal Revenue Code of 1986,as amended.

 

“Company” shall have the meaning specified in thepreamble hereof.

 

“Company Benefit Plans” shall have the meaning setforth in Section 5.12(a).

 

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“Company Common Stock” shall mean the common stock,par value $.0001 per share, of the Company.

 

“Company Consent” shall mean the consent of theCompany.

 

“Company Disclosure Schedule” shall mean the scheduleprepared and delivered by the Company to Forest and Spinco as of the date ofthis Agreement, setting forth, among other things, certain information that, tothe extent provided herein, qualifies certain representations, warranties andagreements of the Company made in this Agreement.

 

“Company Employee” shall have the meaning set forth inSection 5.12(a).

 

“Company Financial Statements” shall have the meaningspecified in Section 5.4(b).

 

“Company Preferred Stock” shall mean the PreferredStock, par value $.0001 per share, of the Company.

 

“Company Reserve Report” shall have the meaningspecified in Section 5.24.

 

“Company Savings Plan” shall have the meaningspecified in Section 6.8(d).

 

“Company Stock Plans” shall mean the Mariner Energy,Inc. Stock Incentive Plan, effective as of March 11, 2005, and the MarinerEnergy, Inc. Equity Participation Plan, effective March 11, 2005.

 

“Company Stockholders Meeting” shall have the meaningspecified in Section 2.4(a).

 

“Company Subsidiaries” shall mean all direct andindirect Subsidiaries of the Company.

 

“Company Voting Debt” shall have the meaning specifiedin Section 5.2.

 

“Company Welfare Plans” shall have the meaningspecified in Section 6.8(c).

 

“Confidentiality Agreement” shall mean theConfidentiality Agreement, dated as of May 23, 2005, between Forest andthe Company.

 

“Continuing Company Employees” shall have the meaningset forth in Section 6.8(a).

 

“Continuing Spinco Employees” shall have the meaningset forth in Section 6.8(a).

 

“Contract” shall mean any loan or credit agreement,note, bond, indenture, mortgage, deed of trust, lease, franchise, permit,authorization, license, contract, instrument or other binding agreement, obligationor commitment.

 

“Contribution” shall have the meaning set forth in theRecitals hereto.

 

“Controlling Person” shall have the meaning specifiedin Section 9.1(b).

 

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“Derivative Transaction” shall mean a derivativetransaction within the coverage of Statement of Financial Accounting StandardsNo. 133, including any swap transaction, option, warrant, forward purchaseor sale transaction, futures transaction, cap transaction, floor transaction orcollar transaction relating to one or more currencies, commodities, bonds,equity securities, loans, interest rates, credit-related events orconditions or any indexes, or any other similar transaction (including anyoption with respect to any of such transactions) or combination of any of suchtransactions, including collateralized mortgage obligations or other similarinstruments or any debt or equity instruments evidencing or embedding any suchtypes of transactions, and any related credit support, collateral, transportationor other similar arrangements or agreements related to such transactions.

 

“DGCL” shall mean the General Corporation Law of theState of Delaware.

 

“Disclosure Schedules” shall mean, collectively, theForest Disclosure Schedule, the Spinco Disclosure Schedule and the CompanyDisclosure Schedule.

 

“Distribution” shall have the meaning set forth in theRecitals hereto.

 

“Distribution Agreement” shall have the meaning setforth in the Recitals hereto.

 

“Distribution Date” shall mean the date and time thatthe Distribution shall become effective.

 

“Effective Time” shall have the meaning specified inSection 2.6.

 

“Employee Benefits Agreement” shall mean the EmployeeBenefits Agreement of even date herewith between Forest and Spinco, in the formattached to the Distribution Agreement.

 

“Environmental Laws” shall mean any and all federal,state or local statute, rule, regulation or ordinance, and any judicial oradministrative interpretation thereof, including any guidance document, cleanupstandard, Order or determination issued, promulgated, approved or enteredthereunder by any Governmental Authority, relating to pollution or theprotection, cleanup or restoration of the environment, protection of species orecosystems, or to human health, safety or natural resources, including thoseestablished by or promulgated under the Federal Clean Air Act, the Federal OilPollution Act, the Federal Water Pollution Control Act, the Federal ResourceConservation and Recovery Act, the Federal Comprehensive EnvironmentalResponse, Compensation, and Liability Act, the Federal Toxic Substances ControlAct, the Federal Coastal Zone Management Act, the Federal Outer ContinentalShelf Lands Act, the Federal Endangered Species Act, the Federal Marine MammalProtection Act, the Federal National Environmental Policy Act, and similarstate laws.

 

“ERISA” shall mean the Employee Retirement IncomeSecurity Act of 1974, as amended.

 

“ERISA Affiliate” shall mean, with respect to anyPerson, any other Person or any trade or business, whether or not incorporated,that, together with such first Person would be deemed a “single employer”within the meaning of section 4001(b) of ERISA.  For all purposes under this

 

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Agreement, Forest shall be deemed to be an ERISA Affiliate of Spinco,regardless of whether the Distribution has occurred.

 

“Estimated Basis” shall have the meaning specified inSection 6.21.

 

“Exchange Act” shall mean the Securities Exchange Actof 1934, as amended, together with the rules and regulations of the SECpromulgated thereunder.

 

“Exchange Agent” shall have the meaning specified inSection 2.8(a).

 

“Exchange Fund” shall have the meaning specified inSection 2.8(a).

 

“Forest” shall have the meaning specified in the preamblehereof.

 

“Forest Common Stock” shall mean the common stock, parvalue $.10 per share, of Forest.

 

“Forest Disclosure Schedule” shall mean the scheduleprepared and delivered by Forest to the Company as of the date of thisAgreement, setting forth, among other things, certain information that, to theextent provided herein, qualifies certain representations, warranties andagreements of Forest made in this Agreement.

 

“Forest Group” shall mean Forest and the ForestSubsidiaries.

 

“Forest Incentive Plans” shall mean the ForcenergyInc. 1999 Stock Plan and the Forest 2001 Stock Incentive Plan.

 

“Forest Rights” shall mean the common stock purchaserights issued pursuant to the First Amended and Restated Rights Agreement,dated as of October 17, 2003, by and between Forest and Mellon InvestorServices LLC.

 

“Forest Savings Plan” shall have the meaning specifiedin Section 6.8(d).

 

“Forest Stock Option” shall mean an option to acquireForest Common Stock granted pursuant to a Forest Incentive Plan that is held bya Continuing Spinco Employee as of the Effective Time.

 

“Forest Subsidiaries” shall mean all direct andindirect Subsidiaries of Forest immediately after the Distribution Date.

 

“GAAP” shall mean United States generally acceptedaccounting principles.

 

“Governmental Authority” shall mean any federal, stateor local court, administrative agency, board, bureau or commission or othergovernmental department, authority or instrumentality or any subdivision,agency, commission or authority thereof.

 

“Group” shall mean the Forest Group or the SpincoGroup, as the case may be.

 

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“Hazardous Material” shall mean any substance,material or waste regulated under Environmental Laws, and includes petroleumand any derivative thereof.

 

“HSR Act” shall mean the Hart-Scott-RodinoAntitrust Improvements Act of 1976, as amended, and the rules and regulationspromulgated thereunder.

 

“HSR Agencies” shall mean the Federal Trade Commissionand the Antitrust Division of the Department of Justice.

 

“Indemnified Party” shall have the meaning set forthin Section 6.12(a).

 

“Information” shall mean all records, books,contracts, instruments, computer data and other data and information.

 

“IRS” shall mean the United States Internal RevenueService or any successor thereto, including, but not limited to its agents,representatives and attorneys.

 

“Knowledge” of any Person or person shall mean theknowledge after due inquiry of the executive officers of such Person(including, with respect to Forest’s or Spinco’s knowledge, the head of theSpinco Business unit).

 

“Licenses” shall mean any license, authorization,permit, certificate, variance, exemption, Order, franchise or approval from anyGovernmental Authority.

 

“Liens” has the meaning set forth inSection 4.21.

 

“Losses” shall have the meaning set forth inSection 9.1(b).

 

“Material Adverse Effect,” with respect to any Person,shall mean any circumstance, change or effect that is or is reasonably likelyto be materially adverse to (i) the business, operations, assets,liabilities, results of operations or condition (financial or otherwise) ofsuch Person and its Subsidiaries, taken as a whole (which may include damageattributable, both directly and indirectly, to Hurricane Katrina), except forsuch effects on or changes in general economic or capital market conditions andeffects and changes that generally affect the U.S. domestic oil and gasexploration and production business, or (ii) the ability of such Person toperform its obligations hereunder or under the other Transaction Agreements, ineach case other than any such circumstance, change or effect that relates to orresults primarily from (x) the announcement, pendency or consummation of thetransactions contemplated by this Agreement or the other Transaction Agreementsor (y) acts of war, insurrection, sabotage or terrorism; provided, however,that damages attributable to Hurricane Katrina disclosed in the September 9,2005 written damage report of the Company and in the September 9, 2005 writtendamage report of Forest, respectively, shall not be taken into account indetermining whether a Material Adverse Effect exists or has occurred.

 

“Merger” shall have the meaning specified inSection 2.1(b).

 

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“Merger Consideration” shall mean the number of sharesof Company Common Stock issuable at the Effective Time in exchange for oneshare of Spinco Common Stock in accordance with the provisions ofSection 2.2(a).

 

“Merger Sub” shall have the meaning specified in thepreamble hereto.

 

“Nasdaq” shall mean The Nasdaq Stock Market.

 

“NYBCL” shall mean the Business Corporation Law of theState of New York.

 

“NYSE” shall mean the New York StockExchange, Inc.

 

“Offshore Gulf of Mexico” shall mean (i) the OuterContinental Shelf, as defined at 43 U.S.C. 1331(a), located in the Gulf ofMexico, and (ii) lands submerged in offshore waters within the jurisdiction ofAlabama, Florida, Louisiana, Mississippi or Texas.

 

“Option Exchange Ratio” shall have the meaningspecified in Section 2.9(b).

 

“Order” shall mean any decree, judgment, injunction,writ, rule or other order of any Governmental Authority.

 

“Out-of-Pocket Expenses” shall have themeaning specified in Section 8.3(a).

 

“PBGC” shall mean the U.S. Pension Benefit GuarantyCorporation.

 

“Permitted Liens” of any Person shall mean any (a)purchase money Liens and Liens in connection with capital leases, in each caseupon or in any equipment acquired or held by such Person in the ordinary courseof business; provided that, the indebtedness secured by such Liens (i) wasincurred solely for the purpose of financing the acquisition of such equipment,and does not exceed the aggregate purchase price of such equipment, (ii) issecured only by such equipment and not by any other assets of such Person orits Subsidiaries, (iii) is not increased in amount and (iv) is not described inthe Forest Disclosure Schedule, Spinco Disclosure Schedule or CompanyDisclosure Schedule; (b) Liens for Taxes, assessments, or other governmentalcharges or levies not yet due or that (provided that foreclosure, sale, orother similar proceedings shall not have been initiated) are being contested ingood faith by appropriate proceedings; (c) Liens in favor of vendors, carriers,warehousemen, repairmen, mechanics, workmen, materialmen, construction, orsimilar Liens arising by operation of law in the ordinary course of business inrespect of obligations that are not yet due or that are being contested in goodfaith by appropriate proceedings; (d) Liens to operators and non-operatorsunder joint operating agreements arising in the ordinary course of the businessof such Person to secure amounts owing, which amounts are not yet due or arebeing contested in good faith by appropriate proceedings; (e) royalties,overriding royalties, net profits interests, production payments, reversionaryinterests, calls on production, preferential purchase rights and other burdenson or deductions from the proceeds of production, that do not secureindebtedness for borrowed money; (f) Liens arising in the ordinary course ofbusiness out of pledges or deposits under workers’ compensation laws,unemployment insurance, old age pensions or other social security or retirementbenefits, or similar legislation or to secure public or statutory obligationsof such Person; (g) operating agreements, unitization and pooling agreementsand orders, production

 

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handling agreements, processing agreements, transportation agreements,sales agreements, farmout agreements, gas balancing agreements and otheragreements, in each case that are customary in the oil, gas and mineralexploration and production business and that are entered into in the ordinarycourse of business, to the extent that such Liens do not materially impair theuse of the property covered by such Lien for the purposes for which suchproperty is held by such Person; (h) consents to assignments, rights reservedto or vested in any Governmental Authority or lessor, and rights of set-offand banker’s liens in each case that do not secure indebtedness; and (i)easements, rights-of-way, restrictions, and other similarencumbrances, and minor defects in the chain of title that are customary in theoil and gas industry, none of which interfere with the ordinary conduct of thebusiness of such Person or any Subsidiary of such Person or materially detractfrom the value or use of the property to which they apply.

 

“Person” or “person” shall mean a natural person,corporation, company, partnership, limited partnership, limited liabilitycompany or other entity, including a Governmental Authority.

 

“Privileged Information” shall have the meaningspecified in the Distribution Agreement.

 

“Proxy Statement/Prospectus” shall mean the proxystatement/prospectus to be distributed to the stockholders of the Company inconnection with the Merger and the transactions contemplated by this Agreement,including any preliminary proxy statement/prospectus or definitive proxy statement/prospectusfiled with the SEC in accordance with the terms and provisions hereof.  The Proxy Statement/Prospectus shallconstitute a part of the Registration Statement on Form S-4.

 

“Registration Statements” shall mean the RegistrationStatement on Form S-4 to be filed by the Company with the SEC toeffect the registration under the Securities Act of the issuance of the sharesof Company Common Stock into which shares of Spinco Common Stock will beconverted pursuant to the Merger, the Registration Statement on Form S-1to be filed by the Company with the SEC to effect the registration under theSecurities Act of the resale of the shares of Company Common Stock by certainselling stockholders and the registration statement on Form 10 (or, ifsuch form is not appropriate, the appropriate form pursuant to the ExchangeAct) to be filed by Spinco with the SEC to effect the registration under theExchange Act of Spinco Common Stock in connection with the Distribution.

 

“Representative” shall mean, with respect to anyPerson, any of such Person’s directors, officers, employees, agents,consultants, advisors, accountants, attorneys and representatives.

 

“Requisite Approval” shall have the meaning specifiedin Section 5.20.

 

“Retention Benefit” shall have the meaning specifiedin Section 6.8(g).

 

“Retention Period” shall have the meaning specified inSection 6.8(e).

 

“Rule 145 Affiliate” shall have the meaningspecified in Section 6.13.

 

“Rule 145 Affiliate Agreement” shall have themeaning specified in Section 6.13.

 

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“SEC” shall mean the U.S. Securities and ExchangeCommission.

 

“Securities Act” shall mean the Securities Act of1933, as amended, together with the rules and regulations of the SECpromulgated thereunder.

 

“Significant Subsidiary” shall have the meaning setforth in Rule 1-02 of Regulation S-X of the Exchange Act.

 

“Spinco” shall have the meaning specified in thepreamble hereof.

 

“Spinco 2004 Financial Statements” shall have themeaning set forth in Section 4.4.

 

“Spinco Assets” shall have the meaning specified inthe Distribution Agreement.

 

“Spinco Benefit Plans” shall have the meaningspecified in Section 4.12(a).

 

“Spinco Business” shall have the meaning specified inthe Distribution Agreement.

 

“Spinco Common Stock” shall mean the Common Stock, parvalue $.10 per share, of Spinco.

 

“Spinco Disclosure Schedule” shall mean the scheduleprepared and delivered by Spinco to the Company as of the date of thisAgreement, setting forth, among other things, certain information that, to theextent provided herein, qualifies certain representations, warranties andagreements of Forest and Spinco made in this Agreement.

 

“Spinco Employee” shall have the meaning specified inSection 4.12(a).

 

“Spinco Financial Statements” shall have the meaningspecified in Section 4.4.

 

“Spinco Group” shall mean Spinco and the SpincoSubsidiaries.

 

“Spinco Liabilities” shall have the meaning specifiedin the Distribution Agreement.

 

“Spinco Preferred Stock” shall mean the PreferredStock of Spinco.

 

“Spinco Reserve Report” shall have the meaningspecified in Section 4.23.

 

“Spinco Subsidiaries” shall mean all direct andindirect Subsidiaries of Spinco immediately after the Distribution Date andprior to the Effective Time.

 

“Spinco Voting Debt” shall have the meaning specifiedin Section 4.2.

 

“Subsidiary” shall mean, with respect to any Person, acorporation, partnership, limited liability company or other entity in whichsuch Person, a Subsidiary of such Person or such Person and one or moreSubsidiaries of such Person, directly or indirectly, has either (i) amajority ownership in the equity thereof, (ii) the power, under ordinarycircumstances, to elect, or to direct the election of, a majority of the boardof directors or other governing body of such

 

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entity, or (iii) the title or function of general partner ormanager, or the right to designate the Person having such title or function.

 

“Superior Offer” shall have the meaning specified inSection 6.11(g).

 

“Surviving Corporation” shall have the meaning setforth in Section 2.1(b).

 

“Taxes” shall mean all taxes, charges, fees, duties,levies, imposts, rates or other assessments imposed by any federal, state,local or foreign Taxing Authority, including, but not limited to, income, grossreceipts, excise, property, sales, use, license, capital stock, transfer,franchise, payroll, withholding, social security, value added or other taxes(including any interest, penalties or additions attributable thereto) and a “Tax”shall mean any one of such Taxes.

 

“Tax Return” means any return, report, certificate,form or similar statement or document (including any related or supportinginformation or schedule attached thereto and any information return, amendedtax return, claim for refund or declaration of estimated Tax) required to besupplied to, or filed with, a Taxing Authority in connection with thedetermination, assessment or collection of any Tax or the administration of anylaws, regulations or administrative requirements relating to any Tax.

 

“Tax Sharing Agreement” shall mean the Tax SharingAgreement of even date herewith between Forest, Spinco and the Company.

 

“Taxing Authority” means any Governmental Authority orany quasi-governmental or private body having jurisdiction over theassessment, determination, collection or imposition of any Tax (including theIRS).

 

“Termination Date” shall mean the date, if any, onwhich this Agreement is terminated pursuant to Section 8.1.

 

“Termination Fee” shall have the meaning specified inSection 8.3(b).

 

“Termination for Cause” shall have the meaningassigned to such term in Forest’s Severance Plan as in effect on the date ofthis Agreement.

 

“Third Party Provisions” shall have the meaning specifiedin Section 9.7.

 

“Transaction Agreements” shall mean this Agreement,the Distribution Agreement, the Employee Benefits Agreement, the TransitionServices Agreement and the Tax Sharing Agreement.

 

“Transition Services Agreement” shall mean the TransitionServices Agreement of even date herewith between Forest and its affiliates andSpinco and its affiliates in the form attached to the Distribution Agreement.

 

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“Unvested Forest Stock Option” shall mean the portionof a Forest Stock Option representing the shares of Forest Common Stock forwhich such option is not exercisable as of the Effective Time.

 

# **ARTICLE IITHE MERGER**

# ** **

Section 2.1             *Distribution and Merger*.

 

### (a)           Subjectto the terms and conditions of the Distribution Agreement, prior to or on theDistribution Date, the parties thereto shall effect the various transactionscontemplated by the Distribution Agreement.

###  

### (b)           Atthe Effective Time:  (i) Merger Subshall be merged with and into Spinco (the “Merger”), the separate existence ofMerger Sub shall cease and Spinco shall continue as the surviving corporationof the Merger (sometimes referred to herein as the “Surviving Corporation”);(ii) the Amended and Restated Certificate of Incorporation of Spinco as ineffect immediately prior to the Effective Time shall be the Certificate ofIncorporation of the Surviving Corporation until thereafter duly amended inaccordance with applicable law and such Certificate of Incorporation; and(iii) the Amended and Restated Bylaws of Spinco as in effect immediatelyprior to the Effective Time shall be the Bylaws of the Surviving Corporationuntil thereafter duly amended in accordance with applicable law, theCertificate of Incorporation of the Surviving Corporation and such Bylaws.

###  

### (c)           TheBoard of Directors of the Company from and after the Effective Time shall beincreased to seven (7) directors, five of whom shall be the directors ofthe Company immediately prior to the Effective Time, and two of whom shall bemutually agreed by Forest and the Company prior to the Effective Time.  The initial officers of the Company from andafter the Effective Time shall be as set forth in *Exhibit B* hereto. Such directors and officers of the Company shall serve until their successorshave been duly elected or appointed and qualified or until their earlier death,resignation or removal in accordance with the Company’s Certificate ofIncorporation and Bylaws.  The Board ofDirectors of the Company shall also appoint committees as appropriate,including an audit committee, a compensation committee and a nominatingcommittee.  The Certificate ofIncorporation and Bylaws of the Company at the Effective Time shall besubstantially in the forms attached hereto as *Exhibit C*and *Exhibit D*,respectively.  The corporate andoperational headquarters of the Company will be located in Houston, Texas.

###  

### (d)           Thedirectors of Merger Sub shall, from and after the Effective Time, be thedirectors of the Surviving Corporation. The officers of Merger Sub shall, from and after the Effective Time, bethe officers of the Surviving Corporation. Such directors and officers of the Surviving Corporation shall serveuntil their successors have been duly elected or appointed and qualified oruntil their earlier death, resignation or removal in accordance with theSurviving Corporation’s Certificate of Incorporation and Bylaws.

###  

### 11

### 

###  

### (e)           TheMerger shall have the effects set forth in this Article II and the applicableprovisions of the DGCL. Without limiting the generality of the foregoing, andsubject thereto, at the Effective Time, all the property, rights, privileges,powers and franchises of Spinco and Merger Sub shall vest in the SurvivingCorporation, and all debts, liabilities, obligations, restrictions,disabilities and duties of each of Spinco and Merger Sub shall become thedebts, liabilities, obligations, restrictions, disabilities and duties of theSurviving Corporation.

###  

Section 2.2             *Effect on Capital Stock*.  At the Effective Time,by virtue of the Merger and without any action on the part of Merger Sub,Spinco or any holder of any Spinco Common Stock:

 

### (a)           Eachshare of Spinco Common Stock issued and outstanding immediately prior to theEffective Time (other than shares to be canceled in accordance withSection 2.2(b)) shall be automatically converted into the right to receiveone fully paid and nonassessable share of Company Common Stock; provided,however, that in the event that, subsequent to the date hereof but prior to theEffective Time, the outstanding shares of Spinco Common Stock shall have beenchanged into a different number of shares as a result of a stock split, reversestock split, stock dividend, subdivision, reclassification, combination, exchange,recapitalization or other similar transaction, the Merger Consideration shallbe appropriately adjusted to provide the holders of the Spinco Common Stock thesame economic effect contemplated by this Agreement prior to such event.

###  

### (b)           Eachshare of Spinco Common Stock held by Spinco as treasury stock and each share ofSpinco Common Stock owned by the Company or Merger Sub, in each caseimmediately prior to the Effective Time, shall be canceled and shall cease toexist and no stock or other consideration shall be delivered in exchangetherefor.

###  

### (c)           Eachshare of common stock, par value $.0001 per share, of Merger Sub issued andoutstanding immediately prior to the Effective Time shall be converted into onefully paid and nonassessable share of common stock, par value $.10 per share,of the Surviving Corporation.

###  

Section 2.3             *Cancellation of Stock*.  Each share of Spinco Common Stockissued and outstanding immediately prior to the Effective Time, when convertedin accordance with Section 2.2, shall no longer be outstanding and shallautomatically be canceled and shall cease to exist.  Each holder of a certificate that,immediately prior to the Effective Time, represented outstanding shares ofSpinco Common Stock (collectively, the “Certificates”) shall cease to have anyrights with respect thereto, except the right to receive, upon the surrender ofany such Certificate, a certificate representing the shares of Company CommonStock to which such holder is entitled pursuant to Section 2.2 and any dividendsor other distributions to which such holder is entitled pursuant toSection 2.8(c).

 

Section 2.4             *Stockholders Meeting*.

 

### (a)           Aspromptly as practicable following the date hereof and the effectiveness of theRegistration Statements, the Company, subject to Section 6.11, shall calla special meeting of its stockholders (the “Company Stockholders Meeting”) tobe held as promptly as practicable for

###  

### 12

### 

###  

### the purpose ofvoting upon (i) the adoption of this Agreement and (ii) any relatedmatters.  Subject to Section 6.11,this Agreement shall be submitted for adoption to the stockholders of theCompany at such special meeting.  Withoutlimiting the generality of the foregoing, the Company shall cause the CompanyStockholders Meeting to be held and such vote taken within 60 daysfollowing the effectiveness of Spinco’s Registration Statement on Form S-4.  The Company shall deliver to the Company’sstockholders the Proxy Statement/Prospectus in definitive form in connectionwith the Company Stockholders Meeting at the time and in the manner provided bythe applicable provisions of the DGCL, the Exchange Act and the Company’sSecond Amended and Restated Certificate of Incorporation and Fourth Amended andRestated Bylaws and shall conduct the Company Stockholders Meeting and thesolicitation of proxies in connection therewith in compliance with suchstatutes, charter and bylaws.

###  

### (b)           Subjectto Section 6.11 and its fiduciary duty under applicable law, the Board ofDirectors of the Company shall recommend that the Company’s stockholders adoptthis Agreement and approve the transactions contemplated hereby, and suchrecommendations shall be set forth in the Proxy Statement/Prospectus.  The Company shall comply with its obligationsunder Section 2.4(a) whether or not its Board of Directors withdraws,modifies or changes its recommendation regarding this Agreement or recommendsany other offer or proposal.

###  

Section 2.5             *Closing*.  Unless the transactions hereincontemplated shall have been abandoned and this Agreement terminated pursuantto Section 8.1, the closing of the Merger and the other transactionscontemplated hereby (the “Closing”) shall take place at the offices of BakerBotts L.L.P., in Houston, Texas at 10:00 a.m., Central time, as promptlyas practicable and in no event later than the second business day following thesatisfaction or, if permissible, waiver of the conditions set forth inArticle VII (except for those conditions that, by the express termsthereof, are not capable of being satisfied until the Effective Time), or atsuch other time and place as Spinco and the Company shall agree in writing.

 

Section 2.6             *Effective Time*.  Upon the terms and subject to theconditions of this Agreement, as soon as practicable at or after the Closing, acertificate of merger shall be filed with the Secretary of State of the Stateof Delaware with respect to the Merger (the “Certificate of Merger”), in suchform as is required by, and executed in accordance with, the applicable provisionsof the DGCL. The Merger shall become effective at the time of filing of theCertificate of Merger or at such later time as the parties hereto may agree andas is provided in the Certificate of Merger. The date and time at which the Merger shall become so effective isherein referred to as the “Effective Time.”

 

Section 2.7             *Closing of Transfer Books*.  From and after theEffective Time, the stock transfer books of Spinco shall be closed and notransfer shall be made of any shares of capital stock of Spinco that wereoutstanding immediately prior to the Effective Time.

 

Section 2.8             *Exchange of Certificates*.

 

### (a)           *Exchange Agent.*  Prior to the Effective Time, the Companyshall deposit with such bank or trust company as shall be agreed upon by Spincoand the Company (the “Exchange Agent”), for the benefit of holders of shares ofSpinco Common Stock and for exchange in accordance with this Article II,through the Exchange Agent, certificates representing the shares

###  

### 13

### 

###  

### of Company CommonStock issuable pursuant to Section 2.2 in exchange for outstanding sharesof Spinco Common Stock as of the Effective Time (such certificates for sharesof Company Common Stock, together with any dividends or distributions with respectthereto to which the holders thereof may be entitled pursuant toSection 2.8(c), being hereinafter referred to as the “Exchange Fund”). TheExchange Agent shall, pursuant to irrevocable instructions, deliver the CompanyCommon Stock contemplated to be issued pursuant to Section 2.2 from theshares of stock held in the Exchange Fund. The Exchange Fund shall not be used for any other purpose.

###  

### (b)           *Exchange Procedures.*  As promptly as practicable after theEffective Time, the Company shall cause the Exchange Agent to mail or deliverto each holder of record of a Certificate or Certificates whose shares wereconverted pursuant to Section 2.2 into the right to receive shares ofCompany Common Stock (i) a letter of transmittal (which shall specify thatdelivery shall be effected, and risk of loss and title to the Certificatesshall pass, only upon delivery of the Certificates to the Exchange Agent andshall be in such form and have such other provisions as Spinco and the Companymay reasonably specify) and (ii) instructions for the use of such letterof transmittal in effecting the surrender of the Certificates in exchange forcertificates representing the shares of Company Common Stock that such holderhas the right to receive pursuant to this Article II. Upon surrender of aCertificate for cancellation to the Exchange Agent or to such other agent oragents as may be appointed by Spinco and the Company, together with such letterof transmittal, duly executed, and any other required documents, the holder of suchCertificate shall be entitled to receive in exchange therefor a certificaterepresenting the number of whole shares of Company Common Stock that suchholder has the right to receive pursuant to this Article II (and anydividends or distributions pursuant to Section 2.8(c)), and theCertificate so surrendered shall forthwith be canceled.  In the event of a transfer of ownership ofshares of Spinco Common Stock that is not registered in the transfer records ofSpinco, a certificate representing the proper number of shares of CompanyCommon Stock (and any dividends or distributions pursuant toSection 2.8(c)) may be issued to a transferee only on the condition thatthe Certificate formerly representing such shares of Spinco Common Stock ispresented to the Exchange Agent, properly endorsed, and accompanied by alldocuments required to evidence and effect such transfer and by evidence thatany applicable stock transfer taxes have been paid or that no such taxes areapplicable.  Until surrendered ascontemplated by this Section 2.8, each Certificate shall be deemed at anytime after the Effective Time to represent only the right to receive upon suchsurrender a certificate representing shares of Company Common Stock (and anydividends or distributions pursuant to Section 2.8(c)).  The Exchange Agent shall not be entitled tovote or exercise any rights of ownership with respect to the Company CommonStock held by it from time to time hereunder, except that it shall receive andhold all dividends or other distributions paid or distributed with respectthereto for the account of persons entitled thereto.

###  

If any Certificate shall have been lost, stolen,mislaid or destroyed, upon the making of an affidavit of that fact by theperson claiming such Certificate to be lost, stolen, mislaid or destroyed, theCompany shall cause to be delivered in exchange for such lost, stolen, mislaidor destroyed Certificate the consideration deliverable in respect thereof asdetermined in accordance with this Article II. When authorizing thedelivery of such consideration in exchange therefor, the Company may, in itssole discretion and as a condition precedent to the delivery thereof, requirethe owner of such lost, stolen, mislaid or destroyed Certificate to give theCompany a bond, in form and substance reasonably satisfactory to the Company,and in such sum as the

 

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Company may reasonably direct, as indemnity against any claim that maybe made against the Company or the Exchange Agent with respect to theCertificate alleged to have been lost, stolen, mislaid or destroyed.

 

### (c)           *Distributions with Respect to Unexchanged Shares.*  No dividends or other distributions declaredor made after the Effective Time with respect to Company Common Stock with arecord date after the Effective Time shall be paid to the holder of anyunsurrendered Certificate with respect to the shares of Company Common Stockwhich such holder is entitled to receive pursuant to the terms hereof, untilthe holder of record of such Certificate shall surrender such Certificate.  Subject to the effect of applicable laws,following the surrender of any such Certificate, there shall be paid to therecord holder of the certificates representing shares of Company Common Stock issuedin exchange therefor, without interest (i) at the time of such surrender,the amount of dividends or other distributions with a record date after theEffective Time theretofore paid with respect to such whole shares of CompanyCommon Stock and (ii) at the appropriate payment date therefor, the amountof dividends or other distributions with a record date after the Effective Timebut prior to the surrender of such Certificate and a payment date subsequent tothe surrender of such Certificate payable with respect to such whole shares ofCompany Common Stock.  Spinco shalldeposit in the Exchange Fund all such dividends and distributions.

###  

### (d)           *No Further OwnershipRights in Spinco Common Stock**.*  All shares of Company Common Stock issuedupon the surrender for exchange of Certificates formerly representing shares ofSpinco Common Stock (including any cash paid pursuant to Section 2.8(c))shall be deemed to have been issued in full satisfaction of all rightspertaining to such shares of Spinco Common Stock.  If, after the Effective Time, Certificatesare presented to the Company or the Surviving Corporation for any reason, theyshall be canceled and exchanged as provided in this Article II.

###  

### (e)           *Termination of Exchange Fund.*  Any portion of the Exchange Fund madeavailable to the Exchange Agent that remains undistributed to the holders ofSpinco Common Stock on the eighteen-month anniversary of the EffectiveTime shall be delivered to the Company, upon demand, and any stockholders ofSpinco who have not theretofore complied with this Article II shallthereafter look only to the Company for payment of their claim for CompanyCommon Stock and any dividends or distributions with respect to Company CommonStock to which they are entitled pursuant to Section 2.8(c).

###  

### (f)            *No Liability.*  Neither the Company nor the SurvivingCorporation shall be liable to any holder of a Certificate or any holder ofshares of Company Common Stock for shares of Company Common Stock (or dividendsor distributions with respect thereto or with respect to Spinco Common Stock)or cash delivered to a public official pursuant to any applicable abandonedproperty, escheat or similar law.

###  

Section 2.9             *Certain Stock Options*.

 

### (a)           Notlater than immediately before the Effective Time, Forest and the Company shalltake such actions as may be required to provide that, effective as of theEffective Time, each Unvested Forest Stock Option shall be converted into anoption to acquire (from the

###  

### 15

### 

###  

### Company), on thesame terms and conditions as were applicable under such Unvested Forest StockOption immediately before the Effective Time, the number of shares of CompanyCommon Stock determined by multiplying the number of shares of Forest CommonStock subject to such Unvested Forest Stock Option immediately before theEffective Time by the Option Exchange Ratio (rounded to the nearest wholenumber of shares), at a price per share (rounded to the nearest whole cent)equal to the exercise price per share of Forest Common Stock otherwisepurchasable pursuant to such Unvested Forest Stock Option divided by the OptionExchange Ratio; provided, however, that with respect to any Unvested ForestStock Option, such conversion shall be effected such that (i) the aggregateintrinsic value of the award immediately after the conversion is not greaterthan the aggregate intrinsic value (as determined pursuant to GAAP) of theUnvested Forest Stock Option immediately before the conversion, (ii) theratio of the exercise price per share to the market value per share is notreduced as a result of the conversion and (iii) the substitution requirementsof Q&A 4(d)(ii) of Internal Revenue Service Notice 2005-1 areotherwise met.

###  

### (b)           Forpurposes of Section 2.9(a) above, “Option Exchange Ratio” shall mean thequotient (rounded to the third decimal place) determined by dividing(i) the average of the daily closing prices per share of Forest CommonStock on the NYSE Composite Transactions Reporting System (regular way), asreported in *The Wall Street Journal*,for the last five trading days immediately preceding the Effective Time by(ii) the average of the daily closing prices per share of Company CommonStock on the NYSE Composite Transactions Reporting System (regular way) or onNasdaq (regular way), as applicable and as reported in *The Wall Street Journal*, for the firstfive trading days following the Effective Time. The Option Exchange Ratio shall be subject to appropriate adjustment inthe event of any stock split, stock dividend or recapitalization after the dateof this Agreement applicable to shares of Forest Common Stock or Company CommonStock.  The Company shall take allactions necessary to reserve for issuance, from and after the Effective Time, asufficient number of shares of Company Common Stock for delivery pursuant tothe options described in Section 2.9(a). On or as soon as practicable after the Effective Time, the Company (x)shall cause to be filed with the SEC a registration statement on an appropriateform under the Securities Act with respect to shares of Company Common Stocksubject to the options described in Section 2.9(a) and shall use reasonableefforts to maintain the current status of the prospectus contained therein, aswell as to comply with any applicable state securities or “blue sky” laws, forso long as such options remain outstanding and (y) shall cause the shares ofCompany Common Stock subject to the options described in Section 2.9(a) tobe listed on the NYSE or quoted on Nasdaq.

###  

### (c)           Theprovisions of this Section 2.9 shall not apply to any Forest Stock Option (orportion thereof) that is subject to Section 3.1 of the Employee BenefitsAgreement.

###  

### (d)           Byadopting or approving this Agreement, (i) the Board of Directors of the Companyshall be deemed to have approved and authorized each and every amendment to anyof the Company Stock Plans as the officers of the Company may deem necessary orappropriate to give effect to the preceding provisions of this Section 2.9, and(ii) the Board of Directors of Forest shall be deemed to have approved andauthorized each and every amendment to any of the Forest Incentive Plans andthe Forest Stock Options as the officers of Forest may deem necessary orappropriate to give effect to the preceding provisions of this Section 2.9.

###  

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###  

# **ARTICLE IIIREPRESENTATIONS ANDWARRANTIES OF FOREST**

# ** **

Except as set forth in the Forest Disclosure Schedule(with specific reference to the particular Section of this Agreement to whichthe information set forth in such disclosure schedule relates; provided, thatany information set forth in one section of the Forest Disclosure Scheduleshall be deemed to apply to each other Section thereof to which it isrelevant), Forest represents and warrants to the Company as follows:

 

Section 3.1             *Organization; Qualification*.  Forest is a corporationduly organized, validly existing and in good standing under the laws of theState of New York.

 

Section 3.2             *Corporate Authority; No Violation*.  Forest has thecorporate power and authority to enter into this Agreement and each otherTransaction Agreement and to carry out its obligations hereunder andthereunder.  The execution, delivery andperformance by Forest of this Agreement and each other Transaction Agreementand the consummation of the transactions contemplated hereby and thereby havebeen duly authorized by all requisite corporate action on the part of Forestand no other corporate proceedings on the part of Forest are necessary toconsummate the transactions contemplated hereby and thereby.  This Agreement has been duly executed anddelivered by Forest and, assuming the due authorization, execution and deliveryby the Company, constitutes a legal, valid and binding agreement of Forest,enforceable against Forest in accordance with its terms (except insofar as suchenforceability may be limited by applicable bankruptcy, insolvency,reorganization, moratorium or similar laws affecting creditors’ rightsgenerally, or by principles governing the availability of equitableremedies).  Each other TransactionAgreement has been duly executed and delivered by Forest and, assuming the dueauthorization, execution and delivery by the other parties thereto, constitutesa legal, valid and binding agreement of Forest, enforceable against Forest inaccordance with its terms (except insofar as such enforceability may be limitedby applicable bankruptcy, insolvency, fraudulent transfer, reorganization,moratorium or similar laws affecting creditors’ rights generally, or byprinciples governing the availability of equitable remedies).  Except for matters expressly contemplated bythis Agreement and for such matters described in clauses (b), (c) and(d) below as would not, individually or in the aggregate, have a MaterialAdverse Effect on Forest, the Spinco Business or Spinco, neither the executionand delivery by Forest of this Agreement and each other Transaction Agreement,nor the consummation by Forest of the transactions contemplated hereby orthereby and the performance by Forest of this Agreement and each otherTransaction Agreement will (a) violate or conflict with any provisions ofForest’s Certificate of Incorporation or Bylaws; (b) require any consent,approval, authorization or permit of, registration, declaration or filing with,or notification to, any Governmental Authority or any other Person;(c) result in any breach of or constitute a default (or an event that,with notice or lapse of time or both, would become a default) under, or give toothers any right of termination, cancellation, amendment or acceleration of anyobligation or the loss of any benefit under, any Contract to which Forest orany of its Subsidiaries is a party or by which Forest or any of itsSubsidiaries is bound or affected; (d) result in the creation of a lien,pledge, security interest, claim or other encumbrance on any of the issued andoutstanding shares of Spinco Common Stock, capital stock of any SpincoSubsidiary or on any of the Spinco Assets pursuant to any Contract to whichForest or any of its Subsidiaries (including Spinco and its Subsidiaries) is a

 

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party or by which Forest or its Subsidiaries is bound or affected; or(e) violate or conflict with any Order, law, ordinance, rule or regulationapplicable to Forest or any of its Subsidiaries (including Spinco and itsSubsidiaries), or any of the properties, business or assets of any of theforegoing.  Section 3.2 of theForest Disclosure Schedule identifies all material consents, approvals andauthorizations of any Governmental Authority that are legally required to beobtained by Forest for the consummation of the transactions contemplated by theTransaction Agreements.

 

Section 3.3             *Information Supplied*.  All documents that Forest is responsiblefor filing with any Governmental Authority in connection with the transactionscontemplated hereby and by each other Transaction Agreement will comply in allmaterial respects with the provisions of applicable law.

 

Section 3.4             *Brokers or Finders*.  No agent, broker, investment banker,financial advisor or other similar Person is or will be entitled, by reason ofany agreement, act or statement by Forest or any of its Subsidiaries,directors, officers or employees, to any financial advisory, broker’s, finder’sor similar fee or commission, to reimbursement of expenses or toindemnification or contribution, in each case, by Spinco or any of itsSubsidiaries, in connection with any of the transactions contemplated by thisAgreement or the other Transaction Agreements.

 

Section 3.5             *Forest Rights Plan*. Forest has taken all action necessary, if any, to render the ForestRights inapplicable to this Agreement, the Distribution Agreement and thetransactions contemplated hereby and thereby.

 

Section 3.6             *No Other Representations and Warranties.*  Except for the representations and warrantiescontained in this Article III and in Article IV and except for anyrepresentations and warranties specifically set forth in the other TransactionAgreements, the Company acknowledges that neither Forest nor any other Personmakes any express or implied representation or warranty with respect to Forestand its Subsidiaries, the Spinco Assets, the Spinco Business or otherwise orwith respect to any other information provided to the Company, whether onbehalf of Forest or such other Persons. Neither Forest nor any other Person will have or be subject to anyliability or indemnification obligation to the Company or any other Person to theextent resulting from the distribution to the Company or the Company’s use of,any information related to Forest and any other information, document,financial information or projections or material made available to the Companyin certain “data rooms,” management presentations or in any other form inconnection with the transactions contemplated by this Agreement.

 

# **ARTICLE IVREPRESENTATIONS ANDWARRANTIES OF FOREST AND SPINCO**

# ** **

Except as set forth in the Spinco Disclosure Schedule(with specific reference to the particular Section of this Agreement to whichthe information set forth in such disclosure schedule relates; provided, thatany information set forth in one section of the Spinco Disclosure

 

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Schedule shall be deemed to apply to each other Section thereof towhich it is relevant), Forest and Spinco, jointly and severally, represent andwarrant to the Company as follows:

 

Section 4.1             *Organization, Qualification*.  Spinco is a corporationduly organized, validly existing and in good standing under the laws of theState of Delaware.  Spinco has allrequisite power and authority to own, lease and operate its properties andassets and to carry on the Spinco Business as presently conducted and as proposedto be conducted and at the Distribution Date and the Effective Time will beduly qualified and licensed to do business and in good standing in eachjurisdiction in which the ownership or leasing of its property or the conductof the Spinco Business, as presently conducted and as proposed to be conducted,requires such qualification, except for jurisdictions in which the failure tobe so qualified or to be in good standing, individually or in the aggregate,would not have a Material Adverse Effect on the Spinco Business or Spinco.  The copies of the Spinco Certificate ofIncorporation and Bylaws in existence on the date hereof are included as partof Section 4.1 of the Spinco Disclosure Schedule and are complete andcorrect and in full force and effect on the date hereof.  Spinco is not in violation of any of theprovisions of its Certificate of Incorporation or Bylaws.  All of the Subsidiaries of Spinco and theirrespective jurisdictions of incorporation or organization (together with adesignation of those Subsidiaries constituting Significant Subsidiaries ofSpinco) are identified in Section 4.1 of the Spinco DisclosureSchedule.  Spinco was formed solely forthe purpose of engaging in the transactions contemplated by this Agreement, hasengaged in no other business activities and has conducted its operations onlyas contemplated by this Agreement.

 

Section 4.2             *Capital Stock and Other Matters*.  The authorized capitalstock of Spinco consists of 100,000 shares of Spinco Common Stock and no sharesof Spinco Preferred Stock.  As of thedate hereof, 100 shares of Spinco Common stock were issued andoutstanding.  At the Distribution Dateand immediately prior to the Closing, (i) there will be issued andoutstanding 50,637,010 shares of Spinco Common Stock, subject to adjustment asset forth on Section 4.2 of the Spinco Disclosure Schedule and as providedin Section 2.4 of the Distribution Agreement; (ii) no shares ofSpinco Common Stock will be held by Spinco in its treasury; (iii) noshares of Spinco Preferred Stock will be issued and outstanding; and(iv) no bonds, debentures, notes or other indebtedness of Spinco or any ofits Subsidiaries having the right to vote (or convertible into securitieshaving the right to vote) on any matters on which holders of shares of capitalstock of Spinco (including Spinco Common Stock) may vote (“Spinco Voting Debt”)will be issued or outstanding.  None ofsuch shares of Spinco Common Stock are, nor at the Distribution Date will theybe, subject to preemptive rights.  All ofthe issued and outstanding shares of Spinco Common Stock are, and all of theissued and outstanding shares of Spinco Common Stock at the Distribution Datewill be, validly issued, fully paid and nonassessable.  Except as set forth in this Section 4.2,there are no outstanding, (i) shares of capital stock of Spinco, SpincoVoting Debt or other voting securities of Spinco, (ii) securities of Spinco orany of its Subsidiaries convertible into or exchangeable for shares of capitalstock of Spinco, Spinco Voting Debt or other voting securities of Spinco orSpinco Common Stock or (iii) options, warrants, calls, rights (includingpreemptive rights), commitments or other Contracts (other than certainTransaction Agreements) to which Spinco or any of its Subsidiaries is a partyor by which Spinco or any of its Subsidiaries will be bound obligating Spincoor any of its Subsidiaries to issue, deliver, sell, purchase, redeem oracquire, or cause to be issued, delivered, sold, purchased, redeemed oracquired, or otherwise relating to, shares of capital stock of Spinco or anySpinco Voting Debt or other voting securities

 

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of Spinco or any of its Subsidiaries or obligating Spinco or any of itsSubsidiaries to grant, extend or enter into any such option, warrant, call,right, commitment or Contract.  There areno stockholder agreements, voting trusts or other Contracts (other than theDistribution Agreement) to which Spinco is a party or by which it is boundrelating to the voting or transfer of any shares of capital stock ofSpinco.  Spinco has no direct or indirectSubsidiaries.

 

Section 4.3             *Corporate Authority; No Violation*.  Spinco has thecorporate power and authority to enter into this Agreement and each otherTransaction Agreement and to carry out its obligations hereunder andthereunder.  The execution, delivery andperformance by Spinco of this Agreement and each other Transaction Agreementand the consummation of the transactions contemplated hereby and thereby havebeen duly authorized by all requisite corporate action on the part of Spinco,and no other corporate proceedings are necessary to consummate the Merger andthe other transactions contemplated by the Transaction Agreements.  This Agreement has been duly executed anddelivered by Spinco and, assuming the due authorization, execution and deliveryby the Company and Merger Sub, constitutes a legal, valid and binding agreementof Spinco, enforceable against Spinco in accordance with its terms (exceptinsofar as such enforceability may be limited by applicable bankruptcy,insolvency, fraudulent transfer, reorganization, moratorium or similar lawsaffecting creditors’ rights generally, or by principles governing theavailability of equitable remedies). Each other Transaction Agreement has been duly executed and delivered bySpinco and, assuming the due authorization, execution and delivery by the otherparties thereto, constitutes a legal, valid and binding agreement of Spinco,enforceable against Spinco in accordance with its terms (except insofar as suchenforceability may be limited by applicable bankruptcy, insolvency,reorganization, moratorium or similar laws affecting creditors’ rightsgenerally, or by principles governing the availability of equitableremedies).  Except for matters expresslycontemplated by this Agreement and for such matters described in clauses (b),(c) and (d) below as would not, individually or in the aggregate,have a Material Adverse Effect on Forest, the Spinco Business or Spinco,neither the execution and delivery by Spinco of this Agreement and each otherTransaction Agreement, nor the consummation by Spinco of the transactionscontemplated hereby or thereby and the performance by Spinco of this Agreementand each other Transaction Agreement will (a) violate or conflict with anyprovision of Spinco’s Certificate of Incorporation or Bylaws; (b) requireany consent, approval, authorization or permit of, registration, declaration orfiling with, or notification to, any Governmental Authority or any otherPerson; (c) result in any breach of or constitute a default (or an eventthat, with notice or lapse of time or both, would become a default) under, orgive to others any right of termination, cancellation, amendment oracceleration of any obligation or the loss of any benefit under any Contract towhich Spinco or any of its Subsidiaries is a party or by which Spinco or any ofits Subsidiaries or any of the Spinco Assets is bound or affected;(d) result in the creation of a lien, pledge, security interest, claim orother encumbrance on any of the issued and outstanding shares of Spinco CommonStock or capital stock of any Spinco Subsidiaries or on any of the SpincoAssets pursuant to any Contract to which Spinco or any of its Subsidiaries is aparty or by which Spinco or any of its Subsidiaries or any of the Spinco Assetsis bound or affected; or (e) violate or conflict with any Order, law,ordinance, rule or regulation applicable to Spinco or any of its Subsidiaries,or any of the properties, businesses or assets of any of the foregoing.  Section 4.3 of the Spinco DisclosureSchedule identifies all material consents, approvals and authorizations of anyGovernmental Authority that are legally required to be obtained by Spinco forthe consummation of the transactions contemplated by the TransactionAgreements.

 

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Section 4.4             *Spinco Financial Statements; Liabilities*.  Forestand Spinco have previously made available to the Company complete and correctcopies of unaudited financial statements for the Spinco Business, comprisedsolely of statements of revenues and direct operating expenses, for the yearsended December 31, 2004 (the “Spinco 2004 Financial Statements”),December 31, 2003 and December 31, 2002, and unaudited interimfinancial statements for the Spinco Business, comprised solely of statements ofrevenues and expenses, for the three-month periods ended March 31,2005 and June 30, 2005 (together with the Spinco 2004 Financial Statements, the“Spinco Financial Statements”), and Forest and Spinco will make available tothe Company any and all other financial statements for the Spinco Businessrequired to be included by Regulation S-X of the Exchange Act in theRegistration Statements and the Proxy Statement/Prospectus.  The Spinco Financial Statements fairlypresent in all material respects, on the basis set forth therein, the revenuesand direct operating expenses for the respective periods, and any otherfinancial statements prepared in accordance with this Section 4.4 will fairlypresent in all material respects, as applicable, on the basis set forththerein, the financial position of the Spinco Business as of the respectivedates thereof, and the results of operations and changes in financial positionor other information included therein for the respective periods or as of therespective dates then ended, in each case except as otherwise noted therein andsubject, where appropriate, to normal year-end audit adjustments.  The Spinco Financial Statements and suchother financial statements have been or will be prepared in accordance withpast practice and GAAP, and on a consistent basis, except as otherwise notedtherein.  Spinco and the Spinco Businessdo not have any liability or obligation (whether accrued, absolute, contingentor otherwise), other than (i) liabilities incurred in the ordinary courseof business since June 30, 2005, (ii) liabilities that, individually or in theaggregate, would not have a Material Adverse Effect on the Spinco Business orSpinco and (iii) liabilities and obligations under the TransactionAgreements.

 

Section 4.5             *Absence of Certain Changes or Events*.  Except as specificallycontemplated by this Agreement or the other Transaction Agreements, since June30, 2005, the Spinco Business has been conducted only in the ordinary courseand in a manner consistent with past practice and, since such date, there hasnot been, occurred or arisen any change, or any event (including any damage,destruction or loss whether or not covered by insurance), condition or state offacts of any character that, individually or in the aggregate, would have aMaterial Adverse Effect on the Spinco Business or Spinco, whether or notarising in the ordinary course of business.

 

Section 4.6             *Investigations; Litigation*.

 

### (a)           ToForest’s or Spinco’s Knowledge, no investigation or review by any GovernmentalAuthority with respect to Forest, Spinco or any of their respectiveSubsidiaries or the Spinco Business is pending or threatened, nor has anyGovernmental Authority indicated to Forest or Spinco or any of their respectiveSubsidiaries an intention to conduct the same.

###  

### (b)           Thereis no Action pending or, to Forest’s or Spinco’s Knowledge, threatened againstor affecting Forest, Spinco or any of their respective Subsidiaries, propertiesor assets or the Spinco Business at law or in equity, or before anyGovernmental Authority or arbitrator, that (i) if adversely determined,individually or in the aggregate, would have a Material Adverse Effect on theSpinco Business or Spinco or (ii) seeks to delay or prevent theconsummation of

###  

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### 

###  

### the Merger or anyother transaction contemplated by this Agreement or any other TransactionAgreement.  There is no Order of anyGovernmental Authority or arbitrator outstanding against Forest, Spinco or anyof their respective Subsidiaries or with respect to their respective propertiesor assets or the Spinco Business that, individually or in the aggregate, wouldhave a Material Adverse Effect on the Spinco Business or Spinco.

###  

Section 4.7             *Licenses; Compliance with Laws*.  As of the date hereof Forestor a Subsidiary of Forest holds, and as of the Distribution Date and theEffective Time Spinco and its Subsidiaries will hold, all Licenses that arerequired for the conduct of the Spinco Business, as presently conducted, exceptsuch Licenses for which the failure to so hold, individually or in theaggregate, would not have a Material Adverse Effect on the Spinco Business orSpinco.  As of the date hereof Forest ora Subsidiary of Forest is, and as of the Distribution Date and the EffectiveTime Spinco and its Subsidiaries will be, in compliance with the terms of allsuch Licenses so held, except where the failure so to comply, individually orin the aggregate, would not have a Material Adverse Effect on the SpincoBusiness or Spinco.  No suspension orcancellation of any of the Licenses relating to the Spinco Business is pendingor, to Forest’s or Spinco’s Knowledge, threatened, except where the failure tohave, or the suspension or cancellation of, any of such Licenses would not havea Material Adverse Effect on the Spinco Business or Spinco.  Except with respect to Environmental Laws,ERISA and laws relating to Taxes, Forest, Spinco and their respectiveSubsidiaries are in compliance with all, and have received no notice of anyviolation (as yet unremedied) of any laws, ordinances or regulations of anyGovernmental Authority applicable to the Spinco Business, except for suchinstances of noncompliance which, individually or in the aggregate, would nothave a Material Adverse Effect on the Spinco Business or Spinco.

 

Section 4.8             *Proxy Statement/Prospectus; Registration Statements*.  Noneof the information regarding Forest or its Subsidiaries or Spinco or itsSubsidiaries or the transactions contemplated by this Agreement or any otherTransaction Agreement provided by Forest or Spinco specifically for inclusionin the Proxy Statement/Prospectus or the Registration Statements will, in thecase of the definitive Proxy Statement/Prospectus or any amendment orsupplement thereto, at the time of the mailing of the definitive ProxyStatement/Prospectus and any amendment or supplement thereto and at the time ofthe Company Stockholders Meeting, or, in the case of each Registration Statement,at the time it becomes effective, at the time of the Company StockholdersMeeting, at the Distribution Date and at the Effective Time contain an untruestatement of a material fact or omit to state any material fact required to bestated therein or necessary in order to make the statements therein, in thelight of the circumstances under which they are made, not misleading.  The Registration Statements will comply inall material respects with the provisions of the Securities Act and theExchange Act, as the case may be, and the rules and regulations thereunder,except that no representation is made by Forest or Spinco with respect toinformation provided by the Company specifically for inclusion in theRegistration Statements.  All factualinformation (excluding estimates and projections) previously furnished byForest to the Company with regard to the Spinco Assets and the Spinco Businesswas (taken as a whole) true and correct in all material respects on the date onwhich such information was furnished and did not contain any untrue statementof a material fact or omit to state a material fact relevant to theconsummation of the transactions contemplated by this Agreement or necessary tomake the statements contained therein not misleading.

 

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Section 4.9             *Information Supplied*.  All documents that Spinco or Forest isresponsible for filing with any Governmental Authority in connection with thetransactions contemplated hereby or by any other Transaction Agreement willcomply in all material respects with the provisions of applicable law.

 

Section 4.10*           Environmental Matters*.  Except as would not,individually or in the aggregate, have a Material Adverse Effect on the SpincoBusiness or Spinco:

 

#### (i)            Asof the date hereof Forest or a Subsidiary of Forest has obtained, and as of theDistribution Date and the Effective Time each of Spinco and its Subsidiariesshall have obtained, all Licenses, permits and other authorizations underEnvironmental Laws (“Environmental Permits”) required for the conduct andoperation of the Spinco Business.  Eachof Spinco, its Subsidiaries and the Spinco Business is in compliance and at alltimes has been in compliance with the terms and conditions contained in itsEnvironmental Permits, and each of them and the Spinco Business is, and for thepast one year has been, in compliance with all applicable Environmental Laws;

####  

#### (ii)           NeitherSpinco nor any of its Subsidiaries is subject to any environmentalindemnification obligation regarding businesses currently operated by Forest,Spinco or the Spinco Business or any of their respective Subsidiaries orregarding properties currently owned or leased by Forest, Spinco or the SpincoBusiness or any of their respective Subsidiaries;

####  

#### (iii)          ToForest’s and Spinco’s Knowledge there is no condition on, at, under or relatedto any property (including any release of a Hazardous Material into the air,soil, surface water, sediment or ground water at, under or migrating to or fromsuch property) currently owned, leased or used by Forest, Spinco or any oftheir respective Subsidiaries or created by Spinco’s or any Spinco Subsidiary’soperations or the Spinco Business that would create liability for Spinco or anyof its Subsidiaries under applicable Environmental Laws and, to Forest’s andSpinco’s Knowledge, the foregoing representation is true and correct withregard to property formerly owned, leased or used either by Forest, Spinco orany of their respective Subsidiaries, or in connection with the SpincoBusiness;

####  

#### (iv)          Thereare no past or present actions, activities, circumstances, conditions, eventsor incidents (including the release, emission, discharge, presence or disposalof any Hazardous Material) that form or are reasonably likely to form the basisof a claim against Forest, Spinco or any of their respective Subsidiaries underEnvironmental Laws, including any claims based on the alleged exposure of anyPerson or property to any Hazardous Material;

####  

#### (v)           Spincohas made available to the Company all material site assessments, complianceaudits, and other similar studies prepared since January 1, 2002 in thepossession or custody of Forest, Spinco or any of their respective Subsidiariesrelating to (A) the environmental conditions on, under or about theproperties or assets currently owned, leased, operated or used by Spinco, theSpinco Business, any of its Subsidiaries or any predecessor in interest theretoand (B) any Hazardous Materials used, managed,

####  

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#### 

####  

#### handled, transported,treated, generated, stored, discharged, emitted, or otherwise released bySpinco, the Spinco Business, any of its Subsidiaries or, to Forest’s and Spinco’sKnowledge, any other Person, on, under, about or from any of the propertiescurrently owned or leased by, or otherwise in connection with the use oroperation of any of the properties owned or leased by, or otherwise inconnection with the use or operation of any of the properties and assets of,Spinco or any of its Subsidiaries, or their respective businesses andoperations;

####  

#### (vi)          SinceJanuary 1, 2002, neither Spinco nor Forest in connection with the SpincoBusiness nor any Spinco Subsidiary has received any communication that has notbeen resolved, whether from a Governmental Authority, citizen’s group, employeeor otherwise, alleging that it is liable under, or not in compliance with, anyEnvironmental Law; and

####  

#### (vii)         ToSpinco’s and Forest’s Knowledge, there is no requirement anticipated orformally proposed for notice, comment, adoption or implementation under anyEnvironmental Law or any Environmental Permit issued pursuant thereto that isreasonably expected to result in liability or material increases in eithercapital or operating costs for Spinco or any of its Subsidiaries.

####  

### (b)           Insofaras the representations set forth in subsections (a)(i), (a)(ii), (a)(iii),(a)(iv) and (a)(vii) relate to Spinco Assets operated by a Personother than Spinco or any of its respective Subsidiaries, such representationsare given only to the Knowledge of Forest and Spinco.

###  

Section 4.11           *Tax Matters*.

 

### (a)           (i) Allmaterial Tax Returns relating to Forest, the Subsidiaries of Forest, Spinco,the Spinco Subsidiaries and the Spinco Business required to be filed have beenduly and timely filed, (ii) all such Tax Returns are true, correct andcomplete in all material respects, (iii) all Taxes shown as due andpayable on such Tax Returns, relating to Forest, any Subsidiary of Forest,Spinco, any of the Spinco Subsidiaries or the Spinco Business required to bepaid, have been duly and timely paid, (iv) no adjustment relating to suchTax Returns has been proposed in writing by any Governmental Authority (insofaras it relates to the activities or income of Forest, the Subsidiaries ofForest, Spinco, the Spinco Subsidiaries or the Spinco Business), (v) allmaterial Taxes relating to Forest, any of the Subsidiaries of Forest, Spinco,any of the Spinco Subsidiaries or the Spinco Business for any taxable period(or a portion thereof) beginning on or prior to the date of the Closing (whichare not yet due and payable) have been properly reserved for in the Spinco 2004Financial Statements (or, with respect to Forest and its Subsidiaries, onForest’s audited financial statements as of and for the year ended December 31,2004) whether or not shown as being due on any Tax Returns and (vi) allmaterial Taxes required to be withheld by or with respect to Forest, theSubsidiaries of Forest, Spinco, the Spinco Subsidiaries and the Spinco Businesshave been withheld and such withheld Taxes have been either duly and timelypaid to the proper Governmental Authority or properly set aside in accounts forsuch purpose and will be duly and timely paid to the proper GovernmentalAuthority.

###  

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### 

###  

### (b)           Nowritten agreement or other written document waiving or extending, or having theeffect of waiving or extending, the statute of limitations or the period ofassessment or collection of any Taxes relating to Forest or the Spinco Businessand no power of attorney with respect to any such Taxes, in each case that iscurrently outstanding and in effect, has been filed or entered into with anyGovernmental Authority.

###  

### (c)           No(i) audits or other administrative proceedings or court proceedings arepresently pending with regard to any Taxes or Tax Return of Spinco, any SpincoSubsidiary or with respect to the Spinco Business as to which any TaxingAuthority has asserted in writing any claim which, if adversely determined,would have a Material Adverse Effect on Spinco or the Spinco Business, and (ii)Governmental Authority has asserted in writing any deficiency or claim forTaxes (including any adjustment to Taxes) with respect to income or any othermaterial Tax relating to the Spinco Business or for which Spinco or any SpincoSubsidiary may be liable which has not been fully paid or finally settled.

###  

### (d)           NeitherSpinco nor any Spinco Subsidiary (i) is a party to or bound by or has anyobligation or liability under any written Tax separation, sharing or similaragreement or arrangement other than the Tax Sharing Agreement, (ii) is orhas been a member of any consolidated, combined or unitary group for purposesof filing Tax Returns or paying Taxes, (iii) has entered into a closingagreement pursuant to Section 7121 of the Code, or any predecessorprovision or any similar provision of state or local law, (iv) is requiredto include in income any amount in respect of an adjustment pursuant toSection 481 of the Code by reason of a change in accounting method, or(v) has filed any consents under Section 341(f) of the Code.

###  

### (e)           Noasset of Spinco or any Spinco Subsidiary and no asset of the Spinco Business issubject to any Tax lien (other than liens for Taxes that are not yet due orthat are being contested in good faith by appropriate proceedings and whichhave been properly reserved for in the books and records of Spinco).

###  

### (f)            ToForest’s and Spinco’s Knowledge, neither Forest nor Spinco, nor any of theirrespective Affiliates, has taken or agreed to take any action that wouldprevent the Merger from constituting a transaction qualifying underSection 368(a) of the Code.  NeitherForest nor Spinco is aware of any agreement, plan or other circumstance thatwould prevent the Merger from qualifying under Section 368(a) of the Code.

###  

### (g)           Noneof the assets of Forest, any Subsidiary of Forest, Spinco, any SpincoSubsidiary or the Spinco Business are tax-exempt use property within themeaning of Section 168(h) of the Code.

###  

### (h)           NeitherForest, any Subsidiary of Forest, Spinco nor any Spinco Subsidiary hasconsummated, has participated in or is currently participating in anytransaction which was or is a listed transaction as defined in TreasuryRegulation Section 1.6011-4(b)(2).

###  

Section 4.12*           Benefit Plans*.

 

### (a)           Section 4.12(a)of the Spinco Disclosure Schedule lists each “employee benefit plan” (asdefined in Section 3(3) of ERISA), and all other employee benefit, bonus,incentive, deferred compensation, stock option (or other equity-based),severance, change in control,

###  

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### 

###  

### welfare (includingpost-retirement medical and life insurance), vacation, retention andfringe benefit plans, whether or not subject to ERISA and whether written ororal, sponsored, maintained or contributed to or required to be contributed toby Forest (to the extent affecting Spinco or the Spinco Business), Spinco orany of their respective Subsidiaries, or to which Forest (to the extentaffecting Spinco or the Spinco Business), Spinco or any of their respectiveSubsidiaries is a party, for the benefit of any Person who is currently, hasbeen or, on or prior to the Effective Time, is expected to become an employeeof Spinco or any of its Subsidiaries (a “Spinco Employee”) (the “Spinco BenefitPlans”).  Except as provided in Section2.9 or in the Employee Benefits Agreement, neither Spinco, any of itsSubsidiaries nor any ERISA Affiliate of any of them has any commitment orformal plan, whether legally binding or not, to create any additional employeebenefit plan or modify or change any existing Spinco Benefit Plan that wouldaffect any Spinco Employee.  Spinco hasheretofore delivered or made available to the Company true and complete copiesof each Spinco Benefit Plan and any amendments thereto (or if the plan is not awritten plan, a description thereof), any related trust or other fundingvehicle, any reports or summaries required under ERISA or the Code for the mostrecent reporting period and the most recent determination letter received fromthe IRS (if any) with respect to each such plan intended to qualify underSection 401(a) of the Code.

###  

### (b)           Noliability under Title IV (including Sections 4069 and 4212(c) of ERISA) orSection 302 of ERISA has been incurred by Spinco, any of its Subsidiariesor any ERISA Affiliate of any of them that has not been satisfied in full, andno condition exists that presents a material risk to Spinco, any of itsSubsidiaries or any ERISA Affiliate of any of them of incurring any suchliability, other than liability for premiums due the PBGC (which premiums havebeen paid when due).  Except for the planestablished under the Forest Oil Corporation Pension Trust Agreement, no SpincoBenefit Plan is subject to Title IV of ERISA, Section 302 of ERISA or Section412 of the Code.

###  

### (c)           NoSpinco Benefit Plan is a “multiemployer pension plan,” as defined inSection 3(37) of ERISA, and none of Spinco, any of its Subsidiaries or anyERISA Affiliate of any of them has made or suffered a “complete withdrawal” ora “partial withdrawal,” as such terms are respectively defined in Sections 4203and 4205 of ERISA, which has not been satisfied in full.

###  

### (d)           EachSpinco Benefit Plan has been operated and administered in all material respectsin accordance with its terms and applicable law, including ERISA and theCode.  All contributions required to bemade with respect to any Spinco Benefit Plan have been timely made.  There are no pending or, to Spinco’s andForest’s Knowledge, threatened claims by, on behalf of or against any of theSpinco Benefit Plans or any assets thereof, other than routine benefit claimmatters, that, if adversely determined could, individually or in the aggregate,result in a material liability for Spinco or any of its Subsidiaries and nomatter is pending (other than routine qualification determination filings,copies of which have been furnished to the Company or will be promptlyfurnished to the Company when made) with respect to any of the Spinco BenefitPlans before the IRS, the United States Department of Labor or the PBGC.

###  

### (e)           EachSpinco Benefit Plan intended to be “qualified” within the meaning ofSection 401(a) of the Code is so qualified and the trusts maintainedthereunder are exempt from taxation under Section 501(a) of the Code, eachtrust maintained under any Spinco Benefit Plan

###  

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### 

###  

### intended tosatisfy the requirements of Section 501(c)(9) of the Code has satisfiedsuch requirements and, in either such case, no event has occurred or conditionis known to exist that would reasonably be expected to adversely affect suchtax-qualified status for any such Spinco Benefit Plan or any such trust.

###  

### (f)            Exceptfor a Spinco Benefit Plan that provides retiree medical benefits, no SpincoBenefit Plan provides medical, surgical, hospitalization, death or similarbenefits (whether or not insured) for employees or former employees of Spincoor any Subsidiary of Spinco for periods extending beyond their retirement orother termination of service, other than (i) coverage mandated byapplicable law, (ii) death benefits under any “pension plan,” or(iii) benefits the full cost of which is borne by the current or formeremployee (or his beneficiary).  Withrespect to any Spinco Benefit Plan maintained at the Effective Time, Spincowill have the right at and after the Effective Time to terminate or terminateparticipation in such Spinco Benefit Plan or to amend such Spinco Benefit Planto reduce future benefits without incurring or otherwise being responsible forany material liability with respect thereto.

###  

### (g)           Inconnection with the consummation of the transactions contemplated by thisAgreement, no payment of money or other property, acceleration of benefits orprovision of other rights has been or will be made hereunder, under anyagreement contemplated herein, or under any Spinco Benefit Plan or any Contractlisted in Section 4.15 of the Spinco Disclosure Schedule that could reasonablybe expected to be nondeductible under Section 280G of the Code, whether or notsome other subsequent action or event would be required to cause such payment,acceleration or provision to be triggered.

###  

Section 4.13*           Labor Matters*.  None of Forest, Spincoor any of their respective Subsidiaries is a party to, or bound by, any collectivebargaining agreement or other Contract with a labor union or labor organizationthat would affect the Spinco Business and no collective bargaining agreement isbeing negotiated by Forest, Spinco or any of their respective Subsidiaries thatwould affect the Spinco Business.  Withrespect to Spinco Employees, none of Forest, Spinco or any of their respectiveSubsidiaries is the subject of any proceeding asserting that it has committedan unfair labor practice or is seeking to compel it to bargain with any labororganization as to wages or conditions of employment nor is there any strike,work stoppage or other labor dispute involving Forest, Spinco or any of theirrespective Subsidiaries or the Spinco Business pending or, to Spinco’s orForest’s Knowledge, threatened, that, individually or in the aggregate, wouldhave a Material Adverse Effect on the Spinco Business or Spinco.  There are no labor controversies pending or,to Spinco’s or Forest’s Knowledge, threatened against Forest, Spinco or any oftheir respective Subsidiaries that, individually or in the aggregate, wouldhave a Material Adverse Effect on the Spinco Business or Spinco.  There have been no claims initiated by anylabor organization to represent any Spinco Employees not currently representedby a labor organization.

 

Section 4.14*           Intellectual Property Matters*.  Asof the date hereof Forest or a Subsidiary of Forest owns or possesses, and asof the Distribution Date and the Effective Time Spinco and itsSubsidiaries will own or possess, adequate licenses or other valid rights touse all seismic data, patents, patent rights, trademarks, trademark rights,trade names, trade name rights, copyrights, service marks, trade secrets,applications for trademarks and service marks, know-how and other proprietaryrights and information used or held for use in connection with

 

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the Spinco Business as currently conducted, except where the failure toown or possess such items, individually or in the aggregate, would not have aMaterial Adverse Effect on the Spinco Business or Spinco.  To Forest’s or Spinco’s Knowledge, there isno assertion or claim challenging the validity of any of the foregoing that,individually or in the aggregate, would have a Material Adverse Effect on theSpinco Business or Spinco.  The conductof the Spinco Business as currently conducted does not and will not conflict inany way with any seismic data license, patent, patent right, license, trademark,trademark right, trade name, trade name right, copyright, service mark, tradesecret, know-how or other proprietary rights or information of any thirdparty that, individually or in the aggregate, would have a Material AdverseEffect on the Spinco Business or Spinco.

 

Section 4.15*           Material Contracts*.

 

### (a)           Section 4.15of the Spinco Disclosure Schedule sets forth all Contracts, other than benefitplans maintained by Forest, Spinco Benefit Plans and oil and gas leases andassignments entered into in the ordinary course of business, to which Forest orany of its Subsidiaries is a party relating to the Spinco Business or to whichSpinco or any Spinco Subsidiary is a party (i) relating to indebtednessfor borrowed money, (ii) that is a “material contract” (as such term isdefined in Item 601(b)(10) of Regulation S-K of the SEC),(iii) that obligates Forest or Spinco or any of their respectiveSubsidiaries to make any payments or issue or pay anything of value to anydirector, officer, employee or consultant, (iv) that limit or purport tolimit the ability of Forest or Spinco or any of their respective Subsidiariesto compete in the U.S. domestic oil and gas exploration, production andmarketing business with any Person in any geographic area or during any periodof time, (v) that includes any material indemnification, contribution orguarantee obligations (other than such obligations entered into in the ordinarycourse of business in offshore oil and gas operations), (vi) that relateto capital expenditures involving total payments of more than $1 million,(vii) requiring annual or remaining payments in excess of $1 millionafter the date hereof, (viii) that is a seismic license agreement or rigor drilling contract, (ix) that is a fixed price commodity sales agreementwith a remaining term of more than 60 days, (x) that is a materialContract relating to any of the properties specified in Section 4.15 of theSpinco Disclosure Schedule or (xi) that obligates Forest or Spinco or anyof their Subsidiaries to provide funds to, or make any investment (in the formof a loan, capital contribution or otherwise) in, any other Person.  Neither Forest nor Spinco, nor any of theirrespective Subsidiaries, has received notice that any  party to any such Contract is in default, andeach such Contract (x) is freely assignable to Spinco without penalty orother adverse consequences and (y) upon consummation of the transactionscontemplated by this Agreement and the other Transaction Agreements shallcontinue in full force and effect without penalty or other adverse consequence(other than the termination or expiration thereof in accordance with its terms,for reasons other than the consummation of the transactions contemplated bythis Agreement and the other Transaction Agreements).

###  

### (b)           NeitherForest, Spinco nor any of their respective Subsidiaries is in default in anyrespect under any Contract to which it is a party or by which it or any of itsproperties or assets is bound, which default, individually or in the aggregate,would have a Material Adverse Effect on the Spinco Business or Spinco, andthere has not occurred any event that, with the lapse of time or the giving ofnotice or both, would constitute such a default.

###  

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### 

###  

Section 4.16*           Brokers or Finders*.  No agent, broker,investment banker, financial advisor or other similar Person is or will beentitled, by reason of any agreement, act or statement by Forest, Spinco or anyof their respective Subsidiaries, directors, officers or employees, to anyfinancial advisory, broker’s, finder’s or similar fee or commission, toreimbursement of expenses or to indemnification or contribution in connectionwith any of the transactions contemplated by this Agreement or any otherTransaction Agreement.

 

Section 4.17*           Certain Board Findings*.  The Board of Directorsof each of Forest and Spinco, by unanimous written consent or at a meeting dulycalled and held, has approved this Agreement and each other TransactionAgreement.

 

Section 4.18*           Vote Required*.  The only vote ofstockholders of Forest or Spinco required under any of the NYBCL, DGCL, NYSErules, Forest’s Certificate of Incorporation or Bylaws or Spinco’s Certificateof Incorporation or Bylaws to approve the transactions contemplated by thisAgreement and each other Transaction Agreement is the affirmative vote of thesole holder of the outstanding shares of Spinco Common Stock prior to theDistribution Date.  Such affirmative votehas been obtained on or prior to the date hereof.

 

Section 4.19*           Stockholder Approval*.  As of the date hereof,the sole stockholder of Spinco is Forest. On the date of this Agreement Forest shall deliver to Spinco a writtenconsent of Spinco’s sole stockholder in compliance with Section 228 of theDGCL with respect to all aspects of this Agreement and the other TransactionAgreements and the transactions contemplated hereby and thereby which requirethe consent of Spinco’s stockholders under the DGCL, NYSE rules, Spinco’sCertificate of Incorporation or Spinco’s Bylaws.  The approval of Forest’s shareholders is notrequired to effect the transactions contemplated by the Distribution Agreement,this Agreement or any other Transaction Agreement.  Upon delivery of such written consent, theapproval of Spinco’s stockholders after the Distribution Date will not berequired to effect the transactions contemplated by this Agreement, includingthe Merger, unless this Agreement is amended in accordance withSection 251(d) of the DGCL after the Distribution Date and such approvalis required, solely as a result of such amendment, under the DGCL, NYSE rules,Spinco’s Certificate of Incorporation or Spinco’s Bylaws or by the IRS.

 

Section 4.20*           Certain Payments*.  Except as contemplatedby the Transaction Agreements, no Spinco Benefit Plan or employmentarrangement, no similar plan or arrangement sponsored or maintained by Forestin which any Spinco Employee is a participant and no contractual arrangementbetween Spinco and any third party exists that could result in the payment toany current, former or future director, officer, stockholder or employee ofSpinco or any of its Subsidiaries, or of any entity the assets or capital stockof which have been acquired by Spinco or a Spinco Subsidiary, of any money orother property or rights or accelerate or provide any other rights or benefitsto any such individual as a result of the consummation of the transactionscontemplated by the Transaction Agreements (including the Distribution),whether or not (a) such payment, acceleration or provision wouldconstitute a “parachute payment” (within the meaning of Section 280G ofthe Code), or (b) some other subsequent action or event would be requiredto cause such payment, acceleration or provision to be triggered.

 

Section 4.21           *Assets*.  As of the date hereof, Forest, aSubsidiary of Forest, Spinco or a Spinco Subsidiary has, and as of theEffective Time, Spinco or a Spinco Subsidiary will have,

 

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good and marketable title to all oil and gas properties forming thebasis for the reserves reflected in the Spinco Reserve Report as attributableto interests owned by Spinco or any Spinco Subsidiary and, as of the datehereof, Forest, a Subsidiary of Forest, Spinco or a Spinco Subsidiary has, andas of the Effective Time, Spinco or a Spinco Subsidiary will have, good andvalid title to or valid leasehold interests or other contractual rights in, allother Spinco Assets, with respect to both the oil and gas properties and allother Spinco Assets, free and clear of all mortgages, deeds of trust, liens,security interests, pledges, leases, conditional sale contracts, claims,charges, liabilities, obligations, privileges, easements, rights of way,limitations, reservations, restrictions, options, rights of first refusal andother encumbrances of every kind (“Liens”) except for Permitted Liensand Liens associated with obligations reflected in the Spinco ReserveReport.  The oil and gas leases and otheragreements that provide Forest and its Subsidiaries, and that as of theEffective Time will provide Spinco and its Subsidiaries, with operating rightsin the oil and gas properties reflected in the Spinco Reserve Report are legal,valid and binding and in full force and effect, the rentals, royalties andother payments due thereunder have been properly paid and, to Forest’s andSpinco’s Knowledge, there is no existing default (or event that, with notice orlapse of time or both, would become a default) under any of such oil and gasleases or other agreements, except as would not, individually or in theaggregate, have a Material Adverse Effect on the Spinco Business orSpinco.  Each of Spinco and Forest andtheir respective Subsidiaries (as the case may be) has maintained all theSpinco Assets owned on the date hereof in working order and operating condition,subject only to ordinary wear and tear. The Spinco Assets constitute all the assets, properties and rightsrelated to or required for the conduct of the Spinco Business as currentlyconducted, except for the services to be provided pursuant to the TransitionServices Agreement.  The Spinco Assetsinclude all properties reflected in the Spinco Reserve Report.

 

Section 4.22           *Loans*.  There are no outstanding loans made toany Person by Forest, Spinco or any of their respective Subsidiaries that are orwill be Spinco Assets.

 

Section 4.23*           Oil and Gas Reserves*.  Forest has furnished tothe Company reserve reports prepared by Forest containing estimates of the oiland gas reserves, as of December 31, 2004 and June 30, 2005 (collectively,the “Spinco Reserve Report”), that will be owned by Spinco and the SpincoSubsidiaries upon completion of the Contribution.  The factual, non-interpretive data onwhich the Spinco Reserve Report was based for purposes of estimating the oiland gas reserves set forth therein was accurate in all material respects, andto the Knowledge of Forest no errors in such information existed at the timesuch information was provided.  TheSpinco Reserve Report conforms to the guidelines with respect thereto of theSEC.  Except for changes (includingchanges in hydrocarbon commodity prices) generally affecting the oil and gasindustry and normal depletion by production, there has been no change inrespect of the matters addressed in the Spinco Reserve Report that wouldreasonably be expected to have a Material Adverse Effect on the Spinco Businessor Spinco.  Since January 1, 2003 allwells included in the Spinco Assets have been drilled and (if completed)completed, operated and produced in compliance in all respects with applicableoil and gas leases and applicable laws, except where any such failure orviolation would not have a Material Adverse Effect on Spinco, the Spinco Assetsor the Spinco Business.  To the Knowledgeof Forest and Spinco, there are no wells included in the Spinco Assets thatForest, Spinco or any of their respective Subsidiaries are (i) currentlyobligated by applicable law or Contract to plug and abandon, or (ii) obligatedby applicable law or Contract to plug and abandon with the lapse of

 

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time or notice or both because the well is not currently capable ofproducing in commercial quantities.  NoPerson has any call on, option to purchase or similar rights with respect tothe production of hydrocarbons attributable to the Spinco Assets, except anysuch call, option or similar right at market prices.  Except for gas imbalances between Forest,Spinco or any of their respective Subsidiaries and any third party workinginterest owners, marketers or pipelines relative to the Spinco Assets that haveaccrued since June 30, 2005, neither Forest, Spinco nor any of their respectiveSubsidiaries is obligated by any gas prepayment arrangement or by any “take-or-pay”requirement, advance payment or other similar arrangement to deliver any gas ata future time without then or thereafter receiving payment therefor.  With respect to any oil and gas interestscomprising Spinco Assets that are not operated by Forest, Spinco or any oftheir respective Subsidiaries, Forest and Spinco make the representations andwarranties set forth in this Section 4.23 only to Forest’s and Spinco’sKnowledge.

 

Section 4.24*           Derivative Transactions*.  Neither Forest norSpinco nor any of their respective Subsidiaries has entered into any DerivativeTransaction pursuant to which Spinco, any Spinco Subsidiary or the SpincoBusiness has or will have a continuing financial liability or obligation.  All Derivative Transactions entered into byForest, Spinco or any of their respective Subsidiaries that are currently openand pursuant to which Spinco, any Spinco Subsidiary or the Spinco Business hasor will have a continuing financial liability or obligation were entered intoin material compliance with applicable rules, regulations and policies of allregulatory authorities.

 

Section 4.25*           No Other Representations and Warranties*.  Except for the representations and warrantiescontained in Article III and in this Article IV and except for anyrepresentations and warranties specifically set forth in the other TransactionAgreements, the Company acknowledges that neither Forest nor Spinco nor anyother Person makes any express or implied representation or warranty withrespect to Spinco or its Subsidiaries, the Spinco Business or otherwise or withrespect to any other information provided to the Company, whether on behalf ofForest, Spinco or such other Persons, including as to (i) merchantability orfitness for any particular use or purpose, (ii) the use of the Spinco Assetsand the assets of the Spinco Business and the operation of the Spinco Businessafter the Closing in any manner or (iii) the success or profitability of theownership, use or operation of the Spinco Business after the Closing.  Neither Forest, Spinco nor any other Personwill have or be subject to any liability or indemnification obligation to theCompany or any other Person to the extent resulting from the distribution tothe Company, or the Company’s use of, any information related to the SpincoBusiness and any other information, document or material made available to theCompany in certain “data rooms,” management presentations or in any other formin connection with the transactions contemplated by this Agreement and theother Transaction Agreements.

 

# **ARTICLE VREPRESENTATIONS ANDWARRANTIES OF THE COMPANY**

# ** **

Except as set forth in the Company Disclosure Schedule(with specific reference to the particular Section of this Agreement to whichthe information set forth in such disclosure schedule relates; provided, thatany information set forth in one section of the Company

 

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Disclosure Schedule shall be deemed to apply to each other Sectionthereof to which it is relevant), the Company represents and warrants to Forestand Spinco as follows:

 

Section 5.1             *Organization, Qualification*.  Each of the Company andMerger Sub is a corporation duly organized, validly existing and in goodstanding under the laws of the State of Delaware, has all requisite power andauthority to own, lease and operate its properties and assets and to carry onits business as presently conducted and is duly qualified and licensed to dobusiness and is in good standing in each jurisdiction in which the ownership orleasing of its property or the conduct of its business requires such qualification,except for jurisdictions in which the failure to be so qualified or to be ingood standing, individually or in the aggregate, would not have a MaterialAdverse Effect on the Company.  Thecopies of the Company’s Second Amended and Restated Certificate ofIncorporation and Fourth Amended and Restated Bylaws in existence on the datehereof included as part of Section 5.1 of the Company Disclosure Scheduleare complete and correct and in full force and effect on the date hereof.  The Company is not in violation of any of theprovisions of its Second Amended and Restated Certificate of Incorporation orFourth Amended and Restated Bylaws.  Allof the Company Subsidiaries and their respective jurisdictions of incorporationor organization (together with a designation of those Subsidiaries constitutingSignificant Subsidiaries of the Company) are identified in Section 5.1 ofthe Company Disclosure Schedule.  MergerSub was formed solely for the purpose of engaging in the transactionscontemplated by this Agreement, has engaged in no other business activities andhas conducted its operations only as contemplated by this Agreement.

 

Section 5.2             *Capital Stock and Other Matters*.  The authorized capitalstock of the Company consists of 70,000,000 shares of Company Common Stock and20,000,000 shares of Company Preferred Stock. At the close of business on September 9, 2005, (i) 35,615,400shares of Company Common Stock were issued and outstanding, including 2,267,270shares of restricted stock issued to employees pursuant to the Company’s EquityParticipation Plan, and 2,000,000 shares of Company Common Stock were reservedfor issuance as restricted stock or upon the exercise of stock options grantedor that may be granted under the Company’s Stock Incentive Plan, and none ofsuch shares have been issued as restricted stock and 807,960 of such shares aresubject to stock options that have been granted to employees and directors;(ii) no shares of Company Common Stock were held by the Company in itstreasury or by its Subsidiaries; (iii) no shares of Company PreferredStock were issued and outstanding; and (iv) no bonds, debentures, notes orother indebtedness of the Company or any of its Subsidiaries having the rightto vote (or convertible into securities having the right to vote) on anymatters on which holders of shares of capital stock of the Company may vote (“CompanyVoting Debt”) were issued or outstanding. All of the issued and outstanding shares of Company Common Stock arevalidly issued, fully paid and nonassessable and are not subject to preemptiverights.  Except as set forth in thisSection 5.2, there are no outstanding (i) shares of Company CommonStock, Company Voting Debt or other voting securities of the Company,(ii) securities of the Company or any of its Subsidiaries convertible intoor exchangeable for shares of capital stock, Company Voting Debt or othervoting securities of the Company or (iii) except as specified in Section2.9, options, warrants, calls, rights (including preemptive rights),commitments or other Contracts (other than certain Transaction Agreements) towhich the Company or any of its Subsidiaries is a party or by which the Companyor any of its Subsidiaries is bound obligating the Company or any of itsSubsidiaries to issue, deliver, sell, purchase, redeem or acquire, or

 

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cause to be issued, delivered, sold, purchased, redeemed or acquired,or otherwise relating to, shares of capital stock of the Company or any of itsSubsidiaries or any Company Voting Debt or other voting securities of theCompany or any of its Subsidiaries or obligating the Company or any CompanySubsidiary to grant, extend or enter into any such option, warrant, call,right, commitment or Contract.  There areno stockholder agreements, voting trusts or other Contracts to which theCompany is a party or by which it is bound relating to the voting or transferof any shares of capital stock of the Company. The authorized capital stock of Merger Sub consists of 1,000 shares ofcommon stock, par value $.0001 per share, all of which are owned by theCompany.  Each outstanding share ofcapital stock of Merger Sub is duly authorized, validly issued, fully paid andnonassessable and each such share owned by the Company is free and clear of allsecurity interests, liens, claims, pledges, options, rights of first refusal,agreements, limitations on the voting rights of the Company or such CompanySubsidiary, charges and other encumbrances of any nature whatsoever.

 

Section 5.3             *Corporate Authority; No Violation*.  The Company has thecorporate power and authority to enter into this Agreement and, subject toobtaining the Requisite Approval, to carry out its obligations hereunder.  The execution, delivery and performance by theCompany of this Agreement and the consummation of the transactions contemplatedhereby have been duly authorized by all requisite corporate action on the partof the Company, subject to obtaining the Requisite Approval, and no othercorporate proceedings are necessary to consummate the Merger.  Merger Sub has the corporate power andauthority to enter into this Agreement and to carry out its obligationshereunder.  The execution, delivery andperformance by Merger Sub of this Agreement and the consummation of thetransactions contemplated hereby have been duly authorized by all requisitecorporate action on the part of Merger Sub. This Agreement has been duly executed and delivered by Merger Sub and,assuming the due authorization, execution and delivery by Forest and Spinco,constitutes a legal, valid and binding agreement of Merger Sub, enforceableagainst Merger Sub in accordance with its terms (except insofar as suchenforceability may be limited by applicable bankruptcy, insolvency,reorganization, moratorium or similar laws affecting creditors’ rightsgenerally, or by principles governing the availability of equitableremedies).  This Agreement has been dulyexecuted and delivered by the Company and, assuming the due authorization,execution and delivery by Forest and Spinco, constitutes a legal, valid andbinding agreement of the Company, enforceable against the Company in accordancewith its terms (except insofar as such enforceability may be limited byapplicable bankruptcy, insolvency, fraudulent transfer, reorganization,moratorium or similar laws affecting creditors’ rights generally, or byprinciples governing the availability of equitable remedies).  Merger Sub is not a party to any Contractexcept this Agreement, and has no obligations or liabilities except under thisAgreement and costs incidental to its incorporation in the State ofDelaware.  Except for matters expresslycontemplated by this Agreement and except for such matters described in clauses(b), (c) and (d) below as would not, individually or in theaggregate, have a Material Adverse Effect on the Company, neither the executionand delivery by the Company and Merger Sub of this Agreement, nor theconsummation by the Company and Merger Sub of the transactions contemplatedhereby and the performance by the Company and Merger Sub of this Agreement will(a) violate or conflict with any provision of the Company’s Second Amendedand Restated Certificate of Incorporation or Fourth Amended and Restated Bylawsor any provision of Merger Sub’s Certificate of Incorporation or Bylaws;(b) require any consent, approval, authorization or permit of,registration, declaration or filing with, or notification to, any GovernmentalAuthority or any other Person; (c) result in any breach of or

 

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constitute a default (or an event that, with notice or lapse of time orboth, would become a default) under, or give to others any right oftermination, cancellation, amendment or acceleration of any obligation or theloss of any benefit under any Contract to which the Company or any of itsSubsidiaries is a party, or by which the Company or any of its Subsidiaries orany of their respective assets or properties is bound or affected;(d) result in the creation of a lien, pledge, security interest, claim orother encumbrance on any of the issued and outstanding shares of Company CommonStock or on any of the assets of the Company or its Subsidiaries pursuant toany Contract to which the Company or any of its Subsidiaries is a party or bywhich the Company or any of its Subsidiaries or any of the assets of theCompany or its Subsidiaries is bound or affected; or (e) violate orconflict with any Order, law, ordinance, rule or regulation applicable to theCompany or any of its Subsidiaries, or any of the properties, businesses orassets of any of the foregoing. Section 5.3 of the Company Disclosure Schedule identifies allmaterial consents, approvals and authorizations of any Governmental Authoritythat are legally required to be obtained by the Company for the consummation ofthe transactions contemplated by this Agreement.

 

Section 5.4             *Company Financial Statements; Liabilities*.  TheCompany has previously made available to Forest complete and correct copies ofaudited consolidated financial statements for the Company as of and for theyears ended December 31, 2004, 2003 and 2002, and unaudited consolidatedinterim financial statements for the Company as of and for the three-monthperiods ended March 31, 2005 and June 30, 2005 (including any relatednotes and schedules thereto, the “Company Financial Statements”).  The Company Financial Statements fairlypresent in all material respects the financial position of the Company and itsconsolidated Subsidiaries as of the respective dates thereof and the results ofoperations and changes in financial position or other information includedtherein for the respective periods or as of the respective dates then ended, ineach case except as otherwise noted therein and subject, where appropriate, tonormal year-end audit adjustments, in each case in accordance with pastpractice and GAAP, consistently applied, during the periods involved (except asotherwise stated therein).  Except as setforth in the Company Financial Statements, the Company and its Subsidiaries donot have any liability or obligation (whether accrued, absolute, contingent orotherwise) of a nature or character required to be reflected in theconsolidated balance sheet of the Company or in the footnotes thereto, in eachcase prepared in conformity with GAAP, other than (i) liabilities incurredin the ordinary course of business since June 30, 2005, (ii) liabilities thatindividually or in the aggregate, would not have a Material Adverse Effect onthe Company and (iii) liabilities and obligations under the TransactionAgreements.

 

Section 5.5             *Absence of Certain Changes or Events*.  Except as specificallycontemplated by this Agreement, since June 30, 2005, each of the Company andits Subsidiaries has conducted its business only in the ordinary course and ina manner consistent with past practice, and, since such date, there has notbeen, occurred or arisen any change, or any event (including any damage,destruction or loss whether or not covered by insurance), condition or state offacts of any character that, individually or in the aggregate, would have aMaterial Adverse Effect on the Company, whether or not arising in the ordinarycourse of business.

 

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Section 5.6*             Investigations;Litigation*.

 

### (a)           Tothe Company’s Knowledge, no investigation or review by any GovernmentalAuthority with respect to the Company or any of its Subsidiaries is pending orthreatened, nor has any Governmental Authority indicated to the Company or anyof its Subsidiaries an intention to conduct the same.

###  

### (b)           Thereis no Action pending or, to the Company’s Knowledge, threatened against oraffecting the Company or any of its Subsidiaries at law or in equity, or beforeany Governmental Authority or arbitrator, that, (i) if adverselydetermined, individually or in the aggregate, would have a Material AdverseEffect on the Company or (ii) seeks to delay or prevent the consummationof the Merger or any other transaction contemplated by this Agreement.  There is no Order of any GovernmentalAuthority or arbitrator outstanding against the Company or any CompanySubsidiary or with respect to any of their properties or assets that,individually or in the aggregate, would have a Material Adverse Effect on theCompany.

###  

Section 5.7*             Licenses; Compliancewith Laws*.  The Company and its Subsidiaries holdall Licenses that are required for the conduct of the businesses of the Companyand its Subsidiaries, taken as a whole, as presently conducted, except suchLicenses for which the failure to so hold, individually or in the aggregate,would not have a Material Adverse Effect on the Company.  The Company and its Subsidiaries are incompliance with the terms of all such Licenses so held, except where thefailure so to comply, individually or in the aggregate, would not have aMaterial Adverse Effect on the Company. No suspension or cancellation of any of the Company’s Licenses ispending or, to the Company’s Knowledge, threatened, except where the failure tohave, or the suspension or cancellation of, any of the Company’s Licenses wouldnot have a Material Adverse Effect on the Company.  Except with respect to Environmental Laws,ERISA and laws relating to Taxes, the Company and its Subsidiaries are in compliancewith all, and have received no notice of any violation (as yet unremedied) ofany, laws, ordinances or regulations of any Governmental Authority applicableto any of them or their respective operations, except for such instances ofnoncompliance which, individually or in the aggregate, would not have aMaterial Adverse Effect on the Company.

 

Section 5.8*             ProxyStatement/Prospectus; Registration Statements*.  Noneof the information regarding the Company or its Subsidiaries or thetransactions contemplated by this Agreement provided by the Companyspecifically for inclusion in the Proxy Statement/Prospectus or theRegistration Statements will, in the case of the definitive ProxyStatement/Prospectus or any amendment or supplement thereto, at the time of themailing of the definitive Proxy Statement/Prospectus and any amendment orsupplement thereto and at the time of the Company Stockholders Meeting, or, inthe case of each Registration Statement, at the time it becomes effective, atthe time of the Company Stockholders Meeting, at the Distribution Date and atthe Effective Time, contain an untrue statement of a material fact or omit tostate any material fact required to be stated therein or necessary in order tomake the statements therein, in the light of the circumstances under which theyare made, not misleading.  TheRegistration Statements (other than the Registration Statement on Form 10) willcomply in all material respects with the provisions of the Securities Act andthe Exchange Act, as the case may be, and the rules and regulations thereunder,except that no representation is made by the Company with respect toinformation provided by Forest and Spinco specifically for inclusion in the

 

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Registration Statements.  All factual information (excluding estimatesand projections) previously furnished by the Company to Forest relating to theCompany or its business was (taken as a whole, including disclosures set forthin the Company’s Registration Statement on Form S-1 filed with the SEC,as amended) true and correct in all material respects on the date on which suchinformation was furnished and did not contain any untrue statement of amaterial fact or omit to state a material fact relevant to the consummation ofthe transactions contemplated by this Agreement or necessary to make thestatements contained therein not misleading.

 

Section 5.9*             Information Supplied*.  Alldocuments that the Company is responsible for filing with any Governmental Authorityin connection with the transactions contemplated hereby or by any otherTransaction Agreement will comply in all material respects with the provisionsof applicable law.

 

Section 5.10*           Environmental Matters*.  Exceptas would not, individually or in the aggregate, have a Material Adverse Effecton the Company:

 

#### (i)            Eachof the Company and its Subsidiaries has obtained all Environmental Permitsrequired for the conduct and operation of its business and is in compliance andat all times has been in compliance with the terms and conditions contained inits Environmental Permits, and is, and for the past one year has been, incompliance with all applicable Environmental Laws;

####  

#### (ii)           Neitherthe Company nor any of its Subsidiaries is subject to any environmentalindemnification obligation regarding businesses currently operated by theCompany or any of its Subsidiaries or regarding properties currently owned orleased by the Company or any of its Subsidiaries;

####  

#### (iii)          Tothe Company’s Knowledge there is no condition on, at, under or related to anyproperty (including any release of a Hazardous Material into the air, soil,surface water, sediment or ground water at, under or migrating to or from suchproperty) currently owned, leased or used by the Company or any of itsSubsidiaries or created by the Company’s or any of the Company Subsidiary’soperations that would create liability for the Company or any of itsSubsidiaries under applicable Environmental Laws and, to the Company’sKnowledge, the foregoing representation is true and correct with regard toproperty formerly owned, leased or used by the Company or any of itsSubsidiaries;

####  

#### (iv)          Thereare no past or present actions, activities, circumstances, conditions, eventsor incidents (including the release, emission, discharge, presence or disposalof any Hazardous Material) that form or are reasonably likely to form the basisof a claim against the Company or any of its Subsidiaries under EnvironmentalLaws, including any claims based on the alleged exposure of any Person orproperty to any Hazardous Material;

####  

#### (v)           TheCompany has made available to Spinco and Forest all material site assessments,compliance audits, and other similar studies prepared since January 1, 2002 inthe Company’s possession or custody relating to (A) the environmentalconditions on, under or about the properties or assets currently owned, leased,operated or used by the

####  

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#### 

####  

#### Company, any of itsSubsidiaries or any predecessor in interest thereto and (B) any HazardousMaterials used, managed, handled, transported, treated, generated, stored,discharged, emitted, or otherwise released by the Company, any of itsSubsidiaries or, to the Company’s Knowledge, any other Person, on, under, aboutor from any of the properties currently owned or leased by, or otherwise inconnection with the use or operation of any of the properties owned or leasedby, or otherwise in connection with the use or operation of any of theproperties and assets of, the Company or any of its Subsidiaries, or theirrespective businesses and operations;

####  

#### (vi)          SinceJanuary 1, 2002, neither the Company nor any of its Subsidiaries has receivedany communication that has not been resolved, whether from a GovernmentalAuthority, citizen’s group, employee or otherwise, alleging that it is liableunder, or not in compliance with, any Environmental Law; and

####  

#### (vii)         Tothe Company’s Knowledge, there is no requirement anticipated or formallyproposed for notice, comment, adoption or implementation under anyEnvironmental Law or Environmental Permit issued pursuant thereto that isreasonably expected to result in liability or material increases in eithercapital or operating costs for the Company or any of its Subsidiaries.

####  

### (b)           Insofaras the representations set forth in subsections (a)(i), (a)(ii), (a)(iii),(a)(iv) and (a)(vii) relate to assets of the Company operated by aPerson other than the Company or any of its Subsidiaries, such representationsare given only to the Knowledge of the Company.

###  

Section 5.11           *Tax Matters*.

 

### (a)           (i) Allmaterial Tax Returns relating to the Company and the Company Subsidiariesrequired to be filed have been duly and timely filed, (ii) all such TaxReturns are true, correct and complete in all material respects, (iii) allTaxes shown as due and payable on such Tax Returns, relating to the Company orany Company Subsidiary required to be paid, have been duly and timely paid,(iv) no adjustment relating to such Tax Returns has been proposed in writingby any Governmental Authority, (v) all material Taxes relating to theCompany and the Company Subsidiaries for any taxable period (or a portionthereof) beginning on or prior to the date of the Closing (which are not yetdue and payable) have been properly reserved for in the books and records ofthe Company whether or not shown as being due on any Tax Return, and(vi) the Company and the Company Subsidiaries have duly and timelywithheld all material Taxes required to be withheld and such withheld Taxes havebeen either duly and timely paid to the proper Governmental Authority orproperly set aside in accounts for such purpose and will be duly and timelypaid to the proper Governmental Authority.

###  

### (b)           Nowritten agreement or other written document waiving or extending, or having theeffect of waiving or extending, the statute of limitations or the period ofassessment or collection of any Taxes relating to the Company or any CompanySubsidiary and no power of attorney with respect to any such Taxes, in eachcase that is currently outstanding and in effect, has been filed or enteredinto with any Governmental Authority.

###  

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### 

###  

### (c)           (i) Noaudits or other administrative proceedings or court proceedings are presentlypending with regard to any Taxes or Tax Return of the Company or any CompanySubsidiary as to which any Taxing Authority has asserted in writing any claimwhich, if adversely determined, would have a Material Adverse Effect on theCompany, and (ii) no Governmental Authority has asserted in writing anydeficiency or claim for Taxes (including any adjustment to Taxes) with respectto which the Company or any Company Subsidiary may be liable with respect toincome or any other material Tax which has not been fully paid or finallysettled.

###  

### (d)           Neitherthe Company nor any Company Subsidiary (i) is a party to or bound by orhas any obligation or liability under any written Tax separation, sharing orsimilar agreement or arrangement, (ii) is or has been a member of any consolidated,combined or unitary group for purposes of filing Tax Returns or paying Taxes,(iii) has entered into a closing agreement pursuant to Section 7121of the Code, or any predecessor provision or any similar provision of state orlocal law, (iv) is required to include in income any amount in respect ofan adjustment pursuant to Section 481 of the Code by reason of a change inaccounting method, or (v) has filed any consents under Section 341(f)of the Code.

###  

### (e)           Noneof the assets of the Company or any of its Subsidiaries are subject to any Taxlien (other than liens for Taxes that are not yet due or that are beingcontested in good faith by appropriate proceedings and which have been properlyreserved for in the books and records of the Company).

###  

### (f)            Tothe Company’s Knowledge, neither the Company nor any of its Affiliates hastaken or agreed to take any action that would prevent the Merger fromconstituting a transaction qualifying under Section 368(a) of the Code.  The Company is not aware of any agreement,plan or other circumstance that would prevent the Merger from qualifying underSection 368(a) of the Code.

###  

### (g)           Noneof the assets of the Company or any of the Company Subsidiaries are tax-exemptuse property within the meaning of Section 168(h) of the Code.

###  

### (h)           Neitherthe Company nor any Company Subsidiary has consummated, has participated in oris currently participating in any transaction which was or is a listedtransaction as defined in Treasury Regulation Section 1.6011-4(b)(2).

###  

Section 5.12*           Benefit Plans*.

 

### (a)           Section 5.12(a)of the Company Disclosure Schedule lists each “employee benefit plan” (asdefined in Section 3(3) of ERISA), and all other employee benefit, bonus,incentive, deferred compensation, stock option (or other equity-based),severance, change in control, welfare (including post-retirement medicaland life insurance), vacation, retention and fringe benefit plans, whether ornot subject to ERISA and whether written or oral, sponsored, maintained orcontributed to or required to be contributed to by the Company or any of itsSubsidiaries, or to which the Company or any of its Subsidiaries is a party forthe benefit of any Person who is currently, has been or, prior to the EffectiveTime, is expected to become an employee of the Company or any of itsSubsidiaries (a “Company Employee”) (the “Company

###  

### 38

### 

###  

### BenefitPlans”).  Neither the Company, any of itsSubsidiaries nor any ERISA Affiliate of any of them has any commitment or formalplan, whether legally binding or not, to create any additional employee benefitplan or modify or change any existing Company Benefit Plan that would affectany Company Employee.  The Company hasheretofore delivered or made available to Forest and Spinco true and completecopies of each Company Benefit Plan and any amendments thereto (or if the planis not a written plan, a description thereof), any related trust or otherfunding vehicle, any reports or summaries required under ERISA or the Code forthe most recent reporting period and the most recent determination letterreceived from the IRS (if any) with respect to each such plan intended toqualify under Section 401(a) of the Code.

###  

### (b)           Noliability under Title IV (including Sections 4069 and 4212(c) of ERISA) orSection 302 of ERISA has been incurred by the Company, any of itsSubsidiaries or any ERISA Affiliate of any of them that has not been satisfiedin full, and no condition exists that presents a material risk to the Company,any of its Subsidiaries or any ERISA Affiliate of any of them of incurring anysuch liability, other than liability for premiums due the PBGC (which premiumshave been paid when due).  No CompanyBenefit Plan is subject to Title IV of ERISA, Section 302 of ERISA or Section 412of the Code.

###  

### (c)           NoCompany Benefit Plan is a “multiemployer pension plan,” as defined inSection 3(37) of ERISA and  none of the Company, any of itsSubsidiaries or any ERISA Affiliate of any of them has made or suffered a“complete withdrawal” or a “partial withdrawal,” as such terms are respectivelydefined in Sections 4203 and 4205 of ERISA, which has not been satisfied infull.

###  

### (d)           EachCompany Benefit Plan has been operated and administered in all materialrespects in accordance with its terms and applicable law, including, but notlimited to, ERISA and the Code.  Allcontributions required to be made with respect to any Company Benefit Plan havebeen timely made.  There are no pendingor, to the Company’s Knowledge, threatened claims by, on behalf of or againstany of the Company Benefit Plans or any assets thereof, other than routinebenefit claim matters, that, if adversely determined could, individually or inthe aggregate, result in a material liability for the Company or any of itsSubsidiaries and no matter is pending (other than routine qualificationdetermination filings, copies of which have been furnished to Forest and Spincoor will be promptly furnished to Forest and Spinco when made) with respect toany of the Company Benefit Plans before the IRS, the United States Departmentof Labor or the PBGC.

###  

### (e)           EachCompany Benefit Plan intended to be “qualified” within the meaning ofSection 401(a) of the Code is so qualified and the trusts maintainedthereunder are exempt from taxation under Section 501(a) of the Code, eachtrust maintained under any Company Benefit Plan intended to satisfy therequirements of Section 501(c)(9) of the Code has satisfied suchrequirements and, in either such case, no event has occurred or condition isknown to exist that would reasonably be expected to adversely affect such tax-qualifiedstatus for any such Company Benefit Plan or any such trust.

###  

### (f)            NoCompany Benefit Plan provides medical, surgical, hospitalization, death orsimilar benefits (whether or not insured) for employees or former employees ofCompany or any Company Subsidiary for periods extending beyond their retirementor other termination of

###  

### 39

### 

###  

### service, otherthan (i) coverage mandated by applicable law, (ii) death benefitsunder any “pension plan,” or (iii) benefits the full cost of which isborne by the current or former employee (or his beneficiary).  The Company has the right, and will have theright after the Effective Time to terminate any Company Benefit Plan or toamend any such Company Benefit Plan to reduce future benefits (including anyCompany Benefit Plan that provides post-retirement medical and lifeinsurance benefits) without incurring or otherwise being responsible for anymaterial liability with respect thereto.

###  

### (g)           Inconnection with the consummation of the transactions contemplated by thisAgreement, no payment of money or other property, acceleration of benefits orprovision of other rights has been or will be made hereunder, under anyagreement contemplated herein, or under any Company Benefit Plan or anyContract listed in Section 5.15 of the Company Disclosure Schedule that couldreasonably be expected to be nondeductible under Section 280G of the Code,whether or not some other subsequent action or event would be required to causesuch payment, acceleration or provision to be triggered.

###  

Section 5.13*           Labor Matters*.  Neitherthe Company nor any of its Subsidiaries is a party to, or bound by, anycollective bargaining agreement or other Contract with a labor union or labororganization and no collective bargaining agreement is being negotiated by theCompany or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries is the subject of anyproceeding asserting that the Company or any of its Subsidiaries has committedan unfair labor practice or is seeking to compel it to bargain with any labororganization as to wages or conditions of employment nor is there any strike,work stoppage or other labor dispute involving the Company or any of itsSubsidiaries pending or, to the Company’s Knowledge, threatened, that,individually or in the aggregate, would have a Material Adverse Effect on theCompany.  There are no labor controversiespending or, to the Company’s Knowledge, threatened against the Company or anyof its Subsidiaries that, individually or in the aggregate, would have aMaterial Adverse Effect on the Company. There have been no claims initiated by any labor organization torepresent any Company Employees not currently represented by a labororganization.

 

Section 5.14*           Intellectual PropertyMatters*.  The Company and its Subsidiaries ownor possess adequate licenses or other valid rights to use all seismic data,patents, patent rights, trademarks, trademark rights, trade names, trade namerights, copyrights, service marks, trade secrets, applications for trademarksand service marks, know-how and other proprietary rights and informationused or held for use in connection with the business of the Company and its Subsidiariesas currently conducted, except where the failure to own or possess such items,individually or in the aggregate, would not have a Material Adverse Effect onthe Company.  To the Company’s Knowledge,there is no assertion or claim challenging the validity of any of the foregoingthat, individually or in the aggregate, would have a Material Adverse Effect onthe Company.  The conduct of the businessof the Company and its Subsidiaries as currently conducted does not and willnot conflict in any way with any seismic data license, patent, patent right,license, trademark, trademark right, trade name, trade name right, copyright,service mark, trade secret, know-how or other proprietary rights orinformation of any third party that, individually or in the aggregate, wouldhave a Material Adverse Effect on the Company.

 

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Section 5.15*           Material Contracts*.

 

### (a)           Section 5.15of the Company Disclosure Schedule sets forth all Contracts, other than CompanyBenefit Plans and oil and gas leases and assignments entered into in theordinary course of business, to which the Company or any of its Subsidiaries isa party (i) relating to indebtedness for borrowed money, (ii) that isa “material contract” (as such term is defined in Item 601(b)(10) ofRegulation S-K of the SEC), (iii) that obligates the Company orany of its Subsidiaries to make any payments or issue or pay anything of valueto any director, officer, key employee or consultant, (iv) that limit orpurport to limit the ability of the Company or any of its Subsidiaries tocompete in the U.S. domestic oil and gas exploration, production and marketingbusiness with any Person in any geographic area or during any period of time,(v) that includes any material indemnification, contribution or guaranteeobligations (other than such obligations entered into in the ordinary course ofbusiness in offshore oil and gas operations), (vi) that relate to capitalexpenditures involving total payments of more than $1 million,(vii) requiring annual or remaining payments in excess of $1 million afterthe date hereof, (viii) that is a seismic license agreement or rig ordrilling contract material to the Company, (ix) that is a fixed pricecommodity sales agreement with a remaining term of more than 60 days, (x)that is a material Contract relating to any of the properties specified inSection 5.15 of the Company Disclosure Schedule or (xi) that obligate theCompany or any of its Subsidiaries to provide funds to, or make any investment(in the form of a loan, capital contribution or otherwise) in, any otherPerson.  Neither the Company nor any ofits Subsidiaries has received notice that any party to any such Contract is in default, and each suchContract, upon consummation of the transactions contemplated by thisAgreement and the other Transaction Agreements, shall continue in full forceand effect without penalty or other adverse consequence (other than thetermination or expiration thereof in accordance with its terms, for reasonsother than the consummation of the transactions contemplated by this Agreementand the other Transaction Agreements).

###  

### (b)           Neitherthe Company nor any of its Subsidiaries is in default in any respect under anyContract to which it is a party or by which it or any of its properties orassets is bound, which default, individually or in the aggregate, would have aMaterial Adverse Effect on the Company, and there has not occurred any eventthat, with the lapse of time or the giving of notice or both, would constitutesuch a default.

###  

Section 5.16*           Opinion of CompanyFinancial Advisor*.  The Company has received the writtenopinion of Lehman Brothers Inc., to the effect that, as of the date of suchopinion, the Exchange Ratio (as defined in such opinion) is fair, from afinancial point of view, to the Company. The Company has previously delivered a complete copy of such opinion toForest.

 

Section 5.17*           Brokers or Finders*.  Noagent, broker, investment banker, financial advisor or other similar Person isor will be entitled, by reason of any agreement, act or statement by theCompany, or any of its Subsidiaries, directors, officers or employees, to anyfinancial advisory, broker’s, finder’s or similar fee or commission, toreimbursement of expenses or to indemnification or contribution in connectionwith any of the transactions contemplated by this Agreement or any otherTransaction Agreement.

 

Section 5.18*           Takeover Statutes*.  TheBoard of Directors of the Company has unanimously approved the terms of thisAgreement and the consummation of the Merger and the

 

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other transactions contemplated by thisAgreement, and such approval represents all the action necessary to renderinapplicable to this Agreement, the Merger and the other transactionscontemplated by this Agreement the restrictions on “business combinations” setforth in Section 203 of the DGCL to the extent such restrictions wouldotherwise be applicable to this Agreement, the Merger or the other transactionscontemplated by this Agreement.

 

Section 5.19*           Certain Board Findings*.  TheBoard of Directors of the Company, at a meeting duly called and held,(i) has determined that the Merger is fair to, and in the best interestsof, the Company and its stockholders and (ii) has resolved, subject to Section 6.11, to recommendthe adoption of this Agreement by the stockholders of the Company.

 

Section 5.20*           Vote Required*.  Theonly vote of the stockholders of the Company required under any of the DGCL orthe Company’s Second Amended and Restated Certificate of Incorporation foradoption of this Agreement and the approval of the transactions contemplated bythis Agreement is the affirmative vote of the holders of a majority of theoutstanding shares of Company Common Stock entitled to vote (sometimes referredto herein as the “Requisite Approval”).

 

Section 5.21*           Certain Payments*.  NoCompany Benefit Plan or employment arrangement, and no contractual arrangementsbetween the Company or any of its Subsidiaries and any third party, exists thatcould result in the payment to any current, former or future director, officer,stockholder or employee of the Company or any of its Subsidiaries, or of anyentity the assets or capital stock of which have been acquired by the Companyor a Company Subsidiary, of any money or other property or rights or accelerateor provide any other rights or benefits to any such individual as a result ofthe consummation of the transactions contemplated by the Transaction Agreementswhether or not (a) such payment, acceleration or provision wouldconstitute a “parachute payment” (within the meaning of Section 280G ofthe Code), or (b) some other subsequent action or event would be requiredto cause such payment, acceleration or provision to be triggered.

 

Section 5.22           *Assets*.  TheCompany has good and marketable title to all oil and gas properties forming thebasis for the reserves reflected in the Company Reserve Report as attributableto interests owned by the Company or any Company Subsidiary and has good andvalid title to, or valid leasehold interests or other contractual rights in,all other Company assets, with respect to both the oil and gas properties andall other Company assets, free and clear of all Liens except for PermittedLiens and Liens associated with obligations reflected in the CompanyReserve Report.  The oil and gas leasesand other agreements that provide the Company and its Subsidiaries withoperating rights in the oil and gas properties reflected in the Company ReserveReport are legal, valid and binding and in full force and effect, the rentals,royalties and other payments due thereunder have been properly paid and, to theCompany’s Knowledge, there is no existing default (or event that, with noticeor lapse of time or both, would become a default) under any of such oil and gasleases or other agreements, except as would not, individually or in theaggregate, have a Material Adverse Effect on the Company.  The Company and its Subsidiaries (as the casemay be) have maintained all of their respective assets owned on the date hereofin working order and operating condition, subject only to ordinary wear andtear.

 

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Section 5.23           *Loans*.  Section 5.23of the Company Disclosure Schedule sets forth each currently outstanding loanexceeding $1 million in principal amount made by the Company or any of itsSubsidiaries to any Person.

 

Section 5.24*           Oil and Gas Reserves*.  TheCompany has furnished to Forest reserve reports prepared by the Companycontaining estimates of the oil and gas reserves, as of December 31, 2004and June 30, 2005 (collectively, the “Company Reserve Report”), that are ownedby the Company or any of its Subsidiaries. The factual, non-interpretive data on which the Company ReserveReport was based for purposes of estimating the oil and gas reserves set forththerein was accurate in all material respects, and to the Knowledge of theCompany no errors in such information existed at the time such information wasprovided.  The Company Reserve Reportconforms to the guidelines with respect thereto of the SEC.  Except for changes (including changes inhydrocarbon commodity prices) generally affecting the oil and gas industry andnormal depletion by production, there has been no change in respect of thematters addressed in the Company Reserve Report that would reasonably beexpected to have a Material Adverse Effect on the Company.  Since January 1, 2003 all of the Company’sand its Subsidiaries’ wells have been drilled and (if completed) completed,operated and produced in compliance in all respects with applicable oil and gasleases and applicable laws, except where any such failure or violation wouldnot have a Material Adverse Effect on the Company.  To the Company’s Knowledge, there are nowells of the Company or any of its Subsidiaries that the Company or any of itsSubsidiaries are (i) currently obligated by applicable law or Contract to plugand abandon, or (ii) obligated by applicable law or Contract to plug andabandon with the lapse of time or notice or both because the well is notcurrently capable of producing in commercial quantities.  No Person has any call on, option to purchaseor similar rights with respect to the production of hydrocarbons attributableto any of the Company’s or its Subsidiaries’ assets, except any such call,option or similar right at market prices. Except for gas imbalances between the Company or any of its Subsidiariesand any third party working interest owners, marketers or pipelines relative toits assets that have accrued since June 30, 2005, neither the Company nor anyof its Subsidiaries is obligated by any gas prepayment arrangement or by any“take-or-pay” requirement, advance payment or other similararrangement to deliver any gas at a future time without then or thereafterreceiving payment therefor.  With respectto any oil and gas interests of the Company and its Subsidiaries that are notoperated by the Company or any of its Subsidiaries, the Company makes therepresentations and warranties set forth in this Section 5.24 only to itsKnowledge.

 

Section 5.25*           Derivative Transactions*.  Neitherthe Company nor any of its Subsidiaries has entered into any DerivativeTransaction pursuant to which it has a continuing financial liability or obligation.  All Derivative Transactions entered into bythe Company or any of its Subsidiaries that are currently open were enteredinto in material compliance with applicable rules, regulations and policies ofall regulatory authorities.

 

Section 5.26*           No OtherRepresentations and Warranties*. Except for the representations and warranties contained in this ArticleV, Forest and Spinco acknowledge that neither the Company nor any other Personmakes any express or implied representation or warranty with respect to theCompany and its Subsidiaries or otherwise or with respect to any otherinformation provided to Forest or Spinco, whether on behalf of the Company orsuch other Persons.  Neither the Companynor any other Person will have or be subject to any liability orindemnification

 

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obligation to Forest or Spinco or any otherPerson to the extent resulting from the distribution to Forest or Spinco, orForest or Spinco’s use of, any information related to the Company and any otherinformation, document or material made available to Forest or Spinco in certain“data rooms,” management presentations or in any other form in connection withthe transactions contemplated by this Agreement.

 

# **ARTICLE VICOVENANTS AND AGREEMENTS**

# ** **

Section 6.1*             Conduct of Businessby the Company Pending the Merger*.  Following the date ofthis Agreement and prior to the earlier of the Effective Time and theTermination Date, except as specifically contemplated or permitted by thisAgreement or the other Transaction Agreements or described in Section 6.1of the Company Disclosure Schedule or to the extent that Forest shall otherwiseconsent in writing (such consent not to be unreasonably withheld or delayed),the Company agrees as to itself and its Subsidiaries as follows:

 

### (a)           *Ordinary Course**.* Each of the Company and its Subsidiaries shall conduct its operations inaccordance with its ordinary course of business consistent with past practiceand use all commercially reasonable efforts to preserve intact its presentbusiness organization, maintain its material rights and franchises, keepavailable the services of its current officers and key employees and preserveits relationships with material customers, suppliers and others having businessdealings with it in such a manner that its goodwill and ongoing businesses arenot impaired in any material respect. The Company shall not, nor shall it permit any of its Subsidiaries to,enter into any new material line of business. Prior to the Effective Time and except as specifically contemplated bythis Agreement or as mutually approved in writing by Spinco and the Company,the Company shall cause Merger Sub not to conduct any business operations,enter into any Contract (other than this Agreement), acquire any assets orincur any liabilities.

###  

### (b)           *Dividends; Changes inStock**.*  The Company shall not, nor shall it permitany of its Subsidiaries to, nor shall the Company or any of its Subsidiariespropose to, (i) declare or pay any dividends on or make otherdistributions in respect of any shares of its capital stock or partnershipinterests (whether in cash, securities or property), except for the declarationand payment of cash dividends or distributions paid on or with respect to aclass of capital stock all of which shares of capital stock or partnershipinterests (with the exception of directors’ qualifying shares and othersimilarly nominal holdings required by law to be held by Persons other than theCompany or its wholly owned Subsidiaries), as the case may be, of theapplicable corporation or partnership are owned directly or indirectly by theCompany; (ii) split, combine or reclassify any of its capital stock orissue or authorize or propose the issuance of any other securities in respect of,in lieu of, or in substitution for, shares of its capital stock; or(iii) redeem, repurchase or otherwise acquire, or permit any Subsidiary toredeem, repurchase or otherwise acquire, any shares of its capital stock(including any securities convertible or exchangeable into such capital stock).

###  

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###  

### (c)           *Issuance of Securities**.* The Company shall not, nor shall it permit any of its Subsidiaries to,issue, deliver or sell, or authorize or propose to issue, deliver or sell, anyshares of its capital stock of any class, any Company Voting Debt or anysecurities convertible into, or any rights, warrants or options to acquire, anysuch shares, Company Voting Debt or convertible securities, other than(i) the issuance of shares of Company Common Stock upon the exercise ofstock options that are outstanding on the date hereof pursuant to the CompanyStock Plans; (ii) the issuance of stock options with three year vestingand restricted stock to existing employees and directors and newly-hiredemployees and directors of the Company or its Subsidiaries, not to exceed300,000 shares of Company Common Stock reserved for issuance under the CompanyStock Plans on the date hereof; and (iii) issuances by a wholly ownedSubsidiary of its capital stock to the Company.

###  

### (d)           *Governing Documents**.* The Company shall not amend or propose to amend its Second Amended andRestated Certificate of Incorporation or Fourth Amended and Restated Bylaws,nor shall it permit any of its Subsidiaries to amend or propose to amend itscharter or bylaws in any manner that would hinder the consummation of thetransactions contemplated by this Agreement.

###  

### (e)           *Acquisitions*.  Other than (i) purchases from vendors orsuppliers in the ordinary course of business consistent with past practice,(ii) exercises of preferential rights, (iii) any single or series ofacquisitions whether or not related, where the fair market value of the totalconsideration payable in all such acquisitions does not exceed $25.0 million inthe aggregate or (iv) with respect to the transaction described inSection 4.2 of the Spinco Disclosure Schedule, the Company shall not, norshall it permit any of its Subsidiaries to, in a single transaction or a seriesof transactions, acquire or agree to acquire by merging or consolidating with,or by purchasing a substantial equity interest in or a substantial portion ofthe assets of, or by any other manner, any business or any corporation,partnership, association or other business organization or division thereof;provided, however, that in any event, the Company shall not, nor shall itpermit any of its Subsidiaries to, make any such acquisition, agreement orpurchase if it would hinder in any material respect the consummation of thetransactions contemplated by this Agreement or the other TransactionAgreements.

###  

### (f)            *Dispositions**.* Subject to Section 6.11, and other than product sales and otherdispositions in connection with normal equipment maintenance or salvage in theordinary course of business consistent with past practice and Permitted Liens,the Company shall not, nor shall it permit any of its Subsidiaries to, in asingle transaction or a series of related or unrelated transactions, sell(including sale-leaseback), lease, pledge, encumber or otherwise disposeof, or agree to sell (or engage in a sale-leaseback), lease (whether suchlease is an operating or capital lease), pledge, encumber or otherwise directlyor indirectly dispose of, any of its assets that in the aggregate have a fairmarket value in excess of $10 million; provided, that the Company shall notconsummate or agree to consummate any such transaction with respect to anysecurities of any of its Subsidiaries.

###  

### (g)           *Indebtedness; Leases**.* The Company shall not, nor shall it permit any of its Subsidiaries to,incur any indebtedness for borrowed money or guarantee or otherwise becomecontingently liable for any such indebtedness or issue or sell any debtsecurities or warrants or rights to acquire any debt securities of the Company orany of its Subsidiaries or guarantee any

###  

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###  

### debt securities ofothers or enter into any material lease (whether such lease is an operating orcapital lease, but excluding compressor leases) or otherwise incur any materialobligation or liability (absolute or contingent) other than indebtedness to theCompany or a wholly owned Subsidiary of the Company, or under the CreditAgreement dated as of March 2, 2004, among the Company and the lendersparty thereto, as amended from time to time, or any replacement thereof;provided, however, that the aggregate outstanding indebtedness under suchcredit agreement shall not exceed $170 million (exclusive of indebtednessincurred to fund (A) costs related to the transactions contemplated bythis Agreement and (B) payments made to Company executives pursuant to non-compete,employment and severance agreements and similar agreements and arrangements).

###  

### (h)           *Capital Expenditures**.* Except as required by law, the Company shall continue its 2005 budgetedcapital expenditure program for exploration and development as described in thecapital expenditure budget dated as of September 8, 2005 provided to Forestprior to the date hereof, and shall perform, to the extent reasonably practicable,all scheduled capital expenditures set forth in such capital expenditureprogram at an aggregate cost not exceeding 120% of the aggregate costs setforth therein (it being understood that particular projects set forth on suchbudget may be substituted with other projects, so long as the aggregate maximumset forth above is not exceeded).  In theevent that the Effective Time does not occur in 2005, the parties shallreasonably consult regarding the Company’s capital expenditure budget for 2006.

###  

### (i)            *Employee Arrangements.*  The Company and its Subsidiaries shall not:

###  

#### (i)            grantany material increases in the compensation of any of its directors, officers oremployees, except in the ordinary course of business consistent with pastpractice;

####  

#### (ii)           payor agree to pay to any director, officer or employee, whether past or present,any pension, retirement allowance or other employee benefit not required orcontemplated by any of the existing benefit, severance, termination, pension oremployment plans, Contracts or arrangements as in effect on the date hereof;

####  

#### (iii)          exceptin the ordinary course of business consistent with past practice, enter intoany new, or materially amend any existing, employment or severance ortermination Contract with any director or officer; or

####  

#### (iv)          except(x) in the ordinary course of business consistent with past practice or(y) as may be required to comply with applicable law, become obligatedunder any new pension plan, welfare plan, multiemployer plan, employee benefitplan, severance plan, benefit arrangement or similar plan or arrangement thatwas not in existence on the date hereof, or amend any such plan or arrangementin existence on the date hereof if such amendment would have the effect ofmaterially enhancing any benefits thereunder.

####  

### (j)            *Compliance with Laws;Licenses**.*  Except as would not individually or in theaggregate have a Material Adverse Effect on the Company, the Company shall not,nor shall it permit any of its Subsidiaries to: (i) fail to comply with any laws, ordinances or regulationsapplicable to it or to the conduct of its business or (ii) permit toexpire or terminate without

###  

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###  

### renewal anyLicense that is necessary to the operation of the business of such party, anyfacilities associated therewith or any other business.

###  

### (k)           *No Liquidation orDissolution**.*  The Company shall not authorize, recommend,propose or announce an intention to adopt a plan of complete or partialliquidation or dissolution of the Company or any of its Subsidiaries.

###  

### (l)            *Accounting Methods**.* The Company shall not make any material change in its methods ofaccounting in effect at December 31, 2004, except (i) as required by theFinancial Accounting Standards Board or changes in GAAP as agreed to by theCompany’s independent auditors, (ii) in response to comments made by the SECwith respect to any Registration Statement or (iii) as otherwise agreed toin this Agreement.  The Company and MergerSub shall not change their respective fiscal years.

###  

### (m)          *Affiliate Transactions**.* The Company shall not, nor shall it permit any of its Subsidiaries to,enter into or amend any agreement or arrangement with any of their respectiveAffiliates (including any Company Employees), other than with wholly ownedSubsidiaries of the Company, on terms materially less favorable to the Companyor such Subsidiary, as the case may be, than could be reasonably expected tohave been obtained with an unaffiliated third party on an arm’s-lengthbasis.

###  

### (n)           *Contracts**.* The Company shall not, nor shall it permit any of its Subsidiaries to,except in the ordinary course of business consistent with past practice,modify, amend, terminate or renew any material Contract to which it or any ofits Subsidiaries is a party or waive, release or assign any material rights orclaims, in each case if such action would have a Material Adverse Effect on theCompany or impair in any material respect the Company’s ability to perform itsobligations under this Agreement and the other Transaction Agreements.  The Company shall not, and shall not permitany of its Subsidiaries to, waive any preferential rights.  The Company shall not, nor shall it permitany of its Subsidiaries to, enter into any Contract not in the ordinary courseof business involving total consideration of $2 million or more with a termlonger than one year which is not terminable by the Company or any suchSubsidiary of the Company without penalty upon no more than 30 days’ priornotice.

###  

### (o)           *Insurance**.* The Company shall, and shall cause its Subsidiaries to, maintain withfinancially responsible insurance companies insurance in such amounts andagainst such risks and losses as are customary for companies engaged in theirrespective businesses; provided, however, that the Company may self-insurewith respect to operators’ extra expense insurance, physical damage to wellsite real and personal property insurance and business interruption insurance.

###  

### (p)           *Tax Matters.*  The Company shall not (i) make orrescind any material express or deemed election relating to Taxes unless suchaction will not materially and adversely affect the Company or any of itsAffiliates, or the Surviving Corporation on a going-forward basis afterthe Effective Date, including elections for any and all joint ventures,partnerships, limited liability companies, working interests or otherinvestments where the Company has the capacity to make such binding election,(ii) settle or compromise any material claim, action, suit, litigation,proceeding, arbitration, investigation, audit or controversy relating to Taxes,except where such 

###  

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###  

### settlement orcompromise will not result in a Material Adverse Effect on the Company,(iii) amend any material Tax Returns, except where such amendment wouldnot adversely affect the Company or any of its Affiliates, or the SurvivingCorporation on a going-forward basis after the Effective Date or(iv) change in any material respect any of its methods of reporting incomeor deductions for federal income tax purposes from those expected to beemployed in the preparation of its federal income tax return for the taxableyear ended December 31, 2004, except as may be required by applicable lawor except for such changes that are reasonably expected not to result in aMaterial Adverse Effect on the Company; provided, however, that the Company maymake or rescind any such election, settle or compromise any such claim, action,suit, litigation, proceeding, arbitration, investigation, audit or controversy,change any such method of reporting or amend any such Tax Return withoutForest’s prior written consent if the amount of Tax liabilities relating tosuch action does not exceed $500,000.

###  

### (q)           *Discharge of Liabilities*.  Unless otherwise provided in this Agreementor required by applicable law, the Company shall not, nor shall it permit anyof its Subsidiaries to, pay, discharge or satisfy any material claims,liabilities or obligations (absolute, accrued, asserted or unasserted, contingentor otherwise), other than the payment, discharge or satisfaction, in theordinary course of business (which includes the payment of final andunappealable judgments) or in accordance with their terms, of liabilitiesreflected or reserved against in, or contemplated by, the most recentconsolidated financial statements (or the notes thereto) of the Company as ofand for the twelve months ended December 31, 2004, or incurred in theordinary course of business.

###  

### (r)            *Tax Treatment**.* Neither the Company nor Merger Sub shall take or cause or permit to betaken any action (i) that would disqualify the Distribution fromconstituting a tax-free distribution under Section 355 of the Codeor the Contribution from constituting a tax-free reorganization underSection 368(a) of the Code or (ii) that would disqualify the Mergerfrom constituting a tax-free reorganization under Section 368(a) ofthe Code.

###  

### (s)           *Advice of Changes**.* Subject to the provisions of the Confidentiality Agreement, the Companyshall promptly advise Forest and Spinco orally and in writing of any change orevent having, or that, insofar as can reasonably be foreseen, could have,either individually or together with other changes or events, a MaterialAdverse Effect on the Company.

###  

### (t)            *No Action**.*  Subjectto the terms and conditions of this Agreement, the Company shall not, nor willit permit any of its Subsidiaries to, intentionally take or agree or commit totake any action that would result in any of the conditions set forth inArticle VII not being satisfied at the Effective Time.

###  

### (u)           *Hedging Activities**.* The Company shall not, nor shall it permit any of its Subsidiaries to,enter into (i) any Derivative Transaction or (ii) any fixed pricecommodity sales agreement with a term of more than 60 days.

###  

### *(v)          **Lender Consent*.  The Company shall use reasonable commercialefforts to obtain the lender consent referenced in Section 5.3 of theCompany Disclosure Schedule and to enter into the new credit facilityreferenced in Section 7.3(b).

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### 

###  

### (w)          *Agreements**.* The Company shall not, nor shall it permit any of its Subsidiaries to,agree in writing or otherwise to take any action inconsistent with theforegoing.

###  

Section 6.2*             Conduct of Businessby Spinco and Forest Pending the Merger*.  Following the date ofthis Agreement and prior to the earlier of the Effective Time and theTermination Date, except as specifically contemplated or permitted by thisAgreement or the other Transaction Agreements or described in Section 6.2of the Spinco Disclosure Schedule or to the extent that the Company shallotherwise consent in writing (such consent not to be unreasonably withheld ordelayed), Forest and Spinco severally agree as follows:

 

### (a)           *Ordinary Course**.* Forest (in regard to the Spinco Business only) and each of Spinco andits Subsidiaries shall conduct its operations in accordance with its ordinarycourse of business consistent with past practice and use all commerciallyreasonable efforts to preserve intact its present business organization,maintain its material rights and franchises, keep available the services of itscurrent officers and key employees and preserve its relationships with materialcustomers, suppliers and others having business dealings with it in such amanner that its goodwill and ongoing businesses are not impaired in anymaterial respect.  Spinco shall not, norshall it permit any of its Subsidiaries to, enter into any new material line ofbusiness.

###  

### (b)           *Dividends; Changes inStock**.*  Except as expressly permitted in the TaxSharing Agreement, Spinco shall not, nor shall it permit any of itsSubsidiaries to, nor shall it or any of its Subsidiaries propose to,(i) declare or pay any dividends on or make other distributions in respectof any shares of its capital stock or partnership interests (whether in cash,securities or property), except for the declaration and payment of cashdividends or distributions paid on or with respect to a class of capital stockor partnership interests all of which shares of capital stock or partnershipinterests (with the exception of directors’ qualifying shares and othersimilarly nominal holdings required by law to be held by Persons other thanSpinco or its wholly owned Subsidiaries), as the case may be, of the applicablecorporation or partnership are owned directly or indirectly by Spinco;(ii) split, combine or reclassify any of its capital stock or issue orauthorize or propose the issuance of any other securities in respect of, inlieu of, or in substitution for, shares of its capital stock, except ascontemplated by the Distribution Agreement or (iii) redeem, repurchase orotherwise acquire, or permit any Subsidiary to redeem, repurchase or otherwiseacquire, any shares of its capital stock (including any securities convertibleor exchangeable into such capital stock).  Forest shall not, nor shall it permit any of its Subsidiaries to, norshall it or any of its Subsidiaries propose to, declare or pay any dividends onor make other distributions in respect of any shares of its capital stock orpartnership interests (whether in cash, securities or property), to the extentsuch dividend or distribution would impact Spinco or the Spinco Business, orwould prevent Forest from consummating the Contribution or the Distribution.  None of Forest, Spinco or any of theirrespective Subsidiaries shall form or propose to form a new Subsidiary ofSpinco.

###  

### (c)           *Issuance of Securities**.* Spinco shall not, nor shall it permit any of its Subsidiaries to, issue,deliver or sell, or authorize or propose to issue, deliver or sell, any sharesof Spinco’s capital stock or capital stock of any Spinco Subsidiary of anyclass, any Spinco Voting Debt or any securities convertible into, or anyrights, warrants or options to acquire, any such shares, Spinco Voting Debt orconvertible securities, other than (i) pursuant to this Agreement andpursuant to the other Transaction Agreements; and (ii) issuances by awholly owned Subsidiary

###  

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###  

### of Spinco of itscapital stock to Spinco.   Withoutlimiting the foregoing, Forest shall not issue, deliver or sell, or authorizeor propose to issue, deliver or sell, any additional options or other equity-basedawards that could be converted into any option to acquire Spinco Common Stock,pursuant to the Employee Benefits Agreement or otherwise.

###  

### (d)           *Governing Documents**.* Spinco shall not amend or propose to amend Spinco’s Certificate ofIncorporation or Bylaws, nor shall it permit any of its Subsidiaries to amendor propose to amend its charter or bylaws except as explicitly provided hereinor in the Distribution Agreement, in each case with a Company Consent.

###  

### (e)           *Acquisitions**.* Other than (i) purchases from vendors or suppliers in the ordinarycourse of business consistent with past practice, (ii) exercises ofpreferential rights, or (iii) any single or series of acquisitions,whether or not related, where the fair market value of the total considerationpayable in all such acquisitions does not exceed $25 million in the aggregate,Forest (in regard to the Spinco Business only) shall not, and Spinco shall not,nor shall they permit any of their respective Subsidiaries to, in a singletransaction or a series of transactions, acquire or agree to acquire by mergingor consolidating with, or by purchasing a substantial equity interest in or asubstantial portion of the assets of, or by any other manner, any business orany corporation, partnership, association or other business organization ordivision thereof; provided, however, that in any event, Forest shall not, andSpinco shall not, nor shall they permit any of their respective Subsidiariesto, make any such acquisition, agreement or purchase if it would hinder in anymaterial respect the consummation of the transactions contemplated by thisAgreement or the other Transaction Agreements.

###  

### (f)            *Dispositions**.* Other than product sales and other dispositions in connection withnormal equipment maintenance or salvage in the ordinary course of businessconsistent with past practice and Permitted Liens, Forest (in regard to theSpinco Business only) shall not, and Spinco shall not, nor shall they permitany of their respective Subsidiaries to, in a single transaction or a series ofrelated or unrelated transactions, sell (including sale-leaseback),lease, pledge, encumber or otherwise dispose of, or agree to sell (or engage ina sale-leaseback), lease (whether such lease is an operating or capitallease), pledge, encumber or otherwise directly or indirectly dispose of, any ofits assets that in the aggregate have a fair market value in excess of $10million, except as otherwise provided in this Agreement and the otherTransaction Agreements; provided, that Forest shall not consummate or agree toconsummate any such transaction with respect to any securities of Spinco or anyof its Subsidiaries.

###  

### (g)           *Indebtedness; Leases**.* Forest (in regard to the Spinco Business only) shall not, and Spincoshall not, nor shall they permit any of their respective Subsidiaries to, incurany indebtedness for borrowed money or guarantee or otherwise becomecontingently liable for any such indebtedness or issue or sell any debtsecurities or warrants or rights to acquire any debt securities of Spinco orany of its Subsidiaries or guarantee any debt securities of others or enterinto any material lease (whether such lease is an operating or capital lease,but excluding compressor leases) or otherwise incur any material obligation orliability (absolute or contingent) other than indebtedness of Spinco to beincurred by Spinco and obligations or liabilities to be assumed by Spinco inconnection with the consummation of the transactions contemplated by theDistribution Agreement.

###  

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###  

### (h)           *Capital Expenditures**.*  Exceptas required by law, Forest and Spinco shall continue the capital expenditureprogram for exploration and development with respect to the Spinco Assets asdescribed in the capital expenditure budget dated as of September 8, 2005provided to the Company prior to the date hereof, and shall perform, to theextent reasonably practicable, such capital expenditures at an aggregate costnot exceeding 120% of the aggregate costs set forth therein (it beingunderstood that particular projects set forth in such budget may be substitutedwith other projects, so long as the aggregate maximum set forth above is notexceeded).  In the event that theEffective Time does not occur in 2005, the parties shall reasonably consult regardingthe Spinco Business’ capital expenditure budget for 2006.

###  

### (i)            *Employee Arrangements**.* Forest (in regard to the Spinco Employees only) shall not, and Spincoshall not, nor shall Forest (in regard to the Spinco Employees only) or Spincopermit any of their respective Subsidiaries to:

###  

#### (i)            grantany material increases in the compensation of any of its directors, officers oremployees, except in the ordinary course of business consistent with pastpractice;

####  

#### (ii)           payor agree to pay to any director, officer or employee, whether past or present,any pension, retirement allowance or other employee benefit not required orcontemplated by any of the existing benefit, severance, termination, pension oremployment plans, Contracts or arrangements as in effect on the date hereof;

####  

#### (iii)          hireany new director, officer or, except in the ordinary course of businessconsistent with past practice, employee, or enter into any new, or materiallyamend any existing, employment or severance or termination Contract with anydirector, officer or employee; or

####  

#### (iv)          exceptas may be required to comply with applicable law, become obligated under anynew pension plan, welfare plan, multiemployer plan, employee benefit plan,severance plan, benefit arrangement or similar plan or arrangement that was notin existence on the date hereof, or amend any such plan or arrangement inexistence on the date hereof solely with respect to Spinco Employees if suchamendment would have the effect of enhancing any benefits thereunder.

####  

### (j)            *Compliance with Laws;Licenses**.*  Except as would not individually or in theaggregate have a Material Adverse Effect on Spinco or the Spinco Assets, Forest(in regard to the Spinco Business only) shall not, and Spinco shall not, norshall they permit any of their respective Subsidiaries to, (i) fail tocomply with any laws, ordinances or regulations applicable to it or to theconduct of its business or (ii) permit to expire or terminate withoutrenewal any License that is necessary to the operation of the business ofSpinco or its Subsidiaries, any facilities associated therewith, the SpincoBusiness, or any other business.

###  

### (k)           *No Liquidation orDissolution**.*  Neither Forest nor Spinco shall authorize,recommend, propose or announce an intention to adopt a plan of complete orpartial liquidation or dissolution of Spinco or any of its Subsidiaries.

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### 

###  

### (l)            *Accounting Methods**.* Neither Forest (in regard to the Spinco Business only) nor Spinco shallmake any material change in Forest’s methods of accounting in effect atDecember 31, 2004, except (i) as required by the Financial AccountingStandards Board or changes in GAAP as agreed to by Forest’s or Spinco’sindependent auditors, (ii) in response to comments made by the SEC with respectto any Registration Statement or (iii) as otherwise agreed to in thisAgreement.  Spinco shall not change itsfiscal year.

###  

### (m)          *Affiliate Transactions**.* Forest (in regard to the Spinco Business only) shall not, and Spincoshall not, nor shall Forest (in regard to the Spinco Business only) or Spincopermit any of their respective Subsidiaries to, enter into or amend anyagreement or arrangement with any of their respective Affiliates (including anySpinco Employees), other than with wholly owned Subsidiaries of Spinco, on termsmaterially less favorable to Spinco or such Subsidiary, as the case may be,than could be reasonably expected to have been obtained with an unaffiliatedthird party on an arm’s-length basis.

###  

### (n)           *Contracts**.* Neither Forest nor Spinco shall, nor shall they permit any of theirrespective Subsidiaries to, except in the ordinary course of businessconsistent with past practice, modify, amend, terminate or renew any materialContract to which Spinco or any of its Subsidiaries is a party or whichotherwise is or will be, a Spinco Asset, or waive, release or assign anymaterial rights or claims which is or will be a Spinco Asset, in each case ifsuch action would have a Material Adverse Effect on Spinco or the SpincoBusiness, or impair in any material respect Forest’s or Spinco’s ability toperform their respective obligations under this Agreement and the otherTransaction Agreements.  Forest, Spincoor their respective Subsidiaries shall reasonably consult with the Company beforeentering into any new Contract material to Spinco or the Spinco Business.  Neither Forest nor Spinco shall, nor shallthey permit any of their respective Subsidiaries to, waive any preferentialrights that constitute Spinco Assets. Neither Forest nor Spinco shall, nor shall they permit any of theirrespective Subsidiaries to, enter into any Contract to which Spinco or any ofits Subsidiaries will be a party or which otherwise will be a Spinco Asset,which Contract is not in the ordinary course of business, involves totalconsideration of $2 million or more, has a term longer than one year and whichis not terminable by Spinco or any such Subsidiary of Spinco without penaltyupon no more than 30 days’ prior notice.

###  

### (o)           *Insurance**.* Forest and Spinco shall, and shall cause their respective Subsidiariesto, maintain with financially responsible insurance companies insurance for theSpinco Business and the Spinco Assets in such amounts and against such risksand losses as are customary for companies engaged in their respectivebusinesses.

###  

### (p)           *Tax Matters**.* Forest and Spinco shall not (i) make or rescind any materialexpress or deemed election relating to Taxes of Spinco or the Spinco Businessunless such action will not materially and adversely affect Spinco or theSurviving Corporation on a going-forward basis after the Effective Date,including elections for any and all joint ventures, partnerships, limitedliability companies, working interests or other investments where Forest orSpinco has the capacity to make such binding election, (ii) settle orcompromise any material claim, action, suit, litigation, proceeding,arbitration, investigation, audit or controversy relating to Taxes of Spinco orthe Spinco Business, except where such settlement or compromise will not resultin a Material Adverse Effect on Spinco or the Spinco Business, (iii) amendany material Tax Returns of

###  

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### 

###  

### Spinco or relatingto the Spinco Business or (iv) change in any material respect any methodof reporting income or deductions of Spinco or the Spinco Business for federalincome tax purposes from those expected to be employed in the preparation ofits federal income tax return for the taxable year ended December 31,2004, except as may be required by applicable law or except for such changesthat are reasonably expected not to result in a Material Adverse Effect onSpinco or the Spinco Business, provided, however, that Spinco may make orrescind any such election, settle or compromise any such claim, action, suit,litigation, proceeding, arbitration, investigation, audit or controversy,change any such method of reporting or amend any such Tax Return without theCompany’s prior written consent if the amount of Tax liabilities relating tosuch action does not exceed $500,000.

###  

### (q)           *Discharge of Liabilities**.* Unless otherwise provided in this Agreement or required by applicablelaw, Forest (in regard to the Spinco Business only) shall not, and Spinco shallnot, nor shall Forest (in regard to the Spinco Business only) or Spinco permitany of their respective Subsidiaries to, pay, discharge or satisfy any materialclaims, liabilities or obligations (absolute, accrued, asserted or unasserted,contingent or otherwise), other than the payment, discharge or satisfaction, inthe ordinary course of business (which includes the payment of final andunappealable judgments).

###  

### (r)            *Tax Treatment**.* Neither Forest nor Spinco shall take or cause or permit to be taken anyaction (i) that would disqualify the Distribution from constituting a tax-freedistribution under Section 355 of the Code or the Contribution fromconstituting a tax-free reorganization under Section 368(a) of theCode or (ii) that would disqualify the Merger from constituting a tax-freereorganization under Section 368(a) of the Code.

###  

### (s)           *Advice of Changes**.* Subject to the provisions of the Confidentiality Agreement, Forest andSpinco shall promptly advise the Company orally and in writing of any change orevent having, or that, insofar as can reasonably be foreseen, could have, eitherindividually or together with other changes or events, a Material AdverseEffect on the Spinco Business or Spinco.

###  

### (t)            *No Action**.* Neither Forest nor Spinco shall, nor will they permit any of theirrespective Subsidiaries to, intentionally take or agree or commit to take anyaction that would result in any of the conditions set forth in Article VIInot being satisfied at the Effective Time.

###  

### (u)           *Hedging Activities**.* Forest (in regard to the Spinco Business only) shall not, and Spincoshall not, nor shall they permit any of their respective Subsidiaries to, enterinto (i) any Derivative Transaction or (ii) any fixed price commoditysales agreement with a term of more than 60 days.

###  

### (v)           *Agreements**.* Neither Forest nor Spinco shall, nor shall they permit any of theirrespective Subsidiaries to, agree in writing or otherwise to take any actioninconsistent with the foregoing.

###  

Section 6.3*             ProxyStatement/Prospectus*.

 

### (a)           Aspromptly as practicable following the date hereof, the Company shall prepareand file with the SEC the Proxy Statement/Prospectus and the RegistrationStatement on

 

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### Form S-4(the Proxy Statement/Prospectus will be included as a prospectus in theRegistration Statement on Form S-4) with respect to the transactionscontemplated by this Agreement.  Aspromptly as practicable following the date hereof, the Company shall prepareand file with the SEC an amendment to its Registration Statement on Form S-1to reflect the transactions contemplated by this Agreement.  The Company shall use its reasonable bestefforts to have such Proxy Statement/Prospectus cleared by the SEC under theExchange Act and the Registration Statements declared effective by the SECunder the Securities Act and the Exchange Act, as the case may be, as promptlyas practicable after such filings.  Thestatus or timing of the adjustment condition described in Section 4.2 ofthe Spinco Disclosure Schedule shall not serve as a basis for delaying theCompany’s efforts to seek effectiveness of the Registration Statements and mailto its stockholders the Proxy Statement/Prospectus.

###  

### (b)           Aspromptly as practicable after the Registration Statements shall have becomeeffective, the Company shall mail the Proxy Statement/Prospectus to itsstockholders.

###  

### (c)           Noamendment or supplement to the Proxy Statement/Prospectus or any RegistrationStatement will be made by the Company without the approval of Forest and Spinco(such approval not to be unreasonably withheld or delayed).  The Company will advise Forest and Spinco,promptly after it receives notice thereof, of the time when any RegistrationStatement has become effective or any supplement or amendment has been filed,of the issuance of any stop order, of the suspension of the qualification ofthe Company Common Stock issuable in connection with the Merger for offering orsale in any jurisdiction, or of any request by the SEC for amendment of theProxy Statement/Prospectus or any Registration Statement or comments thereonand responses thereto or requests by the SEC for additional information.

###  

### (d)           If,at any time prior to the Effective Time, any event or circumstance should occurthat results in the Proxy Statement/Prospectus or the Registration Statementscontaining an untrue statement of a material fact or omitting to state anymaterial fact required to be stated therein or necessary to make the statementstherein, in the light of the circumstances under which they are made, notmisleading, or that otherwise should be described in an amendment or supplementto the Proxy Statement/Prospectus or the Registration Statements, Forest,Spinco and the Company shall promptly notify each other of the occurrence ofsuch event and then promptly prepare, file and clear with the SEC and mail tothe Company’s stockholders each such amendment or supplement.

###  

Section 6.4             *Cooperation*.  Forest,Spinco and the Company shall together, or pursuant to the allocation ofresponsibility set forth below or otherwise to be agreed upon between them,take action as follows:

 

### (a)           TheCompany shall take all such action as may reasonably be required under statesecurities or “blue sky” laws in connection with the issuance of shares ofCompany Common Stock pursuant to the Merger;

###  

### (b)           Forest,Spinco and the Company shall cooperate with one another to the extentreasonably necessary or commercially appropriate in promptly making any filingswith, and seeking any consents or approvals from, Governmental Authoritiesnecessary for the consummation of the transactions contemplated by thisAgreement;

###  

### 54

### 

###  

### (c)           Aspromptly as practicable, the Company shall make application to the NYSE orNasdaq for the listing or quotation of the shares of Company Common Stock to beissued pursuant to the transactions contemplated by this Agreement and theDistribution Agreement and use all commercially reasonable efforts to causesuch shares to be Approved for Listing;

###  

### (d)           Forest,Spinco and the Company shall, as promptly as practicable, make any requiredfilings and any other required or requested submissions under the HSR Act,promptly respond to any requests for additional information from either theFederal Trade Commission or the Department of Justice; and cooperate in thepreparation of, and coordinate, such filings, submissions and responses(including the exchange of drafts between each party’s outside counsel) so asto reduce the length of any review periods; and

###  

### (e)           Forest,Spinco and the Company shall promptly provide outside counsel for the otherparties for their confidential review copies of all filings proposed to be madeby such party with any Governmental Authority in connection with this Agreementand the other Transaction Agreements and the transactions contemplated herebyand thereby.

###  

Section 6.5*             Letter of Spinco’sAccountants*.  In connection with the informationregarding Spinco or its Subsidiaries or the transactions contemplated by thisAgreement provided by Spinco specifically for inclusion in, or incorporation byreference into, the Proxy Statement/Prospectus and the Registration Statements,Spinco shall use all commercially reasonable efforts to cause to be deliveredto the Company a letter of KPMG, LLP, dated the date on which the RegistrationStatement on Form S-4 shall become effective and as of the EffectiveTime and addressed to the Company, in form and substance reasonablysatisfactory to the Company and customary in scope and substance for lettersdelivered by independent public accountants in connection with registrationstatements similar to the Registration Statement on Form S-4.

 

Section 6.6*             Letter of theCompany’s Accountants*.  In connection with the informationregarding the Company or its Subsidiaries or the transactions contemplated bythis Agreement provided by the Company specifically for inclusion in, orincorporation by reference into, the Proxy Statement/Prospectus and theRegistration Statements, the Company shall use all commercially reasonableefforts to cause to be delivered to Spinco a letter of Deloitte & ToucheLLP, dated the date on which the Registration Statements shall become effectiveand as of the Effective Time and addressed to Forest and Spinco, in form andsubstance reasonably satisfactory to Forest and Spinco and customary in scopeand substance for letters delivered by independent public accountants inconnection with registration statements similar to the Registration Statementon Form S-4.

 

Section 6.7*             Forest/SpincoEmployee Stock Options, Incentive and Benefit Plans*.  Spincoand the Company shall take all such steps as may be required to cause anydispositions of Company Common Stock (including derivative securities withrespect to Company Common Stock) and any acquisitions of Spinco Common Stock,as the case may be, resulting from the transactions contemplated by thisAgreement by each officer or director of the Company or Spinco who is subjectto the reporting requirements of Section 16(a) of the Exchange Act to beexempt under Rule 16b-3 promulgated under the Exchange Act, suchsteps to be taken in

 

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accordance with the No-Action Letter,dated January 12, 1999, issued by the SEC to Skadden, Arps, Slate,Meagher & Flom LLP.

 

Section 6.8*             Employee BenefitPlans*.

 

### (a)           Subjectto the remaining provisions of this Section 6.8, Spinco and the Companyshall take all acts necessary to cause Spinco Employees who remain employed bySpinco, the Company or their Subsidiaries from and after the Effective Time(“Continuing Spinco Employees”) to participate in the Company Benefit Plansmaintained by the Company as of the Effective Time on a basis no less favorablethan that applicable to similarly situated Company Employees who remainemployed by the Company or its Affiliates as of the Effective Time (the “ContinuingCompany Employees”).  Notwithstanding theforegoing, if the Effective Time occurs in 2006, then Spinco and the Companyshall cause each Continuing Spinco Employee to receive vacation benefits forthe period beginning on the Effective Time and ending on December 31,2006, that are equal to (i) such employee’s accrued and unused vacation underForest’s vacation policy as of the Effective Time plus (ii) if the Company’svacation policy is more generous than Forest’s vacation policy with respect tosuch Continuing Spinco Employee based on his years of service recognized byForest as of the Effective Time for purposes of such policy, any additionalvacation entitlement earned by such employee under the terms of the Company’svacation policy.  In the event theemployment of a Spinco Employee is terminated by Forest with the Company’sconsent prior to the Effective Time (other than pursuant to a Termination forCause), (i) such employee shall not receive a Retention Benefit, (ii) Forestshall provide such employee with the severance benefits described on *Exhibit E, Part B* (provided suchemployee executes a release of claims in favor of Forest, Spinco, the Companyand their respective Affiliates (which release shall be in a form agreed to byForest, Spinco and the Company)), and (iii) as soon as practicable after theEffective Time, the Company shall reimburse Forest for such severance benefitsactually paid by Forest to such employee; provided that the Company shall notbe responsible for any reimbursement of severance amounts paid to any suchSpinco Employee who is subsequently re-hired by Forest or any Forest Subsidiaryduring the six-month period following the Effective Time (in which case Forestshall refund any reimbursement so made by the Company).

###  

### (b)           NeitherSpinco nor the Company shall establish or maintain effective as of theEffective Time (i) any plan providing supplemental executive retirementbenefits that is not an individual account plan, (ii) any plan providingretiree medical benefits or (iii) any defined benefit pension plan.

###  

### (c)           Spincoand the Company shall cause each Continuing Spinco Employee to be given fullcredit for all service with Forest, Spinco and their Affiliates before theEffective Time for all purposes under each Company Benefit Plan (except to theextent necessary to avoid the duplication of benefits).  Such service credit for each such purposeshall be in an amount equal to the service credit recognized under thecorresponding Spinco Benefit Plan as of the Effective Time for suchpurpose.  For purposes of determining theterms and conditions of a Continuing Spinco Employee’s participation in anyCompany Benefit Plan that is an employee welfare benefit plan (the “CompanyWelfare Plans”), the Company shall, and shall cause its Affiliates to,(i) waive all limitations as to pre-existing condition exclusionsand waiting periods with respect to the Continuing Spinco Employee or his orher dependents under the Company Welfare Plans,

###  

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### 

###  

### other than to theextent limitations or waiting periods that are already in effect with respectto the Continuing Spinco Employee or his or her dependents have not beensatisfied as of the Effective Time under the corresponding welfare benefitplans maintained for the Continuing Spinco Employee immediately before theEffective Time, and (ii) provide each Continuing Spinco Employee withcredit for any co-payments and deductibles paid in the year of theClosing before the Effective Time in satisfying any deductible or out-of-pocketrequirements under the Company Welfare Plans (on a pro-rata basis in theevent of a difference in plan years).

###  

### (d)           Assoon as practicable following the Effective Time, Forest shall cause to betransferred from the trustee of Forest’s Retirement Savings Plan (the “ForestSavings Plan”) to the trustee of the Company’s Employee Capital AccumulationPlan (the “Company Savings Plan”) an amount in cash equal to the aggregateaccount balances of the Continuing Spinco Employees under the Forest SavingsPlan determined as of the transfer date; provided, however, that to the extentany Continuing Spinco Employee owes any amount to the Forest Savings Planpursuant to the terms of a loan from such plan to such Continuing SpincoEmployee, an in-kind transfer of such loan shall be made in addition tothe transfer of cash for the remaining account balance.  All account investments (other than any suchloan amounts), including investments in shares of Forest Common Stock and/orCompany Common Stock, shall be converted to cash prior to the account transferto the Company Savings Plan.  From andafter the date of such transfer, Spinco and the Company shall cause the CompanySavings Plan to assume the obligations of the Forest Savings Plan with respect tobenefits accrued by the Continuing Spinco Employees under the Forest SavingsPlan, and the Forest Savings Plan shall cease to be responsible therefor.  Spinco, the Company and Forest shallcooperate in making all appropriate arrangements and filings, if any, inconnection with the transfer described above. Further, Spinco, the Company and Forest shall cooperate and take suchactions as are necessary to permit the continuation of loan repayments byContinuing Spinco Employees to the Forest Savings Plan by payroll deductionsduring the period beginning on the Effective Time and ending on the date of thetransfer described in this paragraph. Forest represents, covenants and agrees with respect to the ForestSavings Plan, and the Company represents, covenants and agrees with respect tothe Company Savings Plan, that, as of the date of the transfer described inthis paragraph, such plan will satisfy the requirements of Code Sections401(a), (k), and (m) and will have received, or a pending application has beentimely filed for, a favorable determination letter from the IRS regarding suchqualified status and covering amendments required to have been adopted prior tothe expiration of the GUST remedial amendment period.

###  

### (e)           If,during the period beginning on the Effective Time and ending on the later ofJune 30, 2006 or the date which is six months after the Effective Time (the“Retention Period”), the Company or a Subsidiary of the Company desires torelocate the principal place of employment of a Continuing Spinco Employee(other than a scheduled rotational employee) by 50 miles or more from thelocation of his principal place of employment immediately prior to theEffective Time, then Spinco and the Company shall cause any such employee whoaccepts such relocation to receive the relocation benefits described on *Exhibit E, Part A*.  If, during the Retention Period, (i) aContinuing Spinco Employee voluntarily terminates his employment with theCompany and its Subsidiaries within 30 days after the date of a reduction inhis base salary or base wages from that in effect immediately prior to theEffective Time, (ii) a Continuing Spinco Employee voluntarily terminates hisemployment with the Company and its Subsidiaries after the date upon which heis notified that the principal place of his employment is changing to a

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### location that is50 miles or more from the location of his principal place of employmentimmediately prior to the Effective Time (provided, however, that if the Companyor a Subsidiary of the Company permits the employee to continue to work at hisoriginal location, then such termination of employment may not occur prior to adate determined by the Company, which date shall be no later than the last dayof the Retention Period), or (iii) the employment of a Continuing SpincoEmployee is involuntarily terminated by the Company or a Subsidiary of theCompany other than pursuant to a Termination for Cause, then, in any such case,Spinco and the Company shall cause such employee to receive the severancebenefits described on *Exhibit E,Part B*, provided (A) such employee executes a release ofclaims in favor of Forest, Spinco, the Company and their respective Affiliates(which release shall be in a form agreed to by Forest, Spinco and the Company),(B) such employee is not subsequently re-hired by Forest or any ForestSubsidiary during the Retention Period (in which case Forest shall refund anyseverance so paid by the Company), and (C) the amount of such severancebenefit paid to such employee shall be reduced by the portion, if any, of suchemployee’s Retention Benefit that was paid to such employee in accordance withSection 6.8(g).  *Exhibit E,Part B*sets forth the maximum aggregate severance amount payable bythe Company to the Continuing Spinco Employees pursuant to this Section6.8.  Notwithstanding any other provisionof this Agreement, except as specifically provided in the preceding provisionsof this Section 6.8(e), neither Spinco nor the Company shall be responsible forthe payment of, or reimbursement of Forest for, severance paid to any SpincoEmployee who voluntarily resigns employment from Spinco or the Company if suchSpinco Employee was not required to relocate in order to maintain such employment.  No Continuing Spinco Employee shall beeligible for severance pursuant to the Company’s severance plan at any timewhile the provisions of this Section 6.8(e) apply to such Continuing SpincoEmployee.

###  

### (f)            TheCompany shall implement in all material respects (without any enhancement) theagreements with its officers described in Section 6.8(f) of the CompanyDisclosure Schedule. The Company shall obtain the written agreement of theofficers described in Section 6.8(f) of the Company Disclosure Schedule on orbefore the Effective Time.

###  

### (g)           Inlieu of the payment of any annual bonuses for 2005 to the Continuing SpincoEmployees under the annual incentive and bonus plans maintained by Forest, theCompany and Spinco shall provide the Continuing Spinco Employees with theretention benefits described in this Section 6.8(g).  Each Continuing Spinco Employee’s aggregatepotential retention benefit (“Retention Benefit”) shall be in an amount equalto 250% of such employee’s target annual bonus for 2005 under the annualincentive or bonus plan maintained by Forest and applicable to such employee(with such target annual bonus determined as of the Effective Time based uponsuch Continuing Spinco Employee’s annual base salary in effect as of suchtime).  Retention Benefits shall be paidby Spinco (prior to the Effective Time) or the Company (after the EffectiveTime) in four installments, the first of which will equal 25% of the employee’starget annual bonus for 2005, and the remaining three of which will each equal75% of the employee’s target annual bonus for 2005; provided, however, that (i)any payment of an installment of a Retention Benefit prior to the EffectiveTime shall be made to each individual who is a Spinco Employee on the date ofthe payment of such installment and such payment shall be based on such SpincoEmployee’s annual base salary in effect on such payment date and (ii) if suchSpinco Employee’s annual base salary changes between the date of any suchpayment and the Effective Time, the first installment of a Retention Benefitpaid to such employee on or after the

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### Effective Timeshall be adjusted so that, immediately after the payment of such installment,the employee will have received the correct amount of his or her RetentionBenefit through the date of payment of such installment determined based on hisor her annual base salary in effect as of the Effective Time.  The first such installment shall be paid onOctober 14, 2005, the second such installment shall be paid on February 15,2006, the third such installment shall be paid on May 1, 2006, and the fourthsuch installment shall be paid on June 30, 2006.  Retention Benefits shall be subject toapplicable withholding of taxes. Notwithstanding the foregoing, except as hereinafter provided, in orderfor a Continuing Spinco Employee to be eligible to receive an installmentpayment of his or her Retention Benefit, such Continuing Spinco Employee mustremain in the employ of the Company, Spinco or any of their Subsidiaries withat least a satisfactory performance rating until the date of the payment ofsuch installment.  If the employment of aContinuing Spinco Employee is involuntarily terminated after the Effective Timeby the Company or a Subsidiary of the Company (other than pursuant to aTermination for Cause), then, in addition to any severance benefit to whichsuch employee may be entitled pursuant to Section 6.8(e), the Company shall payor cause to be paid to such employee, within 10 days after the date of suchtermination of employment, an amount equal to the next unpaid installment, ifany, of such employee’s Retention Benefit that would have been paid to suchemployee if his or her employment had not terminated; provided, that in no eventshall any such involuntarily terminated Continuing Spinco Employee receive less(in the aggregate) than 100% of such employee’s target annual bonus for 2005pursuant to this Section 6.8(g), unless the employment of such ContinuingSpinco Employee was terminated pursuant to a Termination for Cause.  If a Continuing Spinco Employee voluntarilyterminates his or her employment after the Effective Time or if the employmentof a Continuing Spinco Employee is involuntarily terminated after the EffectiveTime by the Company or a Subsidiary of the Company pursuant to a Terminationfor Cause, then no further installments of such employee’s Retention Benefitshall be paid to such employee. Notwithstanding any other provision of this Agreement, neither Spinconor the Company shall be responsible for the payment of, or reimbursement ofForest for, Retention Benefits in excess of the aggregate amount set forth on *Exhibit E, Part C*.

###  

### (h)           TheCompany hereby acknowledges that it consents to, and shall cause any actionrequired on its behalf to implement, the transactions and agreementscontemplated by the Employee Benefits Agreement.

###  

Section 6.9*             Investigation*.  Uponreasonable notice, each of Forest, Spinco, the Company and Merger Sub shallafford to each other and to its respective officers, employees, accountants,counsel and other authorized representatives, reasonable access during normalbusiness hours, throughout the period prior to the earlier of the EffectiveTime or the Termination Date, to its and its Subsidiaries’ plants, properties,Contracts, commitments, books, records and any report, schedule or otherdocument filed or received by it pursuant to the requirements of the federal orstate securities laws, and shall use all commercially reasonable efforts to causeits respective representatives to furnish promptly to the other such additionalfinancial and operating data and other information, including environmentalinformation, as to its and its Subsidiaries’ respective businesses andproperties as the other or its duly authorized representatives, as the case maybe, may reasonably request.  The partieshereby agree that the provisions of the Confidentiality Agreement shall applyto all information and material furnished by any party or its representativesthereunder and hereunder.  Noinvestigation made at any time

 

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by or on behalf of any of the Company, MergerSub, Forest or Spinco shall affect the representations and warranties of theparties hereto.

 

Section 6.10*           Reasonable Efforts;Further Assurances*.  

 

(a)           Subject to the terms and conditions of this Agreement,each of Forest, Spinco, the Company and Merger Sub shall use all commerciallyreasonable efforts to take, or cause to be taken, all actions and to do, orcause to be done, all things necessary under applicable laws and regulations toconsummate and make effective the transactions contemplated by this Agreementand the other Transaction Agreements, including providing information and usingall commercially reasonable efforts to obtain all necessary exemptions,rulings, consents, authorizations, approvals and waivers to effect allnecessary registrations and filings and to lift any injunction or other legalbar to the Merger and the other transactions contemplated hereby and thereby aspromptly as practicable, and to take all other actions necessary to consummatethe transactions contemplated hereby and thereby in a manner consistent withapplicable law.  Without limiting thegenerality of the foregoing, Forest, Spinco, the Company and Merger Sub agreeto cooperate and to use their respective commercially reasonable efforts toobtain any government clearances required to consummate the Merger (includingthrough any required compliance with the HSR Act and any applicable foreigngovernment reporting requirements) and to respond to any government requestsfor information.  The parties hereto willconsult and cooperate with one another, and consider in good faith the views ofone another, in connection with any analyses, appearances, presentations,memoranda, briefs, arguments, opinions and proposals made or submitted by or onbehalf of any party hereto in connection with proceedings under or relating tothe HSR Act or any other federal, state or foreign antitrust or fair trade law.

###  

### (b)           Subjectto Section 6.10(a), in case at any time any further action is reasonablynecessary to carry out the purposes of this Agreement, Forest, Spinco and theCompany shall take all such commercially reasonable necessary action.

###  

Section 6.11*           No Solicitation by theCompany*.

 

### (a)           TheCompany agrees that neither it nor any of its Subsidiaries nor any of theofficers and directors of it or its Subsidiaries shall, and that it shall useall reasonable efforts to cause its and its Subsidiaries’ employees, agents andrepresentatives (including any investment banker, attorney or accountantretained by it or any of its Subsidiaries) not to (and shall not authorize anyof them to), directly or indirectly: (i) solicit, initiate, encourage, facilitateor induce any inquiry with respect to, or the making, submission orannouncement of, any Acquisition Proposal with respect to itself, (ii)participate in any discussions or negotiations regarding, or furnish to anyperson or entity any nonpublic information with respect to, or take any otheraction to facilitate any inquiries or the making of any proposal thatconstitutes or may reasonably be expected to lead to, any Acquisition Proposalwith respect to itself, (iii) engage in discussions with any person or entitywith respect to any Acquisition Proposal with respect to itself, except as tothe existence of these provisions, (iv) approve, endorse or recommend anyAcquisition Proposal with respect to itself (except to the extent specificallypermitted pursuant to Section 6.11 and Section 8.1(g)), or (v) enterinto any letter of intent or similar document or any contract, agreement orcommitment contemplating or otherwise relating to any Acquisition Proposal ortransaction contemplated thereby with respect to itself (except as permittedpursuant 

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### toSection 6.11 and Section 8.1(g)). The Company and its Subsidiaries shall, and the Company shall use allreasonable efforts to cause its and its Subsidiaries’ officers, directors,employees, agents and representatives (including any investment banker,attorney or accountant retained by it or any of its Subsidiaries) to,immediately cease any and all existing activities, discussions or negotiationswith any third parties conducted heretofore with respect to any AcquisitionProposal with respect to itself.  TheCompany shall ensure that its officers, directors and key employees and itsinvestment bankers, attorneys and other representatives are aware of the provisionsof this Section.

###  

### (b)           (i)  As promptly as practicable after receipt ofany Acquisition Proposal or any request for nonpublic information or inquirywhich it reasonably believes could lead to an Acquisition Proposal, the Companyshall provide Forest and Spinco with oral and written notice of the materialterms and conditions of such Acquisition Proposal, request or inquiry, and theidentity of the person, entity or Acquisition Group making any such AcquisitionProposal, request or inquiry and a copy of all written materials provided inconnection with such Acquisition Proposal, request or inquiry.  Upon receipt of the Acquisition Proposal,request or inquiry, the Company shall provide Forest and Spinco as promptly aspracticable oral and written notice setting forth all such information as isreasonably necessary to keep Forest and Spinco informed in all materialrespects of the status and details (including material amendments or proposedmaterial amendments) of any such Acquisition Proposal, request or inquiry andshall promptly provide to Forest and Spinco (A) a copy of all written materialssubsequently provided by the person making the Acquisition Proposal inconnection with such Acquisition Proposal, request or inquiry and (B) a copy ofall material written materials subsequently provided to the person making theAcquisition Proposal in connection with such Acquisition Proposal, request orinquiry to the extent not previously provided to Forest and Spinco.

###  

#### (ii)           TheCompany shall provide Forest and Spinco with forty eight (48) hours priornotice (or such lesser prior notice as is provided to the members of its Boardof Directors) of any meeting of its Board of Directors at which its Board ofDirectors is reasonably expected to consider any Acquisition Proposal.

####  

### (c)           Notwithstandinganything to the contrary contained in Section 6.11 and under circumstances inwhich the Company has complied with all of its obligations under Section6.11(a) and (b), in the event that, prior to the approval of the Merger andthis Agreement by the stockholders of the Company as provided herein, theCompany receives an unsolicited, bona fide written Acquisition Proposal withrespect to itself from a third party that its Board of Directors has in goodfaith concluded (following the receipt of the advice of its outside legalcounsel and its financial advisor) is, or is reasonably likely to result in, aSuperior Offer, it may then take the following actions: (i) furnish nonpublicinformation to the third party making such Acquisition Proposal, provided that(A) (1) concurrently with furnishing any such nonpublic information to suchparty, its gives Forest and Spinco written notice of its intention to furnishnonpublic information and (2) it receives from the third party an executedconfidentiality agreement containing customary limitations on the use anddisclosure of all nonpublic written and oral information furnished to suchthird party on its behalf, the terms of which are at least as restrictive asthe terms contained in the Confidentiality Agreement (and containing additionalprovisions that expressly permit the Company to comply with the provisions ofthis Section 6.11) and (B) contemporaneously with furnishing any materialnonpublic information to such third

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### party, itfurnishes such material nonpublic information to Forest and Spinco  (to the extent such nonpublic information hasnot been previously so furnished); and (ii) engage in negotiations with thethird party with respect to the Acquisition Proposal, provided thatconcurrently with entering into negotiations with such third party, it givesForest and Spinco  written notice of itsintention to enter into negotiations with such third party.

###  

### (d)           Inresponse to the receipt of a Superior Offer, the Board of Directors of theCompany may withhold, withdraw, amend or modify, or propose or resolve towithdraw, amend or modify, its recommendation in favor of the Merger, and, inthe case of a Superior Offer that is a tender or exchange offer made directlyto its stockholders, may recommend that its stockholders accept the tender orexchange offer (any of the foregoing actions, whether by a Board of Directorsor a committee thereof, a “Change of Recommendation”), if all of the followingconditions in clauses (i) through (iv) are met: (i) a Superior Offer withrespect to it has been made and has not been withdrawn; (ii) approval of theMerger and this Agreement by the stockholders of the Company as provided hereinhas not occurred; (iii) it shall have (A) provided to Forest and Spinco writtennotice which shall state expressly  (1)that it has received a Superior Offer, (2) the material terms and conditions ofthe Superior Offer (including the most current version of any definitiveagreement proposed to be entered into in connection therewith) and the identityof the person, entity or Acquisition Group making the Superior Offer, and (3)that it intends to effect a Change of Recommendation and the manner in which itintends to do so, (B) provided to Forest and Spinco a copy of all materialwritten materials delivered to the person, entity or Acquisition Group makingthe Superior Offer in connection with such Superior Offer that were notpreviously provided to Forest and Spinco, and (C) made available to Forest andSpinco all materials and information made available to the person, entity orAcquisition Group making the Superior Offer in connection with such SuperiorOffer; and (iv) it shall not have breached in any material respect any of theprovisions set forth in Section 6.11.

###  

### (e)           Notwithstandinganything to the contrary contained in this Agreement, and subject to Section2.4, the obligation of the Company to call, give notice of, convene and holdits stockholders’ meeting as contemplated in Section 2.4 shall not be limitedor otherwise affected by the commencement, disclosure, announcement orsubmission to it of any Acquisition Proposal with respect to it unless thisAgreement is terminated.  Notwithstandinganything to the contrary contained in this Agreement, prior to the terminationof this Agreement, the Company shall not (i) submit to the vote of itsstockholders any Acquisition Proposal other than the Merger, or (ii) enter intoany agreement, agreement in principle or letter of intent (other than theconfidentiality agreement referenced in Section 6.11) with respect to or acceptany Acquisition Proposal other than the Merger (or resolve to or publiclypropose to do any of the foregoing).

###  

### (f)            Nothingcontained in this Agreement shall prohibit the Company or its Board ofDirectors from taking and disclosing to its stockholders a position withrespect to a tender or exchange offer by a third party pursuant to Rules 14d 9and 14e 2(a) promulgated under the Exchange Act to the extent required byapplicable law; provided that the content of any such disclosure thereundershall be governed by the terms of this Agreement; and provided further that theBoard of Directors or the Company shall not recommend that the stockholders ofthe Company tender their Company Common Stock in connection with any suchtender or exchange offer unless the Board of Directors of the Companydetermines in good faith (after receiving the advice of its outside legalcounsel and its financial adviser) that such Acquisition Proposal is a

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### SuperiorOffer.  Without limiting the foregoingsentence, the Company shall not make a Change of Recommendation to recommendthat its stockholders accept a tender or exchange offer unless specificallypermitted pursuant to the terms of Section 6.11.

###  

### (g)           Forpurposes of this Agreement, the following terms shall have the followingmeanings: (i) “Acquisition Proposal” shall mean any inquiry, offer or proposalrelating to any transaction or series of related transactions involving: (A)any purchase from the Company or acquisition by any person, entity or“Acquisition Group” (as “Group” is defined under Section 13(d) of theExchange Act and the rules and regulations thereunder) of more than a fifteenpercent (15%) interest in the total outstanding voting securities of theCompany or any tender offer or exchange offer that if consummated would resultin any person, entity or Acquisition Group beneficially owning fifteen percent(15%) or more of the total outstanding voting securities of the Company or anymerger, consolidation, business combination or similar transaction involvingthe Company, (B) any sale, lease (other than in the ordinary course ofbusiness), exchange, transfer, license (other than in the ordinary course ofbusiness), acquisition or disposition of more than fifteen percent (15%) of theassets of the Company and its Subsidiaries, taken as a whole, or (C) anyliquidation or dissolution of the Company or any of its Subsidiaries; and (ii)“Superior Offer” shall mean an unsolicited, bona fide written proposal made bya third party to acquire, directly or indirectly, pursuant to a tender offer,exchange offer, merger, consolidation or other business combination, all orsubstantially all of the assets of the Company or substantially all of thetotal outstanding voting securities of the Company on terms that the Board ofDirectors of the Company has in good faith concluded (following the receipt ofadvice of its outside legal counsel and its financial adviser), taking intoaccount, among other things, all legal, financial, regulatory and other aspectsof the offer and the person, entity or Acquisition Group making the offer, tobe more favorable, from a financial point of view, to the Company’sstockholders (in their capacities as stockholders) than the terms of the Mergerand is reasonably capable of being consummated.

###  

Section 6.12*           Director and OfficerIndemnification; Insurance*.

 

### (a)           Fromand after the Effective Time, Spinco shall indemnify, defend and hold harmlessto the fullest extent permitted under applicable law each person who is, or hasbeen at any time prior to the Effective Time, an officer or director of theCompany and each Subsidiary of the Company and each person who served at therequest of the Company or any Company Subsidiary as a director, officer,trustee, partner, employee, agent or fiduciary of another corporation,partnership, joint venture, trust, pension or other employee benefit plan orenterprise (individually, an “Indemnified Party” and, collectively, the“Indemnified Parties”) against all losses, claims, damages, liabilities, costsand expenses (including attorneys’ fees), judgments, fines, penalties andamounts paid in settlement with approval of the indemnifying party (whichapproval shall not be unreasonably delayed or withheld) in connection with anyAction arising out of or pertaining to acts or omissions, or alleged acts oromissions, by them in their capacities as such, whether commenced, asserted orclaimed before or after the Effective Time. In the event of any such Action: (i) Spinco shall pay, as incurred, the reasonable fees and expensesof counsel selected by the Indemnified Party, which counsel shall be reasonablyacceptable to Spinco, in advance of the final disposition of any such Action tothe fullest extent permitted by applicable law and, if required, upon receiptof any undertaking required by applicable law, and (ii) Spinco willcooperate in the defense of any such Action; provided, however, Spinco shallnot 

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### be liable for anysettlement effected without its written consent (which consent shall not beunreasonably withheld or delayed), and provided further, that Spinco shall notbe obligated pursuant to this Section 6.12(a) to pay the fees anddisbursements of more than one counsel for all Indemnified Parties in a singleAction, unless, in the good faith judgment of any of the Indemnified Parties,there is or may be a conflict of interests between two or more of suchIndemnified Parties, in which case there may be separate counsel for eachsimilarly situated group (which counsel shall be reasonably acceptable toSpinco).  In the event of any Action, anyIndemnified Party wishing to claim indemnification will promptly notify Spincothereof (provided, that failure to so notify Spinco will not affect theobligations of Spinco except to the extent that Spinco shall have beenmaterially prejudiced as a result of such failure).  Notwithstanding the foregoing, nothingcontained in this Section 6.12 shall be deemed to grant any right to anyIndemnified Party which is not permitted to be granted to an officer ordirector of Spinco under Delaware law, assuming for such purposes that Spinco’sCertificate of Incorporation and Bylaws provide for the maximum indemnificationpermitted by law.

###  

### (b)           Withoutlimiting the rights that any indemnified person may have under applicable law,the parties agree that all rights of indemnification existing as of the datehereof as provided in the respective charter and bylaws of the Company andSpinco shall survive the Merger and shall continue in full force and effect inaccordance with their terms.

###  

### (c)           Fora period of six years following the Effective Time, Spinco shall cause to bemaintained directors’ and officers’ liability insurance policies covering theIndemnified Parties who are or at any time prior to the Effective Time werecovered by the Company’s existing directors’ and officers’ liability insurancepolicies on terms substantially no less advantageous to the Indemnified Partiesthan such insurance with respect to claims arising from facts or events thatoccurred up to and including the Effective Time to the extent available;provided, however, that Spinco may substitute therefor policies of at least thesame coverage and amounts containing terms and conditions that are no lessadvantageous to the covered persons; provided further, that Spinco shall not berequired to pay an annual premium for such insurance in excess of 500% of thelast annual premium paid by the Company prior to the date hereof and, if suchinsurance is not available within such limit, Spinco shall be required toobtain only such insurance as is available within such limit.

###  

### (d)           ThisSection 6.12 is intended to be for the benefit of, and shall beenforceable by, the Indemnified Parties, their heirs and personalrepresentatives, and shall be binding on Spinco and the Company and theirrespective successors and assigns.  Inthe event Spinco or the Company or any of their respective successors orassigns (i) consolidates with or merges into any other Person and shallnot be the continuing or surviving corporation or entity in such consolidationor merger or (ii) transfers all or substantially all its properties andassets to any Person, then, and in each case, proper provision shall be made sothat the successors and assigns of Spinco or the Company, as the case may be,honor the indemnification obligations set forth in this Section 6.12.

###  

Section 6.13*           Rule 145Affiliates*.  Spinco shall, at least 10 daysprior to the Effective Time, cause to be delivered to the Company a list,reviewed by its counsel, identifying all persons who, in its reasonablejudgment, are at such time, or will be at the Effective Time, “affiliates” ofSpinco for purposes of Rule 145 promulgated by the SEC under theSecurities Act

 

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(each, a “Rule 145 Affiliate”).  Spinco shall furnish such information anddocuments as the Company may reasonably request for the purpose of reviewingsuch list.  Spinco shall use allcommercially reasonable efforts to cause each person who is identified as aRule 145 Affiliate in the list furnished pursuant to thisSection 6.13 to execute a written agreement (each, a “Rule 145Affiliate Agreement”), substantially in the form of *Exhibit F*to this Agreement, at or prior to the Effective Time.

 

Section 6.14*           Public Announcements*. Except with respect to a Change in Recommendation, Forest and theCompany shall consult with each other and shall mutually agree upon any pressrelease or public announcement relating to the transactions contemplated bythis Agreement and neither of them shall issue any such press release or makeany such public announcement prior to such consultation and agreement, exceptas may be required by applicable law or by obligations pursuant to any listingagreement with any national securities exchange, in which case the partyproposing to issue such press release or make such public announcement shalluse all commercially reasonable efforts to consult in good faith with the otherparty before issuing any such press release or making any such publicannouncement.

 

Section 6.15*           Defense of Litigation*.  Eachof Forest, Spinco, the Company and Merger Sub shall use all commerciallyreasonable efforts to defend against all Actions in which such party is namedas a defendant that challenge or otherwise seek to enjoin, restrain or prohibitthe transactions contemplated by this Agreement or seek damages with respect tosuch transactions.  None of Forest,Spinco, the Company or Merger Sub shall settle any such Action or fail toperfect on a timely basis any right to appeal any judgment rendered or orderentered against such party therein without having previously consulted with theother parties.  Each of Forest, Spincoand the Company shall use all commercially reasonable efforts to cause each ofits Affiliates, directors and officers to use all commercially reasonableefforts to defend any such Action in which such Affiliate, director or officeris named as a defendant and which seeks any such relief to comply with thisSection 6.15 to the same extent as if such Person was a party.

 

Section 6.16           *Notification*.

 

### (a)           Fromtime to time prior to the Effective Time, each of Forest, Spinco and theCompany shall supplement or amend its respective Disclosure Schedule withrespect to any matter hereafter arising that, if existing or occurring at thedate of this Agreement, would have been required to be set forth or describedin such Disclosure Schedule or that is necessary to complete or correct(i) any information in such Disclosure Schedule that is or has beenrendered untrue, inaccurate, incomplete or misleading, (ii) anyrepresentation or warranty of such party in this Agreement that contains aqualification as to materiality or Material Adverse Effect that has beenrendered untrue or inaccurate, in any respect, thereby or (iii) anyrepresentation or warranty of such party in this Agreement that is not soqualified and that has been rendered untrue or inaccurate, in any materialrespect, thereby.  Delivery of suchsupplements shall be for informational purposes only and shall not expand orlimit the rights or affect the obligations of any party hereunder.  Such supplements shall not constitute a partof the Forest Disclosure Schedule, the Spinco Disclosure Schedule or theCompany Disclosure Schedule, as the case may be, for purposes of thisAgreement.

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### (b)           Eachof Forest, Spinco, the Company and Merger Sub shall give prompt notice to theother of the occurrence or nonoccurrence of any event the occurrence ornonoccurrence of which has caused or is reasonably likely to cause (i) anycovenant or agreement of such party contained in this Agreement not to beperformed or complied with, in any material respect or (ii) any conditioncontained in Article VII to become incapable of being fulfilled at orprior to the Effective Time; provided, however, that the delivery of any noticepursuant to this Section 6.16(b) shall not cure such breach ornoncompliance or limit or otherwise affect the remedies available hereunder tothe party receiving such notice.

###  

### (c)           Eachof the parties hereto shall keep the others informed on a timely basis as tothe status of the transactions contemplated by the Transaction Agreements andthe obtaining of all necessary and appropriate exemptions, rulings, consents,authorizations and waivers related thereto.

###  

Section 6.17*           Obligations of MergerSub*.  The Company shall take all actionnecessary to cause Merger Sub to perform its obligations under this Agreementand to consummate the Merger on the terms and subject to the conditions setforth in this Agreement.

 

Section 6.18*           Accounting Matters*.  Theparties will use their commercially reasonable efforts to ensure that,following the Effective Time, the Company will establish a fiscal year endingon December 31.

 

Section 6.19*           ReorganizationTreatment*.

 

### (a)           Forest(with respect to Spinco) and the Company (on its behalf and on behalf of MergerSub) shall execute and deliver to each of Weil, Gotshal & Manges LLP,special tax counsel to Forest and Spinco, and Baker Botts L.L.P., counsel tothe Company, certificates substantially in the forms attached hereto as *Exhibits G*and *H* at such time or times as reasonablyrequested by each such law firm in connection with its delivery of the opinionreferred to in Section 7.2(c) or Section 7.3(c), as the case may be.  Prior to the Effective Time, neither Forest,Spinco, the Company or Merger Sub shall take or cause to be taken any actionwhich would cause to be untrue any of the representations in such certificates.

###  

### (b)           Forest,Spinco, the Company and Merger Sub intend that the Merger will qualify as areorganization within the meaning of Section 368(a) of the Code and the partieswill take the position for all Tax purposes that the Merger so qualifies unlessa contrary position is required by a final determination within the meaning ofSection 1313 of the Code.  Forest,Spinco, the Company and Merger Sub shall each use their respective commerciallyreasonable efforts to cause the Merger to qualify as a reorganization withinthe meaning of Section 368(a) of the Code, and shall not take actions, causeactions to be taken or fail to take actions that are reasonably likely toprevent such result.

###  

Section 6.20*           Performance Bond*.  The Company shall obtain and maintain theperformance bond as described on Section 6.20 of the Company DisclosureSchedule.

 

### Section 6.21           *Estimated Basis. *Forest has provided the Company with an estimate ofthe tax basis of the Spinco Assets as of June 30, 2005 (the “EstimatedBasis.”)  The Estimated Basis included capitalized intangible drillingcosts incurred with respect to the Spinco Business

###  

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###  

### in Forest’s taxyear ended December 31, 2004 (the “2004 Spinco IDC”).  In respect of this Section 6.21, and for thesake of clarity, Forest agrees that it will capitalize the 2004 Spinco IDC inits Tax Return filing for the year ended December 31, 2004 pursuant to Section59(e) of the Code and in a manner consistent with the computation of theestimated basis. Forest intends to deduct all 2005 IDC with respect to all ofits U.S. assets, including the Spinco Assets in 2005.

###  

# **ARTICLE VIICONDITIONS TO THE MERGER**

# ** **

Section 7.1*             Conditions to theObligations of Spinco, Forest, the Company and Merger Sub to Effect the Merger*.  Therespective obligations of Spinco, Forest, the Company and Merger Sub to consummatethe Merger shall be subject to the fulfillment (or waiver by Forest and theCompany) at or prior to the Effective Time of the following conditions:

 

### (a)           Priorto the Effective Time, the Distribution shall have been consummated inaccordance with the Distribution Agreement and the conditions to theconsummation of the Distribution set forth in Section 9.1 of theDistribution Agreement shall have been satisfied or shall have been waived witha Company Consent;

###  

### (b)           Allmaterial consents, approvals and authorizations of any Governmental Authoritylegally required for the consummation of the transactions contemplated by thisAgreement and the other Transaction Agreements shall have been obtained and bein effect at the Effective Time;

###  

### (c)           Anyapplicable waiting period (including any extended waiting period arising as aresult of a request for additional information by either HSR Agency) under theHSR Act shall have expired or been terminated;

###  

### (d)           TheRegistration Statements shall have become effective in accordance with theSecurities Act and the Exchange Act and shall not be the subject of any stoporder or proceedings seeking a stop order; all necessary permits andauthorizations under state securities or “blue sky” laws, the Securities Actand the Exchange Act relating to the issuance and trading of shares of CompanyCommon Stock to be issued in connection with the Merger shall have beenobtained and shall be in effect; and such shares of Company Common Stock andsuch other shares required to be reserved for issuance in connection with theMerger shall have been Approved for Listing;

###  

### (e)           TheRequisite Approval shall have been obtained;

###  

### (f)            Nocourt of competent jurisdiction or other Governmental Authority shall haveissued an Order that is still in effect restraining, enjoining or prohibitingthe Distribution or the Merger;

###  

### (g)           NoAction by any Governmental Authority with respect to the Merger shall bepending that seeks to restrain, enjoin, prohibit or delay consummation of thetransactions

###  

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###  

### contemplated bythis Agreement or to impose any material restrictions or requirements thereonor on Spinco or the Company with respect thereto;

###  

### (h)           TheCompany Common Stock shall have been approved for listing on the NYSE orNasdaq, subject only to official notice of issuance; and

###  

### (i)            Noaction shall have been taken, and no statute, rule, regulation or executiveorder shall have been enacted, entered, promulgated or enforced, by anyGovernmental Authority with respect to the Merger that, individually or in theaggregate, would (i) restrain, prohibit or delay the consummation of theMerger or (ii) impose material restrictions or requirements thereon or onSpinco or the Company with respect thereto.

###  

Section 7.2*             Additional Conditionsto the Obligations of Forest and Spinco*.  The obligation of Forestand Spinco to consummate the Merger shall be subject to the fulfillment (orwaiver by Forest) at or prior to the Effective Time of the following additionalconditions:

 

### (a)           TheCompany shall have performed in all material respects its covenants andagreements contained in this Agreement required to be performed at or prior tothe Effective Time and the representations and warranties of the Companycontained in this Agreement (which for purposes of this Section 7.2(a)shall be read as though none of them contained any materiality or materialadverse effect qualifications) shall be true and correct in all respects as ofthe date of this Agreement and as of the Effective Time as if made at and as ofthe Effective Time (except to the extent such representations and warrantiesaddress matters as of a particular date), except in each case (i) wherethe failure to be true and correct, individually or in the aggregate, would nothave a Material Adverse Effect on Spinco or the Company or (ii) to theextent specifically contemplated or permitted by this Agreement;

###  

### (b)           TheCompany shall have delivered to Forest a certificate, dated as of the EffectiveTime, of a senior officer of the Company certifying the satisfaction by theCompany of the conditions set forth in subsection (a) of thisSection 7.2;

###  

### (c)           Forestand Spinco shall have received an opinion of Weil, Gotshal & Manges LLP tothe effect that the Merger will constitute a reorganization underSection 368(a) of the Code.  Inrendering such opinion, Weil, Gotshal & Manges LLP may require and relyupon representations contained in certificates of officers of Forest (withrespect to Spinco) and the Company (on its behalf and on behalf of Merger Sub)substantially in the forms attached hereto in *Exhibits G*and *H*;

###  

### (d)           Forestshall have received the bondholder consents referenced in Section 3.2 of theForest Disclosure Schedule; and

###  

### (e)           Forestshall have received the consents of its lenders under its credit facilityreferenced in Section 3.2 of the Forest Disclosure Schedule.

###  

Section 7.3*             Additional Conditionsto the Obligations of the Company and Merger Sub*.  Theobligation of the Company and Merger Sub to consummate the Merger shall be subjectto the fulfillment (or waiver by the Company) at or prior to the Effective Timeof the following additional conditions:

 

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### (a)           Spincoand Forest shall have performed in all material respects their respectivecovenants and agreements contained in this Agreement required to be performedat or prior to the Effective Time and the representations and warranties ofSpinco and Forest contained in this Agreement (which for purposes of thisSection 7.3(a) shall be read as though none of them contained anymateriality or material adverse effect qualifications) shall be true andcorrect in all respects as of the date of this Agreement and as of theEffective Time as if made at and as of the Effective Time (except to the extentsuch representations and warranties address matters as of a particular date),except in each case (i) where the failure to be true and correct,individually or in the aggregate, would not have a Material Adverse Effect onthe Spinco Business, Spinco or the Company or (ii) to the extentspecifically contemplated or permitted by this Agreement;

###  

### (b)           TheCompany shall have received the consent of the lenders under its creditfacility referenced in Section 5.3 of the Company Disclosure Schedule, andSpinco and/or the Company shall have entered into a new or amended creditfacility with available borrowing capacity sufficient to operate the SpincoBusiness and the Company’s business after the Closing consistent with pastpractice;

###  

### (c)           Spincoshall have delivered to the Company a certificate, dated as of the EffectiveTime, of a senior officer of Forest certifying the satisfaction of theconditions set forth in subsection (a) of this Section 7.3;

###  

### (d)           TheCompany shall have received an opinion from Baker Botts L.L.P. to the effectthat the Merger will constitute a reorganization under Section 368(a) ofthe Code.  In rendering such opinion,Baker Botts L.L.P. may require and rely upon representations contained incertificates of officers of Forest (with respect to Spinco) and the Company (onits behalf and on behalf of Merger Sub) substantially in the forms attachedhereto in *Exhibits H*and *I*; and

###  

### (e)           TheCompany shall be reasonably satisfied that the Contribution and Distributionhave taken place in accordance with the terms set forth in the DistributionAgreement.

###  

### Section 7.4             *Frustration of Conditions.* None of Forest, Spinco or the Company may rely on the failure of anycondition set forth in this Article VII to be satisfied if such failure was causedby such party’s failure to act in good faith or to use its commerciallyreasonable efforts to consummate the Merger and the other transactionscontemplated by this Agreement and the other Transaction Agreements.

###  

# **ARTICLE VIIITERMINATION, AMENDMENT AND WAIVERS**

# ** **

Section 8.1             *Termination*.  ThisAgreement may be terminated and the transactions contemplated hereby may beabandoned prior to the Effective Time (notwithstanding the Requisite Approval)as follows:

 

### (a)           bythe mutual written consent of each party hereto, which consent shall beeffected by action of the Board of Directors of each such party;

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### (b)           byany party hereto if the Effective Time shall not have occurred on or beforeMarch 31, 2006 provided that the right to terminate this Agreement pursuant tothis clause (b) shall not be available to any party whose failure toperform any of its obligations under this Agreement required to be performed byit at or prior to such date has been a cause of, or contributed to, the failureof the Merger to have become effective on or before such date;

###  

### (c)           byany party hereto if (i) any court of competent jurisdiction or any otherGovernmental Authority shall have issued an Order restraining, enjoining orotherwise prohibiting the Merger and such Order shall have become final andnonappealable, provided that, if the party seeking to terminate this Agreementpursuant to this Section 8.1(c)(i) is a party to the applicable proceeding,such party shall have used all commercially reasonable efforts to remove suchOrder; or (ii) the Requisite Approval is not obtained; provided, that the rightto terminate this Agreement pursuant to this Section 8.1(c)(ii) shall not beavailable to the Company where the failure to obtain the Requisite Approvalshall have been caused by the action or failure to act by the Company and suchaction or failure to act constitutes a breach by the Company of Section 6.11 inany respect or a material breach by the Company of any of the other covenantsor agreements contained in this Agreement;

###  

### (d)           bythe Company if (i) either Forest or Spinco shall have failed to perform inany material respect any of its respective covenants and agreements containedin this Agreement required to be performed at or prior to the Effective Time,or (ii) the respective representations and warranties of Forest or Spincocontained in this Agreement are or shall become untrue (without giving effectto any materiality qualification or standard contained in any such representationsand warranties) in any respect at any time prior to the Effective Time (exceptto the extent such representations and warranties address matters as of aparticular date), except where the failure to be true and correct, individuallyor in the aggregate, would not have a Material Adverse Effect on the SpincoBusiness, Spinco or the Company; provided that the right of the Company toterminate this Agreement pursuant to this subsection (d) shall not beavailable unless such failure or untruth is incapable of cure or Forest andSpinco shall have been unable to cure such failure or such untruth for 30calendar days after the Company shall have given Forest and Spinco notice ofsuch failure or such untruth;

###  

### (e)           byForest if (i) the Company shall have failed to perform in any materialrespect any of its covenants and agreements contained in this Agreementrequired to be performed at or prior to the Effective Time, or (ii) therepresentations and warranties of the Company contained in this Agreement areor shall become untrue (without giving effect to any materiality qualificationor standard contained in any such representations and warranties) in anyrespect at any time prior to the Effective Time (except to the extent suchrepresentations and warranties address matters as of a particular date), exceptwhere the failure to be true and correct, individually or in the aggregate,would not have a Material Adverse Effect on the Company, the Spinco Business orSpinco; provided that the right of Forest to terminate this Agreement pursuantto this subsection (e) shall not be available unless such failure oruntruth is incapable of cure or the Company shall have been unable to cure suchfailure or such untruth for 30 calendar days after Forest shall have given the Companynotice of such failure or such untruth;

###  

### (f)            byForest in the event that (i) the Board of Directors of the Company shall havefailed to reaffirm publicly its approval, as soon as reasonably practicable,and in no event later

###  

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###  

### than threebusiness days, after Forest’s request for such reaffirmation, of the Merger andthe transactions contemplated by this Agreement, or shall have resolved not toreaffirm the Merger, (ii) the Board of Directors of the Company shall havefailed to include in the Proxy Statement/Prospectus its recommendation, withoutmodification or qualification, that the Company stockholders approve and adoptthis Agreement and approve the Merger, (iii) the Board of Directors of the Companyshall have withheld, withdrawn, amended or modified, or proposed publicly towithdraw, amend or modify, in a manner adverse to Forest and Spinco, therecommendation of such Board of Directors to the Company stockholders that theyapprove and adopt this Agreement and approve the Merger, (iv) the Board ofDirectors of the Company shall have a Change of Recommendation or (v) the Boardof Directors of the Company, within ten business days after commencement of anytender or exchange offer for any shares of Company Common Stock, shall havefailed to recommend against acceptance of such tender or exchange offer by itsstockholders or takes no position with respect to the acceptance of such tenderor exchange offer by its stockholders; or

###  

### (g)           bythe Company if the Board of Directors of the Company has made a Change ofRecommendation in order to approve and permit the Company to accept a SuperiorOffer; provided, however, that (i) the Company is not then in breach of Section6.11 or material breach of any other covenant or other agreement contained inthis Agreement and has not breached any of its representations and warrantiescontained in this Agreement in any material respect, (ii) Forest does not make,within three (3) business days after receipt of the Company’s written noticepursuant to Section 6.11(d), an offer that the Board of Directors of theCompany shall have concluded in good faith (following consultation with itsfinancial advisor and outside legal counsel) is at least as favorable, from afinancial point of view, to the Company stockholders as such Superior Offer,(iii) the Board of Directors of the Company authorizes the Company, subject tocomplying with the terms of Section 6.11 and this clause (g), to enter into abinding written agreement concerning a transaction that constitutes a SuperiorOffer and the Company notifies Forest and Spinco in writing that it intends toenter into such an agreement, attaching the most current version of suchagreement to such notice, and (iv) the Company shall have tendered to Forestpayment in full of the amount specified in Section 8.3 concurrently withdelivery of notice of termination pursuant to this Section 8.1(g).

###  

Section 8.2*             Effect of Termination*.  Inthe event of termination of this Agreement pursuant to Section 8.1, thisAgreement shall terminate (except to the extent set forth in the last sentenceof Section 9.1(a) and in Section 9.2), without any liability on thepart of any party or its directors, officers or stockholders except as setforth in Section 8.3; provided, that nothing in this Agreement shallrelieve any party of liability for breach of this Agreement or prejudice theability of the non-breaching party to seek damages from any other partyfor any breach of this Agreement, including attorneys’ fees and the right topursue any remedy at law or in equity.

 

Section 8.3*             Termination Fee;Expenses*.

 

### (a)           Expenses Payable upon Breach.  Ifthis Agreement is terminated pursuant to one (but not both) ofSection 8.1(d) or Section 8.1(e), then the breaching party shallpromptly (but not later than five (5) business days after receipt ofnotice of the amount due from the other party) pay to the terminating party anamount equal to all documented out-of-pocket expenses and feesincurred by such terminating party (including fees and expenses payable to alllegal,

###  

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###  

### accounting,financial, public relations and other professional advisors arising out of, inconnection with or related to the transactions contemplated by this Agreementand the Transaction Documents) not to exceed $5 million in the aggregate(“Out-of-Pocket Expenses”).

###  

### (b)           TerminationFee Payable in Certain Circumstances.

###  

#### (i)            If(x) this Agreement is terminated by Forest or the Company pursuant to Section8.1(c)(ii) (as it relates to failure to obtain the Requisite Approval), (y)Forest or the Company terminates this Agreement pursuant to Section 8.1(b), or(z) Forest terminates this Agreement pursuant to Section 8.1(e)(i); and

####  

asto any of clauses (x), (y) or (z) above, prior to the termination of thisAgreement, there has been publicly announced an Acquisition Proposal (otherthan the Merger) and within twelve months of such termination the Company shalleither (1) consummate an Acquisition Proposal (whether or not such AcquisitionProposal is the same Acquisition Proposal that had been publicly announcedprior to termination of this Agreement) or (2) enter into an agreement withrespect to an Acquisition Proposal or recommend approval of an AcquisitionProposal (whether or not such Acquisition Proposal is the same AcquisitionProposal that had been publicly announced prior to termination of thisAgreement), which Acquisition Proposal is subsequently consummated (whether ornot such consummation occurs within such twelve-month period); or

 

#### (ii)           IfForest shall terminate this Agreement pursuant to Section  8.1(f); or

####  

#### (iii)          Ifthe Company shall terminate this Agreement pursuant to Section 8.1(g);

####  

thenthe Company shall pay to Forest an amount equal to $25 million (the“Termination Fee”), plus Out of Pocket Expenses.  The Company hereby waives its right to setoff or counterclaim against such amount. If the Termination Fee shall be payable pursuant to subsection (b)(i) ofthis Section 8.3, the Termination Fee shall be paid in same day funds at orprior to the date of consummation of such Acquisition Proposal.  If the Termination Fee shall be payablepursuant to subsection (b)(ii) of this Section 8.3, the Termination Fee shallbe paid in same day funds no later than one business day after the date oftermination of this Agreement.  If theTermination Fee shall be payable pursuant to subsection (b)(iii) of thisSection 8.3, the Termination Fee shall be paid in same day funds concurrentlywith the delivery of the notice of termination of this Agreement pursuant toSection 8.1(g).

 

### (c)           Theparties hereto acknowledge that the agreements contained in paragraph (b) ofthis Section 8.3 are an integral part of the transactions contemplated by thisAgreement, and that without these agreements, they would not enter into thisAgreement.  Accordingly, if the Companyfails to pay promptly any fee payable by it pursuant to this Section 8.3, thenthe Company shall pay to Forest all of Forest’s costs and expenses (includingattorneys’ fees) in connection with collecting such fee, together with intereston the amount of the fee at the rate of 5% from the date such payment was dueunder this Agreement until the date of payment.

###  

Section 8.4             *Amendment*.  ThisAgreement may be amended by Forest, Spinco, the Company and Merger Sub at anytime before or after adoption of this Agreement by the stockholders of theCompany; provided, however, that after such adoption, no amendment shall bemade that by law requires further approval by such stockholders without suchfurther

 

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approval. This Agreement may not be amended except by an instrument in writingsigned by Forest, Spinco, the Company and Merger Sub.

 

Section 8.5             *Waivers*.  Atany time prior to the Effective Time, Forest, Spinco and the Company may, tothe extent legally allowed, (i) extend the time for the performance of anyof the obligations or acts of the other party; (ii) waive any inaccuraciesin the representations and warranties of the other party contained herein or inany document delivered pursuant to this Agreement; and (iii) waivecompliance with any of the agreements or conditions of the other partycontained herein; provided, however, that no failure or delay by Forest, Spincoor the Company in exercising any right hereunder shall operate as a waiverthereof nor shall any single or partial exercise thereof preclude any other orfurther exercise thereof or the exercise of any other right hereunder.  Any agreement on the part of Forest, Spincoor the Company to any such extension or waiver shall be valid only if set forthin an instrument in writing signed on behalf of such party.

 

# **ARTICLE IXMISCELLANEOUS**

# ** **

Section 9.1*             Survival ofRepresentations, Warranties and Agreements; Indemnification*.

 

### (a)           Thecovenants and agreements in this Agreement or in any certificate or instrumentdelivered pursuant to this Agreement shall survive the Effective Time inaccordance with their respective terms. None of the representations or warranties in this Agreement or in anycertificate or instrument delivered pursuant to this Agreement (except for thecertificates substantially in the forms attached hereto in *Exhibits G and H*) shall survive theEffective Time.  Subject toSection 9.14, the Confidentiality Agreement shall survive the executionand delivery of this Agreement and any termination of this Agreement, and theprovisions of the Confidentiality Agreement shall apply to all information andmaterial furnished by any party or its representatives thereunder or hereunder.

###  

### (b)           Followingthe Effective Time, Forest will indemnify, defend and hold harmless Spinco, theCompany and each Person, if any, who controls, within the meaning ofSection 15 of the Securities Act or Section 20 of the Exchange Act(any such person being hereinafter referred to as a “Controlling Person”),Spinco or the Company from and against, and pay or reimburse each of theforegoing for, all losses, claims, damages, liabilities, actions, costs andexpenses, joint or several, including reasonable attorneys’ fees (collectively,“Losses”), arising out of or resulting from, directly or indirectly, or inconnection with any untrue statement or alleged untrue statement of a materialfact contained in or incorporated by reference into either of the RegistrationStatements or in the Proxy Statement/Prospectus (or any amendment or supplementthereto) or any omission or alleged omission to state therein a material factrequired to be stated therein or necessary to make the statements therein, inlight of the circumstances under which they were made, not misleading;provided, however, that Forest shall not be responsible for informationprovided by the Company as to itself and its Subsidiaries specifically forinclusion in, or incorporation by reference into, any such ProxyStatement/Prospectus or Registration Statement.

###  

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###  

### (c)                                  Followingthe Effective Time, Spinco will indemnify, defend and hold harmless Forest andeach Controlling Person of Forest from and against, and pay or reimburse eachof the foregoing for, all Losses arising out of or resulting from, directly orindirectly, or in connection with any untrue statement or alleged untruestatement of a material fact contained in or incorporated by reference intoeither of the Registration Statements or in the Proxy Statement/Prospectus (orany amendment or supplement thereto) or any omission or alleged omission tostate therein a material fact required to be stated therein or necessary tomake the statements therein, in light of the circumstances under which theywere made, not misleading, but only with respect to information provided by theCompany as to itself and its Subsidiaries specifically for inclusion in, orincorporation by reference into, any such Proxy Statement/Prospectus orRegistration Statement.

###  

Section 9.2                                      *Expenses*.  Except as otherwise provided in theDistribution Agreement or in Section 8.3, whether or not the Merger or theother transactions contemplated by this Agreement are consummated, all costsand expenses incurred by Forest or Spinco in connection with this Agreement andthe transactions contemplated hereby shall be paid by Spinco (provided thatSpinco shall not be obligated to pay more than $7 million, exclusive ofthe expenses described in the exception below), and all costs and expensesincurred by the Company in connection with this Agreement and the transactionscontemplated hereby shall be paid by the Company, except that the Company andSpinco each shall pay one-half of all expenses relating to printing,filing and mailing the Registration Statements and the ProxyStatement/Prospectus and all SEC and other regulatory filing fees incurred inconnection with the Registration Statements and the Proxy Statement/Prospectus.

 

Section 9.3                                      *Notices*.  All notices and other communicationsrequired or permitted to be given hereunder shall be in writing and shall bedeemed given upon (a) a transmitter’s confirmation of a receipt of afacsimile transmission (but only if followed by confirmed delivery of astandard overnight courier the following business day or if delivered by handthe following business day), (b) confirmed delivery of a standardovernight courier or when delivered by hand or (c) the expiration of fivebusiness days after the date mailed by certified or registered mail (returnreceipt requested), postage prepaid, to the parties at the following addresses(or at such other addresses for a party as shall be specified by like notice):

 

If to Spinco (prior to the Effective Time) or Forest,to:

 

SML Wellhead Corporationor Forest Oil Corporation707 17th Street, Suite 3600Denver, Colorado 80202Attn:  General CounselFacsimile:  (303) 812-1510

 

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with a copy to (which shall not constitute effectivenotice) to:

 

Vinson & Elkins LLP666 Fifth AvenueNew York, New York 10103Attn:  Alan P. BadenFacsimile:  (212) 849-5337

 

If to Spinco (following the Effective Time), to:

 

SML Wellhead Corporationc/o Mariner Energy, Inc.2101 CityWest BoulevardBuilding 4, Suite 900Houston, Texas 77042Attn:  General CounselFacsimile:  (713) 954-3820

 

with a copy (which shall not constitute effectivenotice) to:

 

Baker Botts L.L.P.One Shell PlazaHouston, Texas 77002Attn:  Kelly B. RoseFacsimile:  (713) 229-7996

 

If to the Company, to:

 

Mariner Energy, Inc.2101 CityWest BoulevardBuilding 4, Suite 900Houston, Texas 77042Attn:  General CounselFacsimile:  (713) 954-3820

 

with a copy (which shall not constitute effectivenotice) to:

 

Baker Botts L.L.P.One Shell PlazaHouston, Texas 77002Attn:  Kelly B. RoseFacsimile:  (713) 229-7996

 

Section 9.4*                                      CertainConstruction Rules*.  The article and section headings andthe table of contents contained in this Agreement are for reference purposesonly and shall not affect in any way the meaning or interpretation of thisAgreement.  As used in this Agreement,unless otherwise provided to the contrary, (a) all references to days ormonths shall be deemed

 

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references to calendar days or months and (b) any reference to a “Section,”“Article,” “Exhibit” or “Schedule” shall be deemed to refer to a section orarticle of this Agreement or an exhibit or schedule to this Agreement.  The words “hereof,” “herein” and “hereunder”and words of similar import referring to this Agreement refer to this Agreementas a whole and not to any particular provision of this Agreement.  Whenever the words “include,” “includes” or “including”are used in this Agreement, they shall be deemed to be followed by the words “withoutlimitation.” Unless otherwise specifically provided for herein, the term “or”shall not be deemed to be exclusive.  Anymatter disclosed in any particular Section or Subsection of the SpincoDisclosure Schedule, the Forest Disclosure Schedule or the Company DisclosureSchedule shall be deemed to have been disclosed in any other Section orSubsection of Articles III, IV, V or VI of this Agreement, as applicable, withrespect to which such matter is relevant so long as the applicability of suchmatter to such Section or Subsection is reasonably apparent.  For avoidance of doubt, “consistent with pastpractice” when used with respect to Spinco, any of its Subsidiaries, any SpincoAsset or the Spinco Business shall mean the past practice of Forest.

 

Section 9.5*                                      Severability*.  Ifany provision of this Agreement or the application of any such provision to anyPerson or circumstance, shall be declared judicially to be invalid,unenforceable or void, such decision shall not have the effect of invalidatingor voiding the remainder of this Agreement, it being the intent and agreementof Spinco, Forest, the Company and Merger Sub that this Agreement shall bedeemed amended by modifying such provision to the extent necessary to render itvalid, legal and enforceable while preserving its intent or, if suchmodification is not possible, by substituting therefor another provision thatis legal and enforceable and that achieves the same objective.

 

Section 9.6*                                      Assignment;Binding Effect*.  Neither this Agreement nor any of therights, benefits or obligations hereunder may be assigned by Spinco, Forest,the Company or Merger Sub (whether by operation of law or otherwise) withoutthe prior written consent of all of the other parties.  Subject to the preceding sentence, thisAgreement will be binding upon, inure to the benefit of and be enforceable bySpinco, Forest, the Company and Merger Sub and their respective successors andpermitted assigns.

 

Section 9.7*                                      NoThird Party Beneficiaries*.  Except as provided in Sections 2.2,2.8, 2.9 and 6.12 (collectively, the “Third Party Provisions”), nothing in thisAgreement, express or implied, is intended to or shall confer upon any Person(other than Forest, Spinco and the Company and their respective successors andpermitted assigns) any legal or equitable right, benefit or remedy of anynature whatsoever under or by reason of this Agreement, and no Person (otherthan as so specified) shall be deemed a third party beneficiary under or byreason of this Agreement.  The ThirdParty Provisions may be enforced by the beneficiaries thereof after theEffective Time.  Subject toSection 6.12, Spinco shall reimburse all expenses, including reasonableattorneys’ fees, that are incurred by any Person who prevails in any litigationor other proceeding required to enforce the obligations of the SurvivingCorporation and Spinco under the Third Party Provisions.

 

Section 9.8*                                      LimitedLiability*.  Notwithstanding any other provision ofthis Agreement, no stockholder, director, officer, Affiliate, agent orrepresentative of Spinco, Forest, the Company or Merger Sub, in its capacity assuch, shall have any liability in respect of or relating to the covenants,obligations, representations or warranties of such party under this Agreementor

 

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in respect of any certificate delivered with respect hereto or theretoand, to the fullest extent legally permissible, each of Spinco, Forest, theCompany and Merger Sub, for itself and its stockholders, directors, officersand Affiliates, waives and agrees not to seek to assert or enforce any such liabilitythat any such Person otherwise might have pursuant to applicable law.

 

Section 9.9*                                      EntireAgreement*.  This Agreement (together with theother Transaction Agreements, the Confidentiality Agreement, the exhibits andthe Disclosure Schedules and the other documents delivered pursuant hereto)constitutes the entire agreement of all the parties hereto and supersedes allprior and contemporaneous agreements and understandings, both written and oral,between the parties, or any of them, with respect to the subject matterhereof.  All exhibits attached to thisAgreement and the Disclosure Schedules are expressly made a part of, andincorporated by reference into, this Agreement. Each section of the Company Disclosure Schedule, the Forest DisclosureSchedule and the Spinco Disclosure Schedule qualifies the correspondingnumbered representation and warranty or covenant to the extent specifiedtherein, and any other representation, warranty or covenant to which suchmatter is relevant so long as the applicability of such matter to any suchrepresentation, warranty or covenant is reasonably apparent.

 

Section 9.10*                                GoverningLaw*.  This Agreement shall be governed by,and construed in accordance with, the laws of the State of Delaware withoutgiving effect to the conflicts of law principles thereof.  EACH OF THE PARTIES TO THIS AGREEMENT HEREBYIRREVOCABLY AND UNCONDITIONALLY (i) AGREES TO BE SUBJECT TO, AND HEREBYCONSENTS AND SUBMITS TO, THE JURISDICTION OF THE COURTS OF THE STATE OFDELAWARE AND OF THE FEDERAL COURTS SITTING IN THE STATE OF DELAWARE,(ii) TO THE EXTENT SUCH PARTY IS NOT OTHERWISE SUBJECT TO SERVICE OFPROCESS IN THE STATE OF DELAWARE, HEREBY APPOINTS THE CORPORATION TRUSTCOMPANY, AS SUCH PARTY’S AGENT IN THE STATE OF DELAWARE FOR ACCEPTANCE OF LEGALPROCESS AND (iii) AGREES THAT SERVICE MADE ON ANY SUCH AGENT SET FORTH IN(ii) ABOVE SHALL HAVE THE SAME LEGAL FORCE AND EFFECT AS IF SERVED UPONSUCH PARTY PERSONALLY WITHIN THE STATE OF DELAWARE.

 

Section 9.11                                *Counterparts*.  ThisAgreement may be executed in two or more counterparts, each of which shall bedeemed to be an original, but all of which together shall constitute oneagreement binding on Spinco, Forest, the Company and Merger Sub,notwithstanding that not all parties are signatories to the original or thesame counterpart.

 

Section 9.12*                                SpecificPerformance*.  The parties hereto agree thatirreparable damage would occur in the event any provision of this Agreement wasnot performed in accordance with the terms hereof and that the parties shall beentitled to specific performance of the terms hereof, in addition to any otherremedy at law or in equity.

 

Section 9.13*                                Waiverof Jury Trial*.  Each of the parties hereto irrevocablyand unconditionally waives all right to trial by jury in any Action orcounterclaim (whether based in contract, tort or otherwise) arising out of orrelating to this Agreement or the actions of the parties hereto in thenegotiation, administration, performance and enforcement thereof.

 

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Section 9.14*                                Confidentiality*.  Subject to Section 7.2 and Section 7.5 of theDistribution Agreement, for a period of eighteen months following the EffectiveTime, each of Forest and the Company shall hold, and shall cause its Affiliatesand Representatives to hold, in strict confidence all Information concerningthe other party and its Affiliates obtained by it prior to the Effective Dateor furnished to it by such other party and its Affiliates pursuant to thisAgreement or the other Transaction Agreements (including, with respect toForest and its Affiliates and Representatives, Information of Forest, itsAffiliates and Representatives to the extent related to Spinco, the SpincoAssets or the Spinco Business) and shall not release or disclose suchInformation to any other Person, except its Affiliates and Representatives, whoshall be advised of the provisions of this Section 9.14, and shall not use suchInformation except as required pursuant to the terms of the TransactionAgreements, and each party shall be responsible for a breach by any of itsAffiliates or Representatives; provided, however, that any member of the ForestGroup or the Company and its Affiliates may disclose such Information to theextent that (a) disclosure is compelled by judicial or administrative processor, based on advice of such Person’s counsel, by other requirements of law, or(b) such party can show that such Information was (i) in the public domainthrough no fault of such Person or (ii) lawfully acquired by such Person fromanother source after the time that it was furnished to such Person by the otherparty or its Affiliates, and not acquired from such source subject to anyconfidentiality obligation on the part of such source known to the acquiror.  Notwithstanding the foregoing, each of Forestand the Company shall be deemed to have satisfied its obligations under thisSection 9.14 with respect to any Information (other than PrivilegedInformation) if it exercises the same care with regard to such Information asit takes to preserve confidentiality for its own similar Information.

 

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IN WITNESS WHEREOF, the parties hereto have executedthis Agreement as of the date first above written.

 
|   | FOREST OIL CORPORATION   |   |
|--------|--------------------------|--------|
|   |                     |   |
|   |                     |   |   |
|   | By:                      |   |   |
|   |                     | Name:  |   |
|   |                     | Title: |   |
|   |                     |   |   |
|   |                     |   |   |
|   | SML WELLHEAD CORPORATION |   |
|   |                     |   |   |
|   |                     |   |   |
|   | By:                      |   |   |
|   |                     | Name:  |   |
|   |                     | Title: |   |
|   |                     |   |   |
|   |                     |   |   |
|   | MARINER ENERGY, INC.     |   |
|   |                     |   |   |
|   |                     |   |   |
|   | By:                      |   |   |
|   |                     | Name:  |   |
|   |                     | Title: |   |
|   |                     |   |   |
|   |                     |   |   |
|   | MEI SUB, INC.            |   |
|   |                     |   |   |
|   |                     |   |   |
|   | By:                      |   |   |
|   |                     | Name:  |   |
|   |                     | Title: |   |

 

79

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**EXHIBIT B**

**TO**

**AGREEMENT AND PLANOF MERGER**

** **

**Initial Officersof the Company**

 
| Scott D. Josey       |   | Chairman of the Board,  Chief Executive Officer and President |
|----------------------|--------|---------------------------------------------------------------|
| Dalton F. Polasek    |   | Chief Operating Officer                                       |
| Rick G. Lester       |   | Vice President, Chief  Financial Officer and Treasurer        |
| Jesus G. Melendrez   |   | Vice President—  Corporate Development                   |
| Mike C. van den Bold |   | Vice President and  Chief Exploration Officer                 |
| Teresa G. Bushman    |   | Vice President, General  Counsel and Secretary                |
| Judd A. Hansen       |   | Vice President— Shelf  and Onshore                       |
| Cory L. Loegering    |   | Vice President—  Deepwater                               |

 

B-1

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**EXHIBIT C**

**TO**

**AGREEMENT AND PLANOF MERGER**

** **

**Certificate ofIncorporation of the Company**

 

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SECOND AMENDED ANDRESTATED

 

CERTIFICATE OFINCORPORATION

 

OF

 

MARINER ENERGY, INC.

 

The original Certificate of Incorporation was filedwith the Secretary of State of the State of Delaware on August 3, 1983 under thename Trafalgar House Oil and Gas Inc. A Certificate of Amendment was filed onJune 2, 1989 changing the name from Trafalgar House Oil and Gas Inc. to HardyOil & Gas USA Inc.  A RestatedCertificate of Incorporation changing the name of the corporation from HardyOil & Gas USA Inc. to Mariner Energy, Inc. was filed on June 12, 1996.

 

ARTICLE ONE: Name. The name of the corporation isMariner Energy, Inc. (the “Corporation”).

 

ARTICLE TWO: Address. The address of the Corporation’sregistered office in the State of Delaware is The Corporation Trust Center,1209 Orange Street, in the City of Wilmington, County of New Castle, Delaware19801. The name of the Corporation’s registered agent at such address is TheCorporation Trust Company.

 

ARTICLE THREE: Purpose. The purpose of the Corporationshall be to engage in any lawful act or activity for which corporations may beorganized under the General Corporation Law of the State of Delaware (“DGCL”).

 

ARTICLE FOUR: Stock. Thetotal number of shares of all classes of capital stock which the Corporationshall have authority to issue is 90 million shares, of which 70 million sharesshall be shares of Common Stock, par value $.0001 per share (“Common Stock”),and 20 million shares shall be shares of Preferred Stock, par value $.0001 pershare (“Preferred Stock”). Upon the effectiveness of this Second Amended andRestated Certificate of Incorporation, the 1,380 shares of Common Stock, parvalue $1.00 per share, of the Corporation that are currently issued andoutstanding, shall automatically be reclassified, changed and converted into29,748,130 shares of Common Stock, par value $.0001 per share.  The powers, designations, preferences andrelative, participating, optional or other special rights, if any, and thequalifications, limitations or restrictions of each class of capital stockshall be governed by the following provisions:

 

Section 1. PreferredStock. The Preferred Stock may be issued from time to time in one or moreseries. The Board of Directors is hereby authorized (i) to provide byresolution or resolutions from time to time for the issuance of shares ofPreferred Stock in one or more series, (ii) to establish from time to time thenumber of shares to be included in each such series, (iii) (to the extent not expresslyprovided for herein) to fix the designations, powers, preferences and relative,participating, optional or other special rights of the shares of each suchseries and the qualifications, limitations or restrictions, if any, thereof, byfiling on or more certificates pursuant to the DGCL (hereinafter, referred toas a “Preferred

 

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Stock Designation”), and (iv) to increase or decreasethe number of shares of any such series to the extent permitted by the DGCL andthe Preferred Stock Designation (but not below the number of shares thereofthen outstanding).  The authority of theBoard of Directors with respect to each series shall include, but not belimited to, determination of the following:

 

a)                                      Thedesignation of the series, which may be by distinguishing the number, letter ortitle of such series.

 

b)                                     Thenumber of shares of the series.

 

c)                                      Whetherdividends, if any, shall be paid in cash or in capital stock or othersecurities, whether such dividends shall be cumulative (and, if so, from whichdate or dates for each such series) or noncumulative, the preference orrelation which such dividends, if any, shall bear to the dividends payable onany other class or classes or any other series of capital stock, and thedividend rate, if any, of the series.

 

d)                                     Conditionsand dates upon which dividends, if any, shall be payable.

 

e)                                      Theredemption rights and redemption price or prices, if any, for shares of

the series.

 

f)                                        Theterms and amount of any sinking fund provided for the purchase or redemption ofshares of the series.

 

g)                                     Theamounts payable on and the preferences, if any, of shares of the series in theevent of any voluntary or involuntary liquidation, dissolution or winding up ofthe affairs of the Corporation.

 

h)                                     Whetherthe shares of the series shall be convertible into or exchangeable for sharesof any other class or series of capital stock, or any other security, of theCorporation or any other corporation and, if so, the specification of such otherclass or series or such other security, the conversion or exchange price orprices or rate or rates, any adjustments thereof, the date or dates at whichsuch shares shall be convertible or exchangeable and all other terms andconditions upon which such conversion or exchange may be made.

 

i)                                         Restrictionson the issuance of shares of the same series or of any other class or series.

 

j)                                         Thevoting rights, if any, of the holders of shares of the series, whether as aclass or otherwise, with respect to the election of directors or otherwise.

 

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k)                                      Theprice or other consideration for which shares of the series shall be issuedand, if deemed desirable, the stated value or other valuation of the sharesconstituting such series.

 

l)                                         Anyother relative rights, preferences and limitations of that series.

 

Section 2. Common Stock.

 

(a)                                  General.All shares of Common Stock shall be identical and will entitle holders thereofto the same rights and privileges, except as otherwise provided herein. Subjectto the prior rights and preferences, if any, applicable to shares of thePreferred Stock or any series thereof, the holders of shares of Common Stockshall be entitled to receive such dividends (payable in cash, stock, orotherwise) as may be declared thereon by the Board of Directors at any time andfrom time to time out of any funds of the Corporation legally availabletherefore.

 

(b)                                 VotingRights.

 

(i)                                     Eachregistered holder of Common Stock shall be entitled to one vote for each shareof Common Stock held by such holder.

 

(ii)                                  Exceptas otherwise provided by law, each registered holder of Common Stock shall beentitled to vote for the election of directors of the Corporation as providedfor in Section 2 of Article Five of this Second Amended and RestatedCertificate of Incorporation and shall be entitled to vote on all other matterssubmitted to a vote of stockholders of the Corporation.

 

(c)                                  Dividends.Any dividend or distribution on Common Stock shall be payable on shares ofCommon Stock ratably.

 

(d)                                 Liquidation.In the event of any voluntary or involuntary liquidation, dissolution, orwinding-up of the Corporation, after distribution in full of the preferentialamounts, if any, to be distributed to the holders of shares of Preferred Stockor any series thereof, the holders of shares of Common Stock shall be entitledto receive all of the remaining assets of the Corporation available fordistribution to its stockholders, ratably in proportion to the number of sharesof Common Stock held by them. A liquidation, dissolution, or winding-up of theCorporation, as such terms are used in this paragraph (d), shall not be deemedto be occasioned by or to include any consolidation or merger of theCorporation with or into any other corporation or corporations or other entityor a sale, lease, exchange, or conveyance of all or a part of the assets of theCorporation.

 

ARTICLE FIVE: Directors. The Board of Directors of theCorporation shall consist of such number of directors as may be determined fromtime to time by the Board of Directors in its sole discretion in accordancewith Article III of the Bylaws of the Corporation; subject, however, to therights of the holders of any series of Preferred Stock of the Corporation,

 

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as set forth in a Preferred Stock Designation, toelect additional Directors under specified circumstances and shall be subjectto the following provisions:

 

Section 1.Classification. The directors shall be divided into three classes as nearlyequal in size as is practicable, hereby designated Class I, Class II and ClassIII. The term of office of the initial Class I directors shall expire on thedate of the first annual meeting of stockholders following adoption of thisSecond Amended and Restated Certificate of Incorporation by the affirmativevote of the stockholders (the “Effective Time”), the term of office of theinitial Class II directors shall expire at the second annual meeting of thestockholders after the Effective Time and the term of office of the initialClass III directors shall expire at the third annual meeting of thestockholders after the Effective Time. At each annual stockholders’ meetingafter the Effective Time, directors to replace those of a class whose termsexpire at such annual meeting shall be elected to hold office until the thirdsucceeding annual meeting of stockholders and until their respective successorsshall have been duly elected and qualified. If the number of directors is hereafter changed, any newly createddirectorships or decrease in directorships shall be so apportioned among theclasses as to make all classes as nearly equal in number as is practicable.

 

Section 2. Election.Holders of Common Stock shall elect all directors of the Corporation (otherthan directors, if any, which holders of any series of Preferred Stock areentitled to elect pursuant to the provisions of the Preferred Stock Designationestablishing such series).

 

Section 3. WrittenBallot. The election of directors need not be by written ballot except as mayotherwise be provided in the Bylaws.

 

Section 4. CumulativeVoting: Cumulative voting for the election of directors is not allowed.

 

Section 5. Removal.Subject to the rights of the holders of any series of Preferred Stock to removedirectors under specified circumstances, (i) no director may be removed withoutcause and (ii) the affirmative vote of the holders of at least eighty percent(80%) of the voting power of all of the then-outstanding shares of the capitalstock of the Corporation entitled to vote generally in the election ofdirectors, voting together as a single class, shall be required to remove anydirector or the entire Board of Directors for cause.

 

ARTICLE SIX: Bylaws. The Board of Directors shall havethe power to adopt, amend or repeal the Bylaws of the Corporation. Anyadoption, amendment or repeal of the Bylaws of the Corporation by the Board ofDirectors shall require the approval of a majority of the total number ofauthorized directors regardless of whether there exist any vacancies in suchauthorized directorships. The stockholders shall also have the power to adopt,amend or repeal the Bylaws of the Corporation; provided, however, that, inaddition to any vote of the holders of any class or series of capital stock ofthe Corporation required by law or by this Second Amended and RestatedCertificate of Incorporation, the affirmative vote of the holders of at least

 

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eighty percent (80%) of the voting power of all of thethen-outstanding shares of the capital stock of the Corporation entitled tovote generally in the election of directors, voting together as a single class,shall be required to adopt, amend or repeal any provision of the Bylaws of theCorporation.

 

ARTICLE SEVEN: Action Without a Meeting. Any actionrequired or permitted to be taken by the stockholders of the Corporation mustbe effected at a duly called annual or special meeting of stockholders of theCorporation and may not be effected by any consent in writing by suchstockholders.

 

ARTICLE EIGHT: Vacancies. Subject to the rights of theholders of any series of Preferred Stock then outstanding, newly createddirectorships resulting from any increase in the authorized number of directorsor any vacancies in the Board of Directors resulting from death, resignation,retirement, disqualification, removal from office or other cause shall, unlessotherwise required by law or by resolution of the Board of Directors, be filledby the affirmative vote of a majority of the directors then in office, thoughless than a quorum (and not by stockholders), and directors so chosen shallhold office for a term expiring at the next annual meeting of stockholders anduntil such director’s successor shall have been duly elected and qualified. Nodecrease in the authorized number of directors shall shorten the term of anyincumbent director.

 

ARTICLE NINE: Arrangements with Creditors. Whenever acompromise or arrangement is proposed between the Corporation and its creditorsor any class of them and/or between the Corporation and its stockholders or anyclass of them, any court of equitable jurisdiction within the State of Delawaremay, on the application in a summary way of the Corporation or of any creditoror stockholder thereof or on the application of any receiver or receiversappointed for the Corporation under the provisions of Section 291 of the DGCLor on the application of trustees in dissolution or of any receiver orreceivers appointed for the Corporation under the provisions of Section 279 ofthe DGCL, order a meeting of the creditors or class of creditors, and/or of thestockholders or class of stockholders of the Corporation, as the case may be,to be summoned in such manner as the said court directs. If a majority innumber representing three-fourths in value of the creditors or class ofcreditors, and/or of the stockholders or class of stockholders of theCorporation, as the case may be, agree to any compromise or arrangement and toany reorganization of the Corporation as a consequence of such compromise orarrangement, the said compromise or arrangement and the said reorganizationshall, if sanctioned by the court to which the said application has been made,be binding on all the creditors or class of creditors, and/or on all thestockholders or class of stockholders, of the Corporation, as the case may be,and also on the Corporation.

 

ARTICLE TEN: Section 203. The Corporation elects notto be governed by Section 203 of the DGCL until the first date on which MEIAcquisitions Holdings, LLC and its current (as of the Effective Time) andfuture Affiliates (as defined in Article Thirteen of this Third Amended andRestated Certificate of Incorporation) cease to beneficially own fifteenpercent (15%) or more of the voting power of the then-outstanding shares of thecapital stock of the Corporation entitled to vote generally in the election ofdirectors, at which time Section 203 of the DGCL shall apply to theCorporation.

 

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ARTICLE ELEVEN: Liability of Directors. No director ofthe Corporation shall be liable to the Corporation or its stockholders formonetary damages for breach of fiduciary duty as a director, except forliability (i) for any breach of the director’s duty of loyalty to theCorporation or its stockholders, (ii) for acts or omissions not in good faithor which involve intentional misconduct or a knowing violation of law, (iii)under Section 174 of the DGCL, or (iv) for any transaction from which thedirector derived an improper personal benefit. If the DGCL hereafter is amendedto authorize the further elimination or limitation of the liability ofdirectors, then the liability of a director of the Corporation, in addition tothe limitation on personal liability provided herein, shall be limited to thefullest extent permitted by the amended DGCL. Any repeal or modification ofthis Article Eleven by the stockholders of the Corporation shall be prospectiveonly, and shall not adversely affect any limitation on the personal liabilityof a director of the Corporation existing at the time of such repeal ormodification.

 

ARTICLE TWELVE: Indemnification. The Corporation shallindemnify, to the full extent permitted by the laws of the State of Delaware asfrom time to time in effect, each director and officer of the Corporation, andmay indemnify each employee and agent of the Corporation, and all other personswhom the Corporation is authorized to indemnify under the provisions of theDGCL.

 

ARTICLE THIRTEEN: Corporate Opportunities. If MEIAcquisitions Holdings, LLC or any of its current (as of the Effective Time) orfuture Affiliates (except the Corporation) (collectively, the “Group”) or anydirector of the Corporation who is a director, officer or employee of the Groupacquires knowledge of a potential transaction or matter that may be a CorporateOpportunity or otherwise is then exploiting any Corporate Opportunity, theCorporation shall have no interest in, and no expectation that, such CorporateOpportunity be offered to it, any such interest or expectation being herebyrenounced so that the Group and such individuals (1) shall (i) have no duty tocommunicate or present such Corporate Opportunity to the Corporation and (ii)have the right to hold any such Corporate Opportunity for the Group’s (and itsofficers’, directors’, agents’, stockholders’, members’, partners’, Affiliates’or Subsidiaries’) own account and benefit; or to recommend, assign, orotherwise transfer or deal in such Corporate Opportunity to Persons other thanthe Corporation or any Affiliate of the Corporation and (2) cannot be, andshall not be, liable to the Corporation or its stockholders for breach of anyfiduciary duty as a stockholder or director of the Corporation by reason of thefact that the Group or any such individual pursues or acquires such CorporateOpportunity for the Group, directs, sells, assigns or otherwise transfers ordeals in such Corporate Opportunity to another Person, or does not communicateinformation regarding such Corporate Opportunity to the Corporation; provided,however, that nothing in this Article Thirteen shall change a director’s dutiesor obligations with respect to proprietary or confidential information of theCorporation or prohibit the Corporation from pursuing any CorporateOpportunity.

 

(a)                                  Definitions

 

(i)                         Affiliatemeans, as applied to a Person, any other Person directly or indirectlycontrolling, controlled by, or under common control with, that Person. Forpurposes of this definition, “control” (including, with correlative meanings,the terms “controlling,” “controlled by” and “under common control with”), asapplied to 

 

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any Person, meansthe possession, directly or indirectly, of the power to direct or cause thedirection of the management and policies of that Person, whether through theownership of voting securities, by contract or otherwise.

 

(ii)                      CapitalStock of any Person means any and all shares, interests, rights to purchase,options, warrants, participation or other equivalents of or interest in(however designated) the equity of such Person, including any preferred stock.

 

(iii)                   CorporateOpportunity means an investment or business opportunity or prospective economicor competitive advantage in which the Corporation could have an interest orexpectancy.

 

(iv)                  Person means anyindividual, firm, corporation, partnership, limited partnership, limitedliability partnership, business trust, limited liability company,unincorporated association, or joint venture or other entity, and shall includeany successor (by merger or otherwise) of such entity.

 

(v)                     Subsidiary ofany Person means any other Person of which more than fifty percent (50%) of thetotal Voting Power thereof of the Capital Stock thereof is at the time owned orcontrolled, directly or indirectly, by the first Person and/or one or more ofits Subsidiaries.

 

(vi)                  Voting Powermeans, as of the date of determination, the voting power in the general electionof directors, managers or trustees, as applicable.

 

ARTICLE FOURTEEN: Issuance of Rights. The Board ofDirectors is expressly authorized to cause the Corporation to issue rightspursuant to Section 157 of the DGCL and, in that connection, to enter into anyagreements necessary or convenient for such issuance, and to enter into otheragreements necessary and convenient to the conduct of the business of theCorporation. Any such agreement may include provisions limiting, in certaincircumstances, the ability of the Board of Directors to redeem the securitiesissued pursuant thereto or to take other action thereunder or in connectiontherewith unless there is a specified number or percentage of ContinuingDirectors then in office. Pursuant to Section 141(a) of the DGCL, ContinuingDirectors shall have the power and authority to make all decisions anddeterminations, and exercise or perform such other acts, that any suchagreement provides that such Continuing Directors shall make,  exercise or perform. For purposes of thisArticle Fourteen and any such agreement, the term, “Continuing Directors,”shall mean (1) those directors who were members of the Board of Directors atthe time the Corporation entered into such agreement and any director whosubsequently becomes a member of the Board of Directors, if such director’snomination for election or appointment to the Board of Directors is recommendedor approved by the majority vote of the Continuing Directors then in office and(2) such other members of the

 

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Board of Directors, if any, designated in, or in themanner provided in, such agreement as Continuing Directors.

 

ARTICLE FIFTEEN: Amendment. The Corporation shall havethe right, subject to any express provisions or restrictions contained in thisSecond Amended and Restated Certificate of Incorporation or the Bylaws of theCorporation, from time to time, to amend this Second Amended and RestatedCertificate of Incorporation or any provision hereof in any manner now orhereafter provided by law, and all rights and powers of any kind conferred upona director or stockholder of the Corporation by this Second Amended andRestated Certificate of Incorporation or any amendment hereof are subject tosuch right of the Corporation; provided however, that the affirmative vote ofthe holders of at least eighty percent (80%) of the voting power of all of thethen-outstanding shares of the capital stock of the Corporation entitled tovote generally in the election of directors, voting together as a single class,shall be required to amend or repeal Article Five, Six, Seven, Eight, Ten,Eleven, Twelve, Thirteen, Fourteen or Fifteen of this Second Amended andRestated Certificate of Incorporation.

 

 IN WITNESSWHEREOF, this Second Amended and Restated Certificate of Incorporation, whichrestates and integrates and further amends the provisions of the Amended andRestated Certificate of Incorporation of the Corporation, and which has beenduly adopted in accordance with Section 242 and 245 of the DGCL, has beenexecuted by its duly authorized officer this 3rd day of August, 2005.

 
|   | MARINER ENERGY,  INC. |
|--------|-----------------------|
|   |                  | ** ** |
|   |                  | ** ** |
|   | By:                   | /s/ Jesus G. Melendrez |   |
|   | Name:                 | Jesus G. Melendrez |
|   | Title:                | Vice President-Corporate Development |

 

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**CERTIFICATE OF**AMENDMENTOF**

**SECOND AMENDED AND RESTATED**

**CERTIFICATE OF**INCORPORATION****OF**

**MARINER ENERGY, INC.**

 

Mariner Energy, Inc., acorporation duly organized and existing under the General Corporation Law ofthe State of Delaware (the “Corporation”), does hereby certify that:

 

First: The amendment tothe Corporation’s Second Amended and Restated Certificate of Incorporation setforth below was duly adopted in accordance with the provisions of Section 242of the General Corporation Law of the State of Delaware and has been authorizedby the stockholders in accordance with Section 242 of the General CorporationLaw of the State of Delaware.

 

Second: The firstsentence of Article Four of the Corporation’s Certificate of Incorporation isamended to read in its entirety as follows:

 

“The total number ofshares of all classes of capital stock which the Corporation shall haveauthority to issue is 200 million shares, of which 180 million shares shall beshares of Common Stock, par value $.0001 per share (“Common Stock”), and 20million shares shall be shares of Preferred Stock, par value $.0001 per share (“PreferredStock”).”

 

IN WITNESS WHEREOF,Mariner Energy, Inc. has caused this Certificate to be executed by  its duly authorized officer on this               day of                             ,                     .

 
|   | **MARINER  ENERGY, INC.** |
|--------|---------------------------|
|   |                      |
|   |                      |
|   | By:                       |   |   |

 

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**EXHIBIT D**

**TO**

**AGREEMENT AND PLANOF MERGER**

** **

**Bylaws of theCompany**

 

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BYLAWS

 

OF

 

MARINER ENERGY, INC.

 

ARTICLE IOFFICES

 

Section 1.1                                      *Registered Office*

 

Theregistered office of Mariner Energy, Inc. (the “Corporation”) required bythe state of incorporation of the Corporation to be maintained in the state ofincorporation of the Corporation shall be the registered office named in thecertificate of incorporation of the Corporation, or such other office as may bedesignated from time to time by the Board of Directors in the manner providedby law.

 

Section 1.2                                      *Other Offices*

 

TheCorporation may also have offices at such other places both within and withoutthe state of incorporation of the Corporation as the Board of Directors mayfrom time to time determine or the business of the Corporation may require.

 

# **ARTICLE II**STOCKHOLDERS

# ** **

Section 2.1                                      *Place of Meetings*

 

Allmeetings of the stockholders shall be held at the principal office of theCorporation, or at such other place within or without the state of incorporationof the Corporation as shall be specified or fixed in the notices or waivers ofnotice thereof.

 

Section 2.2                                      *Quorum; Adjournment of Meetings*

 

Unlessotherwise required by law or provided in the certificate of incorporation ofthe Corporation or these Bylaws, (i) the holders of a majority of thestock issued and outstanding and entitled to vote thereat, present in person orrepresented by proxy, shall constitute a quorum at any meeting of stockholdersfor the transaction of business, (ii) in all matters other than theelection of directors, the affirmative vote of the holders of a majority ofsuch stock so present or represented at any meeting of stockholders at which aquorum is present shall constitute the act of the stockholders, and (iii) wherea separate vote by a class or classes is required, a majority of theoutstanding shares of such class or classes, present in person or representedby proxy shall constitute a quorum entitled to take action with respect to thatvote on that matter and the affirmative vote of the majority of the shares ofsuch class or classes present in person or represented by proxy at the meetingshall be the act of such class. The stockholders present at a 

 

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duly organized meeting may continue to transact business untiladjournment, notwithstanding the withdrawal of enough stockholders to leaveless than a quorum, subject to the provisions of clauses (ii) and (iii) above.

 

Directorsshall be elected by a plurality of the votes of the shares present in person orrepresented by proxy at the meeting and entitled to vote on the election ofdirectors.

 

Notwithstandingthe other provisions of the certificate of incorporation of the Corporation orthese Bylaws, the chairman of the meeting or the holders of a majority of theissued and outstanding stock, present in person or represented by proxy andentitled to vote thereat, at any meeting of stockholders, whether or not aquorum is present, shall have the power to adjourn such meeting from time totime, without any notice other than announcement at the meeting of the time andplace of the holding of the adjourned meeting. If the adjournment is for morethan thirty (30) days, or if after the adjournment a new record date is fixed forthe adjourned meeting, a notice of the adjourned meeting shall be given to eachstockholder of record entitled to vote at such meeting. At such adjournedmeeting at which a quorum shall be present or represented any business may betransacted that might have been transacted at the meeting as originally called.

 

Section 2.3                                      *Annual Meetings*

 

Anannual meeting of the stockholders, for the election of directors to succeedthose whose terms expire and for the transaction of such other business as mayproperly come before the meeting, shall be held at such place (within orwithout the state of incorporation of the Corporation), on such date, and atsuch time as the Board of Directors shall fix and set forth in the notice ofthe meeting, which date shall be within thirteen (13) months subsequent to thelast annual meeting of stockholders.

 

Section 2.4                                      *Special Meetings*

 

Unlessotherwise provided in the certificate of incorporation of the Corporation,special meetings of the stockholders for any purpose or purposes may be calledat any time by the Board of Directors acting pursuant to a resolution adoptedby a majority of the total number of authorized directors regardless of whetherthere exist any vacancies in such authorized directorships, and not bystockholders, at such time and at such place as may be stated in the notice ofthe meeting. Business transacted at a special meeting shall be confined to thepurpose(s) stated in the notice of such meeting.

 

Section 2.5                                      *Record Date*

 

Forthe purpose of determining stockholders entitled to notice of or to vote at anymeeting of stockholders, or any adjournment thereof, or entitled to receivepayment of any dividend or other distribution or allotment of any rights, orentitled to exercise any rights in respect of any change, conversion orexchange of stock or for the purpose of any other lawful action, the Board ofDirectors of the Corporation may fix a date as the record date for any suchdetermination of stockholders, which record date shall not precede the date onwhich the resolutions fixing the record date are adopted and which record dateshall not be more than sixty 

 

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(60) days nor less than ten (10) days before the date of suchmeeting of stockholders, nor more than sixty (60) days prior to any otheraction to which such record date relates.

 

If theBoard of Directors does not fix a record date for any meeting of thestockholders, the record date for determining stockholders entitled to noticeof or to vote at such meeting shall be at the close of business on the dayimmediately preceding the day on which notice is given, or, if in accordancewith Article VIII, Section 3 of these Bylaws notice is waived, at theclose of business on the day immediately preceding the day on which the meetingis held. The record date for determining stockholders for any other purposeshall be at the close of business on the day on which the Board of Directorsadopts the resolution relating thereto. A determination of stockholders of recordentitled to notice of or to vote at a meeting of stockholders shall apply toany adjournment of the meeting; provided, however, that the Board of Directorsmay fix a new record date for the adjourned meeting.

 

Section 2.6                                      *Notice of Meetings*

 

Writtennotice of the place, date and hour of all meetings, and, in the case of aspecial meeting, the purpose or purposes for which the special meeting iscalled, shall be given to each stockholder entitled to vote thereat not lessthan ten (10) nor more than sixty (60) days before the date of themeeting. Such notice may be delivered either personally or by mail. If mailed,notice is given when deposited in the United States mail, postage prepaid,directed to the stockholder at such stockholder’s address as it appears on therecords of the Corporation.

 

Section 2.7                                      *Nomination of Directors*

 

Onlypersons who are nominated in accordance with the following procedures shall beeligible for election as directors, except as otherwise provided in Article Eightof the Certificate of Incorporation. Nominations of persons for election to theBoard of Directors of the Corporation may be made at a meeting of stockholders (a) byor at the direction of the Board of Directors or (b) by any stockholder ofthe Corporation who is a stockholder of record at the time of giving of noticeprovided for in this Section, who shall be entitled to vote for the election ofdirectors at the meeting and who complies with the notice procedures set forthin this Section. Such nominations, other than those made by or at the directionof the Board of Directors, shall be made pursuant to timely notice in writingto the Secretary of the Corporation. To be timely, a stockholder’s notice shallbe delivered to or mailed and received at the principal executive offices ofthe Corporation (i) with respect to an election of directors to be held atthe annual meeting of the stockholders of the Corporation, not later than onehundred twenty (120) days prior to the anniversary date of the proxy statementfor the immediately preceding annual meeting of stockholders of theCorporation, and (ii) with respect to an election of directors to be heldat a special meeting of stockholders of the Corporation, not later than theclose of business on the 10th day following the day on which such notice of thedate of the special meeting was first mailed to the Corporation’s stockholdersor public disclosure of the date of the special meeting was first made,whichever first occurs. Such stockholder’s notice to the Secretary shall setforth (a) as to each person whom the stockholder proposes to nominate forelection or re-election as a director, all information relating to the personthat is required to be disclosed in solicitations for proxies for election ofdirectors, or is otherwise required, pursuant to Regulation 14A under theSecurities Exchange Act of 1934, as amended (including the written consent of 

 

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such person to be named in the proxy statement as a nominee and toserve as a director if elected); and (b) as to the stockholder giving thenotice (i) the name and address, as they appear on the Corporation’sbooks, of such stockholder, and (ii) the class and number of shares ofcapital stock of the Corporation that are beneficially owned by thestockholder. At the request of any officer of the Corporation, any personnominated by the Board of Directors for election as a director shall furnish tothe Secretary of the Corporation the information required to be set forth in a stockholder’snotice of nomination that pertains to the nominee.

 

In theevent that a person is validly designated as nominee to the Board and shallthereafter become unable or unwilling to stand for election to the Board ofDirectors, the Board of Directors or the stockholder who proposed such nominee,as the case may be, may designate a substitute nominee. Except as otherwiseprovided in Article Eight of the Certificate of Incorporation, no personshall be eligible to serve as a director of the Corporation unless nominated inaccordance with the procedures set forth in this Section. The chairman of themeeting of stockholders shall, if the facts warrant, determine and declare tothe meeting that a nomination was not made in accordance with the procedures prescribedby the Bylaws, and if the chairman should so determine, the chairman shall sodeclare to the meeting and the defective nomination shall be disregarded.

 

Notwithstandingthe foregoing provisions of this Section, a stockholder shall also comply with allapplicable requirements of the Securities Exchange Act of 1934, as amended, andthe rules and regulations thereunder with respect to the matters set forthin this Section 7.

 

Section 2.8                                      *Business to be Brought Before a Meeting of Stockholders*

 

To beproperly brought before a meeting of stockholders, business must be either (a) specifiedin the notice of meeting (or any supplement thereto) given by or at thedirection of the Board of Directors, (b) otherwise brought before themeeting by or at the direction of the Board of Directors, or (c) otherwiseproperly brought before an annual meeting by a stockholder of the Corporationwho is a stockholder of record at the time of giving of notice provided for inthis Section, who shall be entitled to vote at such annual meeting and whocomplies with the notice procedures set forth in this Section. In addition toany other applicable requirements, for business to be brought before an annualmeeting by a stockholder of the Corporation, the stockholder must have giventimely notice thereof in writing to the Secretary of the Corporation. To betimely, a stockholder’s notice must be delivered to or mailed and received atthe principal executive offices of the Corporation, not less than one hundredtwenty (120) days prior to the anniversary date of the proxy statement for thepreceding annual meeting of stockholders of the Corporation. A stockholder’snotice to the Secretary shall set forth as to each matter (i) a briefdescription of the business desired to be brought before the annual meeting andthe reasons for conducting such business at the annual meeting, (ii) thename and address, as they appear on the Corporation’s books, of the stockholderproposing such business, (iii) the acquisition date, the class and thenumber of shares of voting stock of the Corporation which are ownedbeneficially by the stockholder, (iv) any material interest of thestockholder in such business, and (v) a representation that thestockholder intends to appear in person or by proxy at the annual meeting tobring the proposed business before the meeting.

 

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Section 2.9                                      *Stockholder List*

 

Acomplete list of stockholders entitled to vote at any meeting of stockholders,arranged in alphabetical order for each class of stock and showing the addressof each such stockholder and the number of shares registered in the name ofsuch stockholder, shall be open to the examination of any stockholder, for anypurpose germane to the meeting, during ordinary business hours, for a period ofat least ten (10) days prior to the meeting, either at a place within thecity where the meeting is to be held, which place shall be specified in thenotice of the meeting, or, if not so specified, at the place where the meetingis to be held.

 

Thestockholder list shall also be produced and kept at the time and place of themeeting during the whole time thereof, and may be inspected by any stockholderwho is present.

 

Section 2.10                                *Proxies*

 

Eachstockholder entitled to vote at a meeting of stockholders may authorize anotherperson or persons to act for him by proxy. Proxies for use at any meeting of stockholders shall be filed with theSecretary, or such other officer as the Board of Directors may from time totime determine by resolution, before or at the time of the meeting. All proxiesshall be received and taken charge of and all ballots shall be received andcanvassed by the secretary of the meeting, who shall decide all questionstouching upon the qualification of voters, the validity of the proxies, and theacceptance or rejection of votes, unless an inspector or inspectors shall havebeen appointed by the chairman of the meeting, in which event such inspector orinspectors shall decide all such questions.

 

Noproxy shall be valid after three (3) years from its date, unless the proxyprovides for a longer period. Each proxy shall be revocable unless expresslyprovided therein to be irrevocable and coupled with an interest sufficient inlaw to support an irrevocable power.

 

Shoulda proxy designate two or more persons to act as proxies, unless such instrumentshall provide the contrary, a majority of such persons present at any meetingat which their powers thereunder are to be exercised shall have and mayexercise all the powers of voting thereby conferred, or if only one be present,then such powers may be exercised by that one; or, if an even number attend anda majority do not agree on any particular issue, each proxy so attending shallbe entitled to exercise such powers in respect of such portion of the shares asis equal to the reciprocal of the fraction equal to the number of proxiesrepresenting such shares divided by the total number of shares represented bysuch proxies.

 

Section 2.11                                *Voting; Elections; Inspectors*

 

Unlessotherwise required by law or provided in the certificate of incorporation ofthe Corporation, each stockholder shall on each matter submitted to a vote at ameeting of stockholders have one vote for each share of the stock entitled tovote which is registered in his name on the record date for the meeting. Forthe purposes hereof, each election to fill a directorship shall constitute aseparate matter. Shares registered in the name of another entity, domestic orforeign, may be voted by such officer, agent or proxy as the organizationaldocuments of such entity may determine. Shares registered in the name of adeceased person may be voted by the executor or administrator of such person’sestate, either in person or by proxy. All voting, except as required by thecertificate of incorporation of the Corporation or 

 

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where otherwise required by law, may be by a voice vote; provided,however, upon request of the chairman of the meeting or upon demand therefor bystockholders holding a majority of the issued and outstanding stock present inperson or by proxy at any meeting a stock vote shall be taken. Every stock voteshall be taken by written ballots, each of which shall state the name of thestockholder or proxy voting and such other information as may be required underthe procedure established for the meeting. All elections of directors shall beby written ballots, unless otherwise provided in the certificate ofincorporation of the Corporation.

 

At anymeeting at which a vote is taken by written ballots, the chairman of themeeting may appoint one or more inspectors, each of whom shall subscribe anoath or affirmation to execute faithfully the duties of inspector at suchmeeting with strict impartiality and according to the best of such inspector’sability. Such inspector shall receive the written ballots, count the votes, andmake and sign a certificate of the result thereof. The chairman of the meetingmay appoint any person to serve as inspector, except no candidate for theoffice of director shall be appointed as an inspector.

 

Unlessotherwise provided in the certificate of incorporation of the Corporation,cumulative voting for the election of directors shall be prohibited.

 

Section 2.12                                *Conduct of Meetings*

 

Themeetings of the stockholders shall be presided over by the Chairman of theBoard or such other officer of the Corporation as designated by the Chairman ofthe Board or the Board of Directors. The Secretary of the Corporation, ifpresent, shall act as secretary of such meetings, or, if the Secretary is notpresent, such other officer of the Corporation as designated by the Board ofDirectors or the chairman of the meeting shall so act.

 

Thechairman of any meeting of stockholders shall determine the order of businessand the procedure at the meeting, including such regulation of the manner ofvoting and the conduct of discussion as seem to the chairman in order.

 

Section 2.13                                *Treasury Stock*

 

TheCorporation shall not vote, directly or indirectly, shares of its own stockowned by it and such shares shall not be counted for quorum purposes.

 

Nothingin this Section 13 shall be construed as limiting the right of theCorporation to vote stock, including but not limited to its own stock, held byit in a fiduciary capacity.

 

# **ARTICLE III**BOARD OF DIRECTORS

# ** **

Section 3.1                                      *Power; Number; Term of Office*

 

Thebusiness and affairs of the Corporation shall be managed by or under thedirection of the Board of Directors, and, subject to the restrictions imposed bylaw or the certificate of 

 

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incorporation of the Corporation, the Board of Directors may exerciseall the powers of the Corporation.

 

Unlessotherwise provided in the certificate of incorporation of the Corporation, thenumber of directors which shall constitute the whole Board of Directors shallbe determined from time to time by the Board of Directors (provided that nodecrease in the number of directors which would have the effect of shorteningthe term of an incumbent director may be made by the Board of Directors). Ifthe Board of Directors makes no such determination, the number of directorsshall be three. Each director shall hold office for the term for which suchdirector is elected, and until such director’s successor shall have beenelected and qualified or until such director’s earlier death, resignation orremoval.

 

TheBoard of Directors may elect one of its members to serve as the Chairman of theBoard. If elected, the Chairman of the Board shall have such powers and dutiesas designated in these Bylaws and as from time to time may be assigned to himor her by the Board of Directors.

 

Unlessotherwise provided in the certificate of incorporation of the Corporation,directors need not be stockholders nor residents of the state of incorporationof the Corporation.

 

Section 3.2                                      *Quorum; Voting*

 

Unlessotherwise provided in the certificate of incorporation of the Corporation, aquorum of the Board of Directors shall be deemed to be present at any meetingif a majority of the total number of directors are present at the meeting. Thevote of a majority of the directors present at a meeting at which a quorum ispresent shall be the act of the Board of Directors.

 

Section 3.3                                      *Place of Meetings; Order of Business*

 

Thedirectors may hold their meetings and may have an office and keep the books ofthe Corporation, except as otherwise provided by law, in such place or places,within or without the state of incorporation of the Corporation, as the Boardof Directors may from time to time determine. At all meetings of the Board ofDirectors business shall be transacted in such order as shall from time to timebe determined by the Chairman of the Board, or in the Chairman of the Board’sabsence by the Chief Executive Officer (should the Chief Executive Officer be adirector), or in the Chief Executive Officer’s absence by the President (shouldthe President be a director), or in the President’s absence by such officer ofthe Corporation as designated by the Board of Directors, or by a majority ofthe Board of Directors.

 

Section 3.4                                      *First Meeting*

 

Eachnewly elected Board of Directors may hold its first meeting for the purpose oforganization and the transaction of business, if a quorum is present,immediately after and at the same place as the annual meeting of thestockholders. Notice of such meeting shall not be required. At the firstmeeting of the Board of Directors in each year at which a quorum shall bepresent, held next after the annual meeting of stockholders, the Board ofDirectors shall elect the  officers ofthe Corporation.

 

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Section 3.5                                      *Regular Meetings*

 

Regularmeetings of the Board of Directors shall be held at such times and places asshall be designated from time to time by the Chairman of the Board or, in theabsence of the Chairman of the Board, by the Chief Executive Officer (shouldthe Chief Executive Officer be a director), or in the Chief Executive Officer’sabsence, by the President (should the President be a director), or in thePresident’s absence, by such officer of the Corporation as designated by theBoard of Directors, or by a majority of the Board of Directors. Notice of suchregular meetings shall not be required.

 

Section 3.6                                      *Special Meetings*

 

Specialmeetings of the Board of Directors may be called by the Chairman of the Board,the Chief Executive Officer (should the Chief Executive Officer be a director),the President (should the President be a director) or such other officer of theCorporation as designated by the Board of Directors, or, on the written requestof any two directors, by the Secretary, in each case on at least twenty-four(24) hours’ personal, written, telegraphic, cable or wireless notice to eachdirector. Such notice, or any waiver thereof pursuant to Article VIII, Section 3of these Bylaws, need not state the purpose or purposes of such meeting, exceptas may otherwise be required by law or provided for in the certificate ofincorporation of the Corporation or these Bylaws. Meetings may be held at anytime without notice if all the directors are present or if those not presentwaive notice of the meeting in writing.

 

Section 3.7                                      *Compensation*

 

Unlessotherwise restricted by the certificate of incorporation of the Corporation,the Board of Directors shall have the authority to fix the compensation ofdirectors.

 

Section 3.8                                      *Action Without a Meeting; Telephone Conference Meeting*

 

Unlessotherwise restricted by the certificate of incorporation of the Corporation,any action required or permitted to be taken at any meeting of the Board ofDirectors or any committee designated by the Board of Directors may be takenwithout a meeting if all members of the Board of Directors or committee, as thecase may be, consent thereto in writing, and the writing or writings are filedwith the minutes of proceedings of the Board of Directors or committee.

 

Suchconsent shall have the same force and effect as a unanimous vote at a meeting,and may be stated as such in any document or instrument filed with theSecretary of State of the state of incorporation of the Corporation.

 

Unlessotherwise restricted by the certificate of incorporation of the Corporation,subject to the requirement for notice of meetings, members of the Board ofDirectors, or members of any committee designated by the Board of Directors,may participate in a meeting of such Board of Directors or committee, as thecase may be, by means of a conference telephone connection or similarcommunications equipment by means of which all persons participating in themeeting can hear each other, and participation in such a meeting shallconstitute presence in person at such meeting, except where a personparticipates in the meeting for the express purpose of objecting to the transactionof any business on the ground that the meeting is not lawfully called orconvened.

 

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Section 3.9                                      *Approval or Ratification of Acts or Contracts by Stockholders*

 

TheBoard of Directors in its discretion may submit any act or contract forapproval or ratification at any annual meeting of the stockholders, or at anyspecial meeting of the stockholders called for the purpose of considering anysuch act or contract, and any act or contract that shall be approved or beratified by the vote of the stockholders holding a majority of the issued andoutstanding shares of stock of the Corporation entitled to vote and present inperson or by proxy at such meeting (provided that a quorum is present) shall beas valid and as binding upon the Corporation and upon all the stockholders asif it has been approved or ratified by every stockholder of the Corporation.

 

# **ARTICLE IV**COMMITTEES

# ** **

Section 4.1                                      *Designation; Powers*

 

TheBoard of Directors may, by resolution passed by a majority of the whole board,designate one or more committees, including, if they shall so determine, anexecutive committee, with each such committee to consist of one or more of thedirectors of the Corporation. Except as otherwise provided by the certificateof incorporation of the Corporation or applicable law, any such designatedcommittee shall have and may exercise such of the powers and authority of theBoard of Directors in the management of the business and affairs of theCorporation as may be provided in such resolution. Any such designatedcommittee may authorize the seal of the Corporation to be affixed to all paperswhich may require it. In addition to the above, such committee or committeesshall have such other powers and limitations of authority as may be determinedfrom time to time by the Board of Directors.

 

Section 4.2                                      *Procedure; Meetings; Quorum*

 

Anycommittee designated pursuant to this Article IV shall keep regularminutes of its actions and proceedings in a book provided for that purpose andreport the same to the Board of Directors at its meeting next succeeding suchaction, shall fix its own rules or procedures, and shall meet at suchtimes and at such place or places as may be provided by such rules, or by suchcommittee or the Board of Directors. Should a committee fail to fix its ownrules, the provisions of these Bylaws, pertaining to the calling of meetingsand conduct of business by the Board of Directors, shall apply as nearly as maybe possible. At every meeting of any such committee, a quorum shall be presentif a majority of all the members of the committee are present. The affirmativevote of a majority of the members present at a meeting at which there is aquorum shall be necessary for the adoption by it of any resolution.

 

Section 4.3                                      *Substitution and Removal of Members; Vacancies*

 

TheBoard of Directors may designate one or more directors as alternate members ofany committee, who may replace any absent or disqualified member at any meetingof such committee. In the absence or disqualification of a member of acommittee, the member or members present at any meeting and not disqualifiedfrom voting, whether or not constituting a quorum, may unanimously appointanother member of the Board of Directors to act at the 

 

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meeting in the place of the absent or disqualified member. The Board ofDirectors shall have the power at any time to remove any member(s) of acommittee and to appoint other directors in lieu of the person(s) so removedand shall also have the power to fill vacancies in a committee.

 

# **ARTICLE V**OFFICERS

# ** **

Section 5.1                                      *Number, Titles and Term of Office*

 

Theofficers of the Corporation shall be a Chief Executive Officer, President,Chief Operating Officer, one or more Vice Presidents (any one or more of whommay be designated Executive Vice President or Senior Vice President), a GeneralCounsel, a Treasurer, a Secretary, and such other officers as the Board ofDirectors may from time to time elect or appoint. If the Board of Directors soelects, it may designate the Chairman of the Board, if any, as an officer.

 

Eachofficer shall hold office until such officer’s successor shall be duly electedand shall qualify or until such officer’s death or until such officer shallresign or shall have been removed. Any number of offices may be held by thesame person, unless the certificate of incorporation of the Corporation provideotherwise. Except for the Chairman of the Board in the case where the Chairmanof the Board is designated an officer, no officer need be a director.

 

Section 5.2                                      *Powers and Duties of the Chief Executive Officer*

 

Subjectto the direction and control of the Board of Directors, the Chief ExecutiveOfficer shall have general executive charge, management and control of theproperties, business and operations of the Corporation with all such powers asmay be reasonably incident to such responsibilities; may agree upon and executeall leases, contracts, evidences of indebtedness and other obligations in thename of the Corporation and may sign all certificates for shares of capitalstock of the Corporation; and shall have such other powers and duties asdesignated in accordance with these Bylaws and as from time to time may beassigned to the Chief Executive Officer by the Board of Directors or theChairman of the Board.

 

Section 5.3                                      *Powers and Duties of the President*

 

Unlessthe Board of Directors otherwise determines and subject to the authority of theChief Executive Officer, the President shall have general responsibility forthe management and control of the operations of the Corporation with all suchpowers as may be reasonably incident to such responsibilities; may agree uponand execute all leases, contracts, evidences of indebtedness and other obligationsin the name of the Corporation; and shall have such other powers and duties asdesignated in accordance with these Bylaws and as from time to time may beassigned to the President by the Board of Directors, the Chairman of the Boardor the Chief Executive Officer.

 

Section 5.4                                      *Powers and Duties of Chief Operating Officer*

 

Unlessthe Board of Directors otherwise determines and subject to the authority of theChief Executive Officer and the President, the Chief Operating Officer shallhave general 

 

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responsibility for the management and control of the operations of theCorporation with all such powers as may be reasonably incident to suchresponsibilities; may agree upon and execute all leases, contracts, evidencesof indebtedness and other obligations in the name of the Corporation; and shallhave such other powers and duties as designated in accordance with these Bylawsand as from time to time may be assigned to the Chief Operating Officer by the Boardof Directors, the Chairman of the Board, the Chief Executive Officer or thePresident.

 

Section 5.5                                      *Vice Presidents*

 

EachVice President shall have such powers and duties as from time to time may beassigned to such Vice President by the Board of Directors, the Chairman of theBoard, the Chief Executive Officer, the President or such other officer asdesignated by the Board of Directors.

 

Section 5.6                                      *General Counsel*

 

TheGeneral Counsel shall act as legal advisor to the Corporation. The GeneralCounsel may have one or more staff attorneys and assistants, and may retainother attorneys to conduct the legal affairs and litigation of the Corporationunder the General Counsel’s supervision.

 

Section 5.7                                      *Secretary*

 

TheSecretary shall keep the minutes of all meetings of the Board of Directors,committees of the Board of Directors and the stockholders, in books providedfor that purpose; shall attend to the giving and serving of all notices; may inthe name of the Corporation affix the seal of the Corporation to all contractsand attest the affixation of the seal of the Corporation thereto; may sign withthe other appointed officers all certificates for shares of capital stock ofthe Corporation; shall have charge of the certificate books, transfer books andstock ledgers, and such other books and papers as the Board of Directors maydirect, all of which shall at all reasonable times be open to inspection of anydirector upon application at the office of the Corporation during businesshours; shall have such other powers and duties as designated in these Bylawsand as from time to time may be assigned to the Secretary by the Board ofDirectors, the Chairman of the Board, the Chief Executive Officer, thePresident or such other officer as designated by the Board of Directors andshall in general perform all acts incident to the office of Secretary, subjectto the direction and control of the Board of Directors, the Chairman of theBoard, the Chief Executive Officer, the President or such other officer asdesignated by the Board of Directors.

 

Section 5.8                                      *Treasurer*

 

TheTreasurer shall have responsibility for the custody and control of all thefunds and securities of the Corporation, and shall have such other powers andduties as designated in these Bylaws and as from time to time may be assignedto the Treasurer by the Board of Directors, the Chairman of the Board, theChief Executive Officer, the President or such other officer as designated bythe Board of Directors. The Treasurer shall perform all acts incident to theposition of Treasurer, subject to the direction and control of the Board ofDirectors, the Chairman of the Board, the Chief Executive Officer, thePresident and such other officer as designated by the Board of Directors; andthe Treasurer shall, if required by the Board of Directors, give such bond 

 

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for the faithful discharge of the Treasurer’s duties in such form asthe Board of Directors may require.

 

Section 5.9                                      *Action with Respect to Securities of Other Corporations*

 

Unlessotherwise directed by the Board of Directors, the Chairman of the Board, theChief Executive Officer, the President or such other officer as designated bythe Board of Directors, together with the Secretary or any assistant Secretaryappointed by the Board of Directors shall have power to vote and otherwise acton behalf of the Corporation, in person or by proxy, at any meeting of securityholders of or with respect to any action of security holders of any othercorporation in which this Corporation may hold securities and otherwise toexercise any and all rights and powers which this Corporation may possess byreason of its ownership of securities in such other corporation.

 

Section 5.10                                *Delegation*

 

Forany reason that the Board of Directors may deem sufficient, the Board ofDirectors may, except where otherwise provided by statute, delegate the powersor duties of any officer to any other person, and may authorize any officer todelegate specified duties of such office to any other person. Any suchdelegation or authorization by the Board shall be effected from time to time byresolution of the Board of Directors.

 

# **ARTICLE VI**INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS

# ** **

Section 6.1                                      *Indemnification*

 

Eachperson who was or is made a party or is threatened to be made a party to or isinvolved in any action, suit or proceeding, whether civil, criminal,administrative or investigative (hereinafter a “proceeding”), by reason of thefact that he or she, or a person of whom he or she is the legal representative,is or was a director or officer of the Corporation or is or was serving at therequest of the Corporation as a director or officer of another corporation orof a partnership, joint venture, trust or other enterprise, including servicewith respect to employee benefit plans, whether the basis of such proceeding isalleged action in an official capacity as a director, officer, employee oragent or in any other capacity while serving as a director, officer, employeeor agent, shall be indemnified and held harmless by the Corporation to thefullest extent authorized by the DGCL, as the same exists or may hereafter beamended (but, in the case of any such amendment, only to the extent that suchamendment permits the Corporation to provide broader indemnification rightsthan said law permitted the Corporation to provide prior to such amendment),against all expense, liability and loss (including attorneys’ fees, judgments,fines, ERISA excise taxes or penalties and amounts paid or to be paid insettlement) reasonably incurred or suffered by such person in connectiontherewith and such indemnification shall continue as to a person who has ceasedto be a director, officer, employee or agent and shall inure to the benefit ofhis or her heirs, executors and administrators; provided, however, that exceptas provided in Article VI, Section 2 of these Bylaws, the Corporationshall indemnify any such person seeking indemnification in connection with aproceeding (or part thereof) initiated by such person only if such proceeding(or part thereof) was authorized by the Board of 

 

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Directors of the Corporation. The right to indemnification conferred inthis paragraph of Article VI shall be a contract right and shall includethe right to be paid by the Corporation the expenses incurred in defending anysuch proceeding in advance of its final disposition; provided, however, that ifthe DGCL requires, the payment of such expenses incurred by a director orofficer in his or her capacity as a director or officer (and not in any othercapacity in which service was or is rendered by such person while a director orofficer, including, without limitation, service to an employee benefit plan) inadvance of the final disposition of a proceeding shall be made only upondelivery to the Corporation of an undertaking, by or on behalf of such directoror officer, to repay all amounts so advanced if it shall ultimately bedetermined that such director or officer is not entitled to be indemnifiedunder this Article VI or otherwise.

 

TheCorporation may indemnify any person who was or is a party or is threatened tobe made a party to any threatened, pending or completed action, suit orproceeding, whether civil, criminal, administrative or investigative (whetheror not an action by or in the right of the Corporation) by reason of the factthat the person is or was an employee (other than an officer) or agent of theCorporation, or, while serving as an employee (other than an officer) or agentof the Corporation, is or was serving at the request of the Corporation as adirector, officer, employee or agent of another corporation, partnership, jointventure, trust or other enterprise, to the extent (i) permitted by thelaws of the State of Delaware as from time to time in effect, and (ii) authorizedin the sole discretion of the Chief Executive Officer and a Vice President ofthe Corporation (the Chief Executive Officer and the Vice President soauthorizing such indemnification, the “Authorizing Officers”). The Corporationmay, to the extent permitted by Delaware law and authorized in the solediscretion of the Authorizing Officers, pay expenses (including attorneys’fees) reasonably incurred by any such employee or agent in defending any civil,criminal, administrative or investigative action, suit or proceeding in advanceof the final disposition of such action, suit or proceeding, upon such termsand conditions as the Authorizing Officers authorizing such expense advancementdetermine in their sole discretion. The provisions of this paragraph of Article VIshall not constitute a contract right for any such employee or agent.

 

Section 6.2                                      *Suit*

 

If aclaim under Article VI, Section 1 of these Bylaws is not paid in fullby the Corporation within thirty (30) days after a written claim has beenreceived by the Corporation, the claimant may at any time thereafter bring suitagainst the Corporation to recover the unpaid amount of the claim and, ifsuccessful in whole or in part, the claimant shall be entitled to be paid alsothe expense of prosecuting such claim. It shall be a defense to any such action(other than an action brought to enforce a claim for expenses incurred indefending any proceeding in advance of its final disposition where the requiredundertaking, if any is required, has been tendered to the Corporation) that theclaimant has not met the standards of conduct which make it permissible underthe Delaware General Corporation Law for the Corporation to indemnify theclaimant for the amount claimed, but the burden of proving such defense shallbe on the Corporation. Neither the failure of the Corporation (including theBoard of Directors, independent legal counsel, or its stockholders) to havemade a determination prior to the commencement of such action thatindemnification of the claimant is proper in the circumstances because he orshe has met the applicable standard of conduct set forth in the DelawareGeneral Corporation Law, nor an actual determination by the Corporation(including its Board of 

 

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Directors, independent legal counsel, or its stockholders) that theclaimant has not met such applicable standard of conduct, shall be a defense tothe action or create a presumption that the claimant has not met the applicablestandard of conduct.

 

Section 6.3                                      *Nonexclusivity of Rights*

 

Theright to indemnification and the payment of expenses incurred in defending aproceeding in advance of its final disposition conferred in this Article VIshall not be exclusive of any other right which any person may have orhereafter acquire under any statute, provision of the certificate ofincorporation of the Corporation, these Bylaws, agreement, vote of stockholdersor disinterested directors or otherwise.

 

Section 6.4                                      *Insurance*

 

TheCorporation may maintain insurance, at its expense, to protect itself and anydirector, employee, agent or consultant of the Corporation or anothercorporation, partnership, joint venture, trust or other enterprise against anysuch expense, liability or loss, whether or not the Corporation would have thepower to indemnify such person against such expense, liability or loss underthe Delaware General Corporation Law.

 

Section 6.5                                      *Savings Clause*

 

Ifthis Article VI or any portion hereof shall be invalidated on any groundby any court of competent jurisdiction, then the Corporation shall neverthelessindemnify and hold harmless each director and officer of the Corporation, as tocosts, charges and expenses (including attorneys’ fees), judgments, fines, andamounts paid in settlement with respect to any action, suit or proceeding,whether civil, criminal, administrative or investigative to the full extentpermitted by any applicable portion of this Article VI that shall not havebeen invalidated and to the fullest extent permitted by applicable law.

 

Section 6.6                                      *Definitions*

 

Forpurposes of this Article VI, reference to the “Corporation” shall include,in addition to the Corporation, any constituent corporation (including anyconstituent of a constituent) absorbed in a consolidation or merger prior to(or, in the case of an entity specifically designated in a resolution of theBoard of Directors, after) the adoption hereof and which, if its separateexistence had continued, would have had the power and authority to indemnifyits directors, officers and employees or agents, so that any person who is orwas a director, officer, employee or agent of such constituent corporation, oris or was serving at the request of such constituent corporation as a director,officer, employee or agent of another corporation, partnership, joint venture,trust or other enterprise, shall stand in the same position under theprovisions of this Article VI with respect to the resulting or survivingcorporation as he would have with respect to such constituent corporation ifits separate existence had continued.

 

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# **ARTICLE VII**CAPITAL STOCK

# ** **

Section 7.1                                      *Certificates of Stock*

 

TheBoard of Directors may provide by resolution or resolutions that some or all ofany or all classes or series of its capital stock shall be uncertificatedshares. The certificates for shares of the capital stock of the Corporationshall be in such form, not inconsistent with that required by law and thecertificate of incorporation of the Corporation, as shall be approved by theBoard of Directors. Every holder of capital stock represented by certificatesshall be entitled to have a certificate signed by or in the name of theCorporation by the Chairman of the Board, the Chief Executive Officer,President, a Vice President or such other officer as designated by the Board ofDirectors and the Secretary or an assistant Secretary or the Treasurer or an assistantTreasurer of the Corporation representing the number of shares (and, if thecapital stock of the Corporation shall be divided into classes or series,certifying the class and series of such shares) owned by such stockholder whichare registered in certified form; provided, however, that any of or all thesignatures on the certificate may be facsimile. The stock record books and theblank stock certificate books shall be kept by the Secretary or at the officeof such transfer agent or transfer agents as the Board of Directors may fromtime to time determine. In case any officer, transfer agent or registrar whoshall have signed or whose facsimile signature or signatures shall have beenplaced upon any such certificate or certificates shall have ceased to be suchofficer, transfer agent or registrar before such certificate is issued by theCorporation, such certificate may nevertheless be issued by the Corporationwith the same effect as if such person were such officer, transfer agent orregistrar at the date of issue. The stock certificates shall be consecutivelynumbered and shall be entered in the books of the Corporation as they areissued and shall exhibit the holder’s name and number of shares.

 

Section 7.2                                      *Transfer of Shares*

 

Inrespect of certificated shares of capital stock, such shares of capital stockof the Corporation shall be transferable only on the books of the Corporationby the holders thereof in person or by their duly authorized attorneys or legalrepresentatives upon surrender and cancellation of certificates for a likenumber of shares. Upon surrender to the Corporation or a transfer agent of theCorporation of such certificate for shares duly endorsed or accompanied byproper evidence of succession, assignment or authority to transfer, it shall bethe duty of the Corporation to issue a new certificate to the person entitledthereto, cancel the old certificate and record the transaction upon its books.In respect of uncertificated shares of capital stock, such shares of capitalstock of the Corporation shall be transferable only on the books of theCorporation by the holders thereof in person or by their duly authorizedattorneys or legal representatives upon the compliance with such rules andprocedures as may be proscribed by the Board of Directors, the Chairman of theBoard, the Chief Executive Officer, the President or such other officer asdesignated by the Board of Directors.

 

Section 7.3                                      *Ownership of Shares*

 

TheCorporation shall be entitled to treat the holder of record of any share orshares of capital stock of the Corporation as the holder in fact thereof and,accordingly, shall not be bound 

 

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to recognize any equitable or other claim to or interest in such shareor shares on the part of any other person, whether or not it shall have expressor other notice thereof, except as otherwise provided by the laws of the stateof incorporation of the Corporation.

 

Section 7.4                                      *Regulations Regarding Certificates*

 

TheBoard of Directors shall have the power and authority to make all such rules andregulations as they may deem expedient concerning the issue, transfer andregistration or the replacement of certificates for shares of capital stock ofthe Corporation.

 

Section 7.5                                      *Lost or Destroyed Certificates*

 

TheBoard of Directors may determine the conditions upon which the Corporation mayissue a new certificate for shares of capital stock in place of a certificatetheretofore issued by it which is alleged to have been lost, stolen or destroyedand may require the owner of such certificate or such owner’s legalrepresentative to give bond, with surety sufficient to indemnify theCorporation and each transfer agent and registrar against any and all losses orclaims which may arise by reason of the alleged loss, theft or destruction ofany such certificate or the issuance of such new certificate in the place ofthe one so lost, stolen or destroyed.

 

# **ARTICLE VIII**MISCELLANEOUS PROVISIONS

# ** **

Section 8.1                                      *Fiscal Year*

 

Thefiscal year of the Corporation shall begin on the first day of January ofeach year.

 

Section 8.2                                      *Corporate Seal*

 

Thecorporate seal shall be circular in form and shall have inscribed thereon thename of the Corporation and the state of its incorporation, which seal shall bein the charge of the Secretary and shall be affixed to certificates of stock,debentures, bonds, and other documents, in accordance with the direction of theBoard of Directors or a committee thereof, and as may be required by law;however, the Secretary may, if the Secretary deems it expedient, have afacsimile of the corporate seal inscribed on any such certificates of stock,debentures, bonds, contract or other documents.

 

Section 8.3                                      *Notice and Waiver of Notice*

 

Wheneverany notice is required to be given by law, the certificate of incorporation ofthe Corporation or under the provisions of these Bylaws, said notice shall bedeemed to be sufficient if given (i) by telegraphic, cable or wirelesstransmission (including by telecopy or facsimile transmission) or (ii) bydeposit of the same in a post office box or by delivery to an overnight courierservice company in a sealed prepaid wrapper addressed to the person entitledthereto at such person’s post office address, as it appears on the records ofthe Corporation, and such notice shall be deemed to have been given on the dayof such transmission or mailing or delivery to courier, as the case may be.

 

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Whenevernotice is required to be given by law, the certificate of incorporation of theCorporation or under any of the provisions of these Bylaws, a written waiverthereof, signed by the person entitled to notice, whether before or after thetime stated therein, shall be deemed equivalent to notice. Attendance of aperson, including without limitation a director, at a meeting shall constitutea waiver of notice of such meeting, except when the person attends a meetingfor the express purpose of objecting, at the beginning of the meeting, to thetransaction of any business because the meeting is not lawfully called orconvened. Neither the business to be transacted at, nor the purpose of, anyregular or special meeting of the stockholders, directors, or members of acommittee of directors need be specified in any written waiver of notice unlessso required by the certificate of incorporation of the Corporation or theseBylaws.

 

Section 8.4                                      *Facsimile Signatures*

 

Inaddition to the provisions for the use of facsimile signatures elsewherespecifically authorized in these Bylaws, facsimile signatures of any officer orofficers of the Corporation may be used whenever and as authorized by the Boardof Directors.

 

Section 8.5                                      *Reliance upon Books, Reports and Records*

 

Amember of the Board of Directors, or a member of any committee designated bythe Board of Directors, shall, in the performance of such person’s duties, beprotected to the fullest extent permitted by law in relying upon the records ofthe Corporation and upon information, opinions, reports or statements presentedto the Corporation.

 

Section 8.6                                      *Application of Bylaws*

 

In theevent that any provisions of these Bylaws is or may be in conflict with any lawof the United States, of the state of incorporation of the Corporation or ofany other governmental body or power having jurisdiction over the Corporation,or over the subject matter to which such provision of these Bylaws applies, ormay apply, such provision of these Bylaws shall be inoperative to the extentonly that the operation thereof unavoidably conflicts with such law orprovision, and shall in all other respects be in full force and effect.

 

# **ARTICLE IX**AMENDMENTS

# ** **

TheBoard of Directors shall have the power to adopt, amend and repeal from time totime these Bylaws, subject to the right of the stockholders entitled to votewith respect thereto to amend or repeal such Bylaws as adopted or amended bythe Board of Directors.

 

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**EXHIBIT ETOAGREEMENT AND PLAN OF MERGER**

 

**Part A– Relocation Benefits**

 

All of the followingbenefits:

 

A relocation allowancepayable in a lump sum cash payment in an amount equal to (i) in the caseof a salaried Continuing Spinco Employee, three Months of Pay (as defined in Part Bof this Exhibit but determined based on the base monthly rate of pay ineffect as of the date of the relocation), or (ii) in the case of an hourlyContinuing Spinco Employee, 12 Weeks of Pay (as defined in Part B of this Exhibit butdetermined based on the scheduled hours of work and rate of pay in effect as ofthe date of the relocation).

 

The reasonable costs ofshipping the employee’s household goods and personal effects from the employee’sprincipal residence immediately prior to the time of the relocation (the “priorlocation”) to the location of the employee’s principal residence immediatelyafter the relocation.  Included is thecost of packing and unpacking the household goods and personal effects,transportation and insurance of those items while in transit, and normalappliance connection at destination.

 

The actual cost of realestate sales commissions, at a rate not to exceed the standard local salescommission rate, and other reasonable and customary closing costs incurred inthe sale of the employee’s primary residence at the prior location.  In addition, if the employee purchases a newprimary residence in the area of his relocation within one year after the dateof the relocation, then the employee will be reimbursed for the reasonable andcustomary closing costs incurred by the employee in connection with suchpurchase (including mortgage points (but not in excess of one total point) andrelated fees, title company fees, etc.).

 

The actual cost incurredin terminating a lease or rental obligation for the employee’s primaryresidence at the prior location in an amount not to exceed one year’slease.  The lesser of required remaininglease payments or lease cancellation fee will be reimbursed.

 

Actual reasonabletransportation, lodging, meals and miscellaneous expenses for the employee andhis spouse, if any, for one trip from the prior location to the area ofrelocation to search for a new primary residence.

 

Actual reasonabletemporary living expenses in the area of relocation if the employer requiresthe employee to begin his assignment in the new location prior to the employeehaving had a reasonable opportunity to secure a new primary residence at thenew location.

 

**Part B– Severance Benefits**

 

Salaried ContinuingSpinco Employees – One-half Month of Pay per Year of Service, with a minimum ofsix Months of Pay and a maximum of 12 Months of Pay.  “Month of Pay” means the employee’s basemonthly rate of pay, excluding overtime, bonuses, commissions, premium pay,shift differentials, employee benefits, expense reimbursements, and similaramounts.  A 

 

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salaried ContinuingSpinco Employee’s base monthly rate of pay shall be determined based upon thehighest rate in effect (1) immediately prior to the Effective Time, (2) 60days prior to the date of such employee’s termination of employment, or (3) thedate of such employee’s termination of employment.

 

Hourly Continuing SpincoEmployees – Two Weeks of Pay per Year of Service, with a minimum of 26 Weeks ofPay and a maximum of 52 Weeks of Pay.  “Weekof Pay” means the employee’s regular hourly rate of pay multiplied by hisregularly scheduled hours per week; provided, however, that if the employee isworking a regular rotational schedule immediately prior to his terminationof employment, then “Week of Pay” shall mean the sum of such employee’s regularhourly rate of pay multiplied by his regularly scheduled straight-time hoursper week plus his regular overtime rate of pay multiplied by his regularlyscheduled overtime hours per week.  Anhourly Continuing Spinco Employee’s Week of Pay shall be the greatest of theamounts determined to be in effect (1) immediately prior to the EffectiveTime, (2) 60 days prior to the date of such employee’s termination ofemployment, or (3) the date of such employee’s termination of employment.

 

“Year of Service” meanseach continuous year (365 days) of service with Forest, Spinco, the Company orany of their Subsidiaries without a break in service.  Any fractional or partial Year of Serviceshall be rounded up to the nearest full year.

 

Severance benefits aresubject to reduction as described in Section 6.8(e) of theAgreement.  Severance benefits shall bepaid in a single lump sum cash payment on or before the fifth business dayafter the release described in Section 6.8(a) or 6.8(e), asapplicable, of the Agreement becomes effective. The maximum aggregate severanceamount payable by the Company to the Continuing Spinco Employees pursuant to Section 6.8is $5,370,000.

 

**Part C- Retention Benefits**

 

The maximum amount payableby Spinco or the Company for the payment of, or reimbursement of Forest for,Retention Benefits pursuant to Section 6.8(g) is $2,660,000.

 

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**EXHIBIT FTOAGREEMENT AND PLAN OF MERGER**

 

**RULE 145 AFFILIATE LETTER**

 

Forest Oil Corporation

707 17th Street, Suite 3600

Denver, Colorado 80202

 

Ladies and Gentlemen:

 

Referenceis made to the Agreement and Plan of Merger (the “Merger Agreement”) dated asof September 9, 2005, is among Forest Oil Corporation, a New Yorkcorporation (“Forest”), SML Wellhead Corporation, a Delaware corporation and awholly owned subsidiary of Forest (“Spinco”), Mariner Energy, Inc., aDelaware corporation (the “Company”), and MEI Sub, Inc., a Delawarecorporation and a wholly owned subsidiary of the Company (“Merger Sub”),pursuant to which Merger Sub will be merged with and into Spinco (the “Merger”).

 

Theundersigned understands that for purposes of Rule 145 promulgated underthe Securities Act of 1933 (the “Act”) he may be deemed to be an underwriterwith respect to the Shares (as defined below). The undersigned is delivering this letter of undertaking and commitmentpursuant to Section 6.14 of the Merger Agreement.

 

Withrespect to such securities of the Company as may be received by the undersignedpursuant to the Merger Agreement (the “Shares”), the undersigned represents toand agrees with the Company that:

 

A.                                   Theundersigned will not make any offer to sell or any sale, transfer or otherdisposition of all or any part of the Shares in violation of the Act or the rules andregulations thereunder, including Rule 145, and will hold all the Sharessubject to all applicable provisions of the Act and the rules andregulations thereunder.

 

B.                                     Theundersigned has been advised that the offering, sale and delivery of the Sharesto the undersigned pursuant to the Merger Agreement will be registered underthe Act on a Registration Statement on Form S 4.  The undersigned has also been advised andagrees, however, that, since the undersigned may be deemed an underwriter ofthe Shares, the undersigned may not offer, sell, pledge, hypothecate, transferor otherwise dispose of any of the Shares except (i) in a transactionpermitted by Rule 145 under the Act, or (ii) pursuant to an effectiveregistration statement under the Act or (iii) in a transaction that, inthe opinion of counsel, reasonably satisfactory to the Company, is not requiredto be registered under the Act.

 

C.                                     Theundersigned understands and agrees that neither the Company nor any of itscurrent or future affiliates is under any obligation to register the sale,transfer or 

 

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otherdisposition of any Shares by the undersigned or on the undersigned’s behalfunder the Act or to take any other action necessary in order to make compliancewith an exemption from such registration available.

 

D.                                    Theundersigned also understands that the Company will give stop transferinstructions to its transfer agents with respect to the Shares and that therewill be placed on the certificates for the Shares, or any substitutionstherefor, a legend stating in substance:

 

“THESECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED TO OR TRANSFERREDTO THE REGISTERED HOLDER AS A RESULT OF A TRANSACTION TO WHICH RULE 145 UNDERTHE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), MAY APPLY AND SUCHSECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT (i) INA TRANSACTION PERMITTED BY RULE 145 UNDER THE ACT, AND AS TO WHICH THE ISSUERHAS RECEIVED REASONABLE SATISFACTORY EVIDENCE OF COMPLIANCE WITH RULE 145, OR (ii) PURSUANTTO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR (iii) IN ATRANSACTION WHICH, IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THEISSUER, IS NOT REQUIRED TO BE REGISTERED UNDER THE ACT.”

 

It is understood and agreed that the legend set forthin paragraph (D) above shall be removed by delivery of substitutecertificates without such legend at such time as the Company receives anopinion of counsel reasonably satisfactory to the Company that the undersigned (i) isnot an affiliate of and (ii) otherwise may transfer the Shares withoutrestriction under Rule 145(d)(3) of the Act.

 

If any of the undersigned’s Shares are initiallyissued to the undersigned in the Merger in other than certificated form, theundersigned agrees that following the Merger the undersigned will have suchShares issued in certificated form so that the legend provided for above may beplaced on the certificates.

 

E.                                      Theundersigned also understands that unless the transfer by the undersigned of anyShares has been registered under the Act or is a sale made in conformity withthe provisions of Rule 145 under the Act, the Company reserves the rightto place the following legend on the certificates issued to any transferee:

 

“THESECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THESECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO RECEIVED SUCHSECURITIES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIESACT OF 1933, AS AMENDED, MAY APPLY. THE SECURITIES HAVE NOT BEEN ACQUIRED BY THE HOLDER WITH A VIEW TO, ORFOR RESALE 

 

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INCONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF SUCH ACT AND MAY NOTBE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVEREGISTRATION STATEMENT OR IN ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATIONREQUIREMENTS OF SUCH ACT.

 

It isunderstood and agreed that the legend set forth in paragraph (E) aboveshall be removed by delivery of substitute certificates without such legend atsuch time as the Company receives an opinion of counsel reasonably satisfactoryto the Company that the holder (i) is not an affiliate of the Company and (ii) otherwisemay transfer the Shares without restriction under Rule 145(d)(3) ofthe Act.

 

Theundersigned acknowledges that (i) the undersigned has carefully read thisletter and the Merger Agreement and discussed the requirements of suchdocuments and other applicable limitations upon the undersigned’s ability tosell, transfer or otherwise dispose of the Shares, to the extent theundersigned felt necessary, with the undersigned’s counsel or counsel forSpinco and (ii) the receipt by the Company of this letter is an inducementand a condition to the Company’s obligation to consummate the Merger.

 

Executionof this letter shall not be considered an admission on the part of theundersigned that the undersigned is an underwriter of the Shares for purposesof Rule 145 under the Act or as a waiver of any rights the undersigned mayhave to any claim that the undersigned is not such an underwriter on or afterthe date of this letter.

 

Verytruly yours,

 

 

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