Exhibit 10.1


MEMBERSHIP
INTEREST PURCHASE AGREEMENT


dated
as of May 24, 2007


among


Forest
Alaska Holding LLC,


As
Seller;


Forest
Alaska Operating LLC,


As
the Company;


Forest Oil Corporation


(for purposes of Sections 7.6, 7.14, 10.1 and
Article XII only)


AND


Pacific
Energy Resources Ltd.


As
Buyer
















TABLE OF CONTENTS


	
  

  	
   

  	
   

  	
   

  	
  Page

  	
   

  
	
  ARTICLE
  I

  	
   

  	
  DEFINITIONS

  	
   

  	
  1

  	
   

  
	
  ARTICLE
  II

  	
   

  	
  EFFECTIVE DATE;
  CLOSING

  	
   

  	
  7

  	
   

  
	
  2.1

  	
   

  	
  Effective Date;
  Closing

  	
   

  	
  7

  	
   

  
	
  2.2

  	
   

  	
  Proceedings at
  Closing

  	
   

  	
  8

  	
   

  
	
  ARTICLE
  III

  	
   

  	
  SALE AND
  PURCHASE OF MEMBERSHIP INTERESTS; CONSIDERATION

  	
   

  	
  8

  	
   

  
	
  3.1

  	
   

  	
  Sale and
  Purchase of Membership Interests

  	
   

  	
  8

  	
   

  
	
  3.2

  	
   

  	
  Amount and Form
  of Consideration

  	
   

  	
  8

  	
   

  
	
  3.3

  	
   

  	
  Payment of
  Consideration

  	
   

  	
  8

  	
   

  
	
  3.4

  	
   

  	
  Price
  Adjustments

  	
   

  	
  8

  	
   

  
	
  ARTICLE
  IV

  	
   

  	
  REPRESENTATIONS
  AND WARRANTIES OF THE SELLER AND THE COMPANY

  	
   

  	
  9

  	
   

  
	
  4.1

  	
   

  	
  Organization and
  Power

  	
   

  	
  9

  	
   

  
	
  4.2

  	
   

  	
  Authorizations;
  Execution and Validity

  	
   

  	
  10

  	
   

  
	
  4.3

  	
   

  	
  Capitalization

  	
   

  	
  10

  	
   

  
	
  4.4

  	
   

  	
  Financial
  Statements; Other Financial Data

  	
   

  	
  10

  	
   

  
	
  4.5

  	
   

  	
  Consents

  	
   

  	
  11

  	
   

  
	
  4.6

  	
   

  	
  No Defaults or
  Conflicts

  	
   

  	
  11

  	
   

  
	
  4.7

  	
   

  	
  Agreements,
  Contracts and Commitments

  	
   

  	
  11

  	
   

  
	
  4.8

  	
   

  	
  Litigation

  	
   

  	
  12

  	
   

  
	
  4.9

  	
   

  	
  Taxes

  	
   

  	
  12

  	
   

  
	
  4.10

  	
   

  	
  Fees

  	
   

  	
  13

  	
   

  
	
  4.11

  	
   

  	
  Absence of
  Certain Changes or Events

  	
   

  	
  13

  	
   

  
	
  4.12

  	
   

  	
  Compliance with
  Laws

  	
   

  	
  14

  	
   

  
	
  4.13

  	
   

  	
  Transactions
  with Related Parties

  	
   

  	
  14

  	
   

  
	
  4.14

  	
   

  	
  Books and
  Records

  	
   

  	
  14

  	
   

  
	
  4.15

  	
   

  	
  Information
  Furnished

  	
   

  	
  14

  	
   

  
	
  4.16

  	
   

  	
  Directors and
  Officers

  	
   

  	
  14

  	
   

  
	
  4.17

  	
   

  	
  Bank Accounts

  	
   

  	
  14

  	
   

  
	
  4.18

  	
   

  	
  Owned Real
  Property

  	
   

  	
  15

  	
   

  
	
  4.19

  	
   

  	
  Leased Real
  Property

  	
   

  	
  15

  	
   

  
	
  4.20

  	
   

  	
  Intentionally
  left blank

  	
   

  	
  15

  	
   

  
	
  4.21

  	
   

  	
  Title to Oil and
  Gas Properties

  	
   

  	
  15

  	
   

  
	
  4.22

  	
   

  	
  Environmental
  Matters

  	
   

  	
  16

  	
   

  
	
  4.23

  	
   

  	
  Bonding Matters

  	
   

  	
  17

  	
   

  
	
  4.24

  	
   

  	
  Insurance

  	
   

  	
  17

  	
   

  
	
  4.25

  	
   

  	
  ERISA

  	
   

  	
  17

  	
   

  
	
  4.26

  	
   

  	
  Condition of
  Assets

  	
   

  	
  17

  	
   

  
	
  4.27

  	
   

  	
  Lease Operating
  Expenses

  	
   

  	
  17

  	
   

  
	
  4.28

  	
   

  	
  Hedging
  Transactions

  	
   

  	
  17

  	
   

  
	
  4.29

  	
   

  	
  Prepayment Premium; Total Company Debt

  	
   

  	
  18

  	
   

  
	
  ARTICLE
  V

  	
   

  	
  REPRESENTATIONS
  AND WARRANTIES OF SELLER

  	
   

  	
  18

  	
   

  
	
  5.1

  	
   

  	
  Organization and
  Good Standing

  	
   

  	
  18

  	
   

  
	
  5.2

  	
   

  	
  Authorization of
  Agreement

  	
   

  	
  18

  	
   

  



 



 i
 









 


	
  5.3

  	
   

  	
  Conflicts,
  Consents of Third Parties

  	
   

  	
  18

  	
   

  
	
  5.4

  	
   

  	
  Brokers

  	
   

  	
  19

  	
   

  
	
  5.5

  	
   

  	
  Litigation

  	
   

  	
  19

  	
   

  
	
  5.6

  	
   

  	
  Ownership of
  Membership Interests

  	
   

  	
  19

  	
   

  
	
  5.7

  	
   

  	
  Tax Status

  	
   

  	
  19

  	
   

  
	
  5.8

  	
   

  	
  Marketable Title

  	
   

  	
  19

  	
   

  
	
  ARTICLE
  VI

  	
   

  	
  REPRESENTATIONS
  AND WARRANTIES OF BUYER

  	
   

  	
  19

  	
   

  
	
  6.1

  	
   

  	
  Organization and
  Good Standing

  	
   

  	
  19

  	
   

  
	
  6.2

  	
   

  	
  Authorization of
  Agreement

  	
   

  	
  20

  	
   

  
	
  6.3

  	
   

  	
  Conflicts,
  Consents of Third Parties

  	
   

  	
  20

  	
   

  
	
  6.4

  	
   

  	
  No Default

  	
   

  	
  20

  	
   

  
	
  6.5

  	
   

  	
  Litigation

  	
   

  	
  20

  	
   

  
	
  6.6

  	
   

  	
  Investment
  Intent

  	
   

  	
  20

  	
   

  
	
  6.7

  	
   

  	
  Disclosure of
  Information

  	
   

  	
  20

  	
   

  
	
  6.8

  	
   

  	
  Funding
  Commitments

  	
   

  	
  21

  	
   

  
	
  6.9

  	
   

  	
  Brokers

  	
   

  	
  21

  	
   

  
	
  ARTICLE
  VII

  	
   

  	
  ADDITIONAL
  AGREEMENTS

  	
   

  	
  21

  	
   

  
	
  7.1

  	
   

  	
  Further Actions

  	
   

  	
  21

  	
   

  
	
  7.2

  	
   

  	
  Conduct of
  Business Pending Closing

  	
   

  	
  21

  	
   

  
	
  7.3

  	
   

  	
  Title Defects

  	
   

  	
  22

  	
   

  
	
  7.4

  	
   

  	
  Environmental
  Defects

  	
   

  	
  24

  	
   

  
	
  7.5

  	
   

  	
  Gas Imbalances

  	
   

  	
  25

  	
   

  
	
  7.6

  	
   

  	
  Access to
  Information

  	
   

  	
  26

  	
   

  
	
  7.7

  	
   

  	
  Regulatory
  Approvals

  	
   

  	
  26

  	
   

  
	
  7.8

  	
   

  	
  Agreement to
  Defend

  	
   

  	
  26

  	
   

  
	
  7.9

  	
   

  	
  Other Actions

  	
   

  	
  26

  	
   

  
	
  7.10

  	
   

  	
  LIMITATION AND
  DISCLAIMER OF IMPLIED REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
  SELLER

  	
   

  	
  26

  	
   

  
	
  7.11

  	
   

  	
  Change of
  Company Name

  	
   

  	
  27

  	
   

  
	
  7.12

  	
   

  	
  Account
  Signatories

  	
   

  	
  27

  	
   

  
	
  7.13

  	
   

  	
  Cooperation with
  Financing

  	
   

  	
  27

  	
   

  
	
  7.14

  	
   

  	
  Hedge Assumption

  	
   

  	
  28

  	
   

  
	
  ARTICLE
  VIII

  	
   

  	
  CONDITIONS TO
  CLOSING

  	
   

  	
  28

  	
   

  
	
  8.1

  	
   

  	
  Buyer’s
  Conditions

  	
   

  	
  28

  	
   

  
	
  8.2

  	
   

  	
  Seller’s
  Conditions

  	
   

  	
  29

  	
   

  
	
  ARTICLE
  IX

  	
   

  	
  DELIVERIES AT
  CLOSING

  	
   

  	
  29

  	
   

  
	
  9.1

  	
   

  	
  Deliveries by
  Seller to Buyer

  	
   

  	
  29

  	
   

  
	
  9.2

  	
   

  	
  Deliveries by
  Buyer to Seller and the Company

  	
   

  	
  30

  	
   

  
	
  ARTICLE
  X

  	
   

  	
  TRANSITION
  OPERATIONS

  	
   

  	
  31

  	
   

  
	
  10.1

  	
   

  	
  Transition
  Operations

  	
   

  	
  31

  	
   

  
	
  ARTICLE
  XI

  	
   

  	
  TERMINATION

  	
   

  	
  31

  	
   

  
	
  11.1

  	
   

  	
  Termination

  	
   

  	
  31

  	
   

  
	
  11.2

  	
   

  	
  Effect of
  Termination

  	
   

  	
  32

  	
   

  



 



 ii
 









 


	
  ARTICLE XII

  	
   

  	
  INDEMNIFICATION

  	
   

  	
  32

  	
   

  
	
  12.1

  	
   

  	
  Seller and FOC
  Indemnification

  	
   

  	
  32

  	
   

  
	
  12.2

  	
   

  	
  Buyer
  Indemnification

  	
   

  	
  32

  	
   

  
	
  12.3

  	
   

  	
  Indemnification
  Procedures

  	
   

  	
  32

  	
   

  
	
  12.4

  	
   

  	
  Limits on
  Indemnification

  	
   

  	
  33

  	
   

  
	
  ARTICLE
  XIII

  	
   

  	
  TAXES

  	
   

  	
  34

  	
   

  
	
  13.1

  	
   

  	
  Sales and Use
  Taxes; Property Taxes

  	
   

  	
  34

  	
   

  
	
  13.2

  	
   

  	
  Tax Proceedings

  	
   

  	
  35

  	
   

  
	
  13.3

  	
   

  	
  Real and
  Personal Property Taxes

  	
   

  	
  35

  	
   

  
	
  13.4

  	
   

  	
  Property Tax
  Reporting

  	
   

  	
  35

  	
   

  
	
  13.5

  	
   

  	
  Production Taxes

  	
   

  	
  35

  	
   

  
	
  13.6

  	
   

  	
  Income Taxes

  	
   

  	
  36

  	
   

  
	
  13.7

  	
   

  	
  Purchase Price
  Allocation

  	
   

  	
  36

  	
   

  
	
  ARTICLE
  XIV

  	
   

  	
  GENERAL

  	
   

  	
  36

  	
   

  
	
  14.1

  	
   

  	
  Governing Law;
  Choice of Forum

  	
   

  	
  36

  	
   

  
	
  14.2

  	
   

  	
  Amendments

  	
   

  	
  36

  	
   

  
	
  14.3

  	
   

  	
  Waivers

  	
   

  	
  36

  	
   

  
	
  14.4

  	
   

  	
  Notices

  	
   

  	
  36

  	
   

  
	
  14.5

  	
   

  	
  Successors and
  Assigns, Parties in Interest

  	
   

  	
  37

  	
   

  
	
  14.6

  	
   

  	
  Severability

  	
   

  	
  37

  	
   

  
	
  14.7

  	
   

  	
  Entire Agreement

  	
   

  	
  37

  	
   

  
	
  14.8

  	
   

  	
  Schedules

  	
   

  	
  38

  	
   

  
	
  14.9

  	
   

  	
  Remedies

  	
   

  	
  38

  	
   

  
	
  14.10

  	
   

  	
  Expenses

  	
   

  	
  38

  	
   

  
	
  14.11

  	
   

  	
  Release of
  Information; Confidentiality

  	
   

  	
  38

  	
   

  
	
  14.12

  	
   

  	
  Certain
  Construction Rules

  	
   

  	
  38

  	
   

  
	
  14.13

  	
   

  	
  Counterparts

  	
   

  	
  39

  	
   

  



 



 iii















 


MEMBERSHIP
INTEREST PURCHASE AGREEMENT


This Membership Interest Purchase Agreement dated as
of May 24, 2007 (the “Agreement”) is entered into by and among Pacific Energy
Resources Ltd., a Delaware corporation (“Buyer”), Forest Alaska Operating LLC,
a Delaware limited liability company (the “Company”), Forest Alaska Holding
LLC, a Delaware limited liability company (“Seller”), and, for purposes of
Sections 7.6, 7.14, 10.1 and Article XII only, Forest Oil Corporation, a New
York corporation (“FOC”) pertaining to the purchase and sale of 100% of the
membership interests of the Company.


WHEREAS, the Seller owns all the outstanding
membership interests (the “Membership Interests”) of the Company; and


WHEREAS, Buyer desires to purchase from Seller and
Seller desires to sell to Buyer all of the Membership Interests on the terms
and subject to the conditions set forth in this Agreement.


NOW, THEREFORE, in consideration of the mutual
agreements, representations, warranties and subject to the conditions contained
herein, the parties hereto hereby agree as follows:


ARTICLE I


DEFINITIONS


As used in this Agreement:


“Affiliate” means, as to any Person, a Person that,
directly or indirectly, controls, is controlled by, or is under common control
with such Person.


“Aggregate Title Defect Value” has the meaning
specified in Section 7.3(d).


“Aggregate Environmental Defect Value” has the meaning
specified in Section 7.4(c).


“Agreement” has the meaning specified in the preamble
hereof.


“Allocated Values” means the allocation of values of
the Oil and Gas Properties included in the Ownership Interests set forth on
Exhibit “A-2” attached hereto.  The
Allocated Values for each Oil and Gas Property has been agreed to by Buyer and
Seller and represents a good faith allocation of value of the Oil and Gas
Properties.


“Base Purchase Price” has the meaning specified in
Section 3.2.


“Basket Amount” has the meaning specified in Section
11.4(a).


“Buyer” has the meaning specified in the preamble
hereof.



 1
 









“CERCLA” has the meaning specified in the definition
of “Environmental Laws.”


“CERCLIS” means the Comprehensive Environmental
Response, Compensation and Liability Information System List.


“Closing” has the meaning specified in Section 2.1.


“Closing Date” has the meaning specified in Section
2.1.


“Closing Date Amounts” means the aggregate of the
amounts set forth in Subsections 3.3(a)(i), (ii) and (iii).


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


“Company” has the meaning specified in the preamble
hereof.


“Company Debt” means (a) all indebtedness of the
Company for the repayment of borrowed money, whether or not represented by
bonds, debentures, notes or similar instruments, all accrued and unpaid
interest thereon, and, solely with respect to the Credit Agreement, all unpaid
premiums, prepayment penalties, fees and other amounts; (b) all other
indebtedness of the Company evidenced by bonds, debentures, notes or similar
instruments, including all accrued and unpaid interest thereon, including
intercompany debt; and (c) all obligations of the Company as lessee under
capital leases as determined in accordance with GAAP.


“Company’s Senior Lender” means Credit Suisse.


“Confidentiality Agreement” means that certain
Confidentiality Agreement by and between Forest Oil Corporation and Buyer dated
March 8, 2007.


“Contract” means any contract, agreement, indenture,
note, bond, loan, instrument, lease, conditional sale contract, mortgage,
license, franchise, insurance policy or commitment, whether written or oral.


“Credit Agreement” means the First Lien Credit
Agreement and the Second Lien Credit Agreement, each dated as of December 8,
2006 (together with all ancillary agreements) by and among the Company, as
Borrower, the Company’s Senior Lender, and certain other financial
institutions, as Lenders (as amended and supplemented as of the date hereof).


“Defensible Title” means such right, title and
interest that is (a) with respect to Ownership Interests of record, evidenced
by an instrument or instruments filed of record in accordance with the conveyance
and recording laws of the applicable jurisdiction to the extent necessary to
give the Company and Buyer, through its ownership of the Membership Interests,
the right to enjoy the benefits of possession of the Ownership Interests
reflected on Exhibit “A”, and, with respect to Ownership Interests not yet
earned under a farmout agreement, if any, is described in and subject to a
farmout agreement containing terms and provisions reasonably consistent with
terms and provisions used in the domestic oil and gas business and under which
there exists no default by the Company and (b) subject to Permitted Liens, free
and clear of all Liens, claims, infringements, and other burdens.



 2
 









“DGCL” means the Delaware General Corporation Law.


“Effective Date” has the meaning specified in Section
2.1.


“Environmental Defect” has the meaning specified in
Section 7.4(b).


“Environmental Law” means any Law of any Governmental
Authority whose purpose is to conserve or protect human health, the
environment, wildlife or natural resources, including, without limitation, the
Clean Air Act, as amended, the Federal Water Pollution Control Act, as amended,
the Rivers and Harbors Act of 1899, as amended, the Safe Drinking Water Act, as
amended, the Comprehensive Environmental Response, Compensation and Liability
Act, as amended (“CERCLA”), the Superfund Amendments and Reauthorization Act of
1986, as amended, the Resource Conservation and Recovery Act of 1976, as
amended, the Hazardous and Solid Waste Amendments Act of 1984, as amended, the
Toxic Substances Control Act, as amended, the Hazardous Materials
Transportation Act, as amended, and Title 18 of the Alaska Administrative Code.


“Financial Statements” has the meaning specified in
Section 4.4.


“FOC” has the meaning specified in the preamble
hereof.


“GAAP” means accounting principles generally accepted
in the United States of America, as in effect from time to time and applied on
a consistent basis.


“Governmental Authority” means any federal, state,
provincial, local or foreign government or governmental regulatory body and any
of their respective subdivisions, agencies, instrumentalities, authorities,
courts or tribunals.


“Hazardous Material” means (a) any “hazardous
substance,” as defined by CERCLA; (b) any “hazardous waste” as defined by the
Resource Conservation and Recovery Act, as amended; or (c) petroleum, petroleum
hydrocarbons, or any fraction or byproducts thereof.


“Hedging Transaction” means any futures, hedge, swap,
collar, put, call, floor, cap, option or other contract that is intended to
benefit from, relate to or reduce or eliminate the risk of fluctuations in the
price of commodities, including Hydrocarbons, interest rates, currencies or
securities.


“Hydrocarbons” means oil, condensate, gas, casinghead
gas and other liquid or gaseous hydrocarbons.


“Income Taxes” means all taxes, assessments, levies or
other charges, including any interest, penalties and additions thereto which
are imposed upon a Party (whether disputed or not), and


i.              which are based or assessed upon a Party’s capital,
income or receipts, including, without limitation, federal, state, local or
foreign income, franchise and gross receipts Taxes assessed by a Governmental
Authority (but only to the extent the same are assessed upon income or
receipts), and



 3
 









ii.             any payroll taxes, capital taxes or
withholding taxes, or any other taxes, assessments, levies or other charges
which are imposed by a Governmental Authority other than Property Taxes.


“Indemnified Party” has the meaning specified in
Section 12.3(a).


“Indemnifying Party” has the meaning specified in
Section 12.3(a).


“Injunction” means a temporary restraining order,
preliminary or permanent injunction or other order issued by a court of
competent jurisdiction, an order of a Governmental Entity having jurisdiction
over any Party hereto, or any legal restraint or prohibition.


“Knowledge”, with respect to any entity, means
knowledge of such entity’s executive officers, after reasonable investigation.


“Lands” has the meaning specified in the definition of
“Oil and Gas Properties.”


“Law” means any federal, state, provincial, municipal,
local or foreign law, statute, rule, rule, writ, order, decree, ordinance, code
or regulation.


“Leases” has the meaning specified the definition of “Oil
and Gas Properties.”


“Legal Proceeding” means any judicial, administrative
or arbitral action, suit, proceeding (public or private), litigation,
investigation, complaint, claim or governmental proceeding.


“Lien” means any lien, pledge, mortgage, deed of
trust, security interest, attachment, right of first refusal, option, easement,
covenant, encroachment, or any other adverse claim whatsoever.


“Litigation” means the Legal Proceedings, Orders and
Official Actions listed on Schedule 4.8.


“Losses” has the meaning specified in Section 12.1.


“Material Adverse Effect” means:


(i)            As to Buyer, any breach of Buyer’s
representations and warranties, which individually or in the aggregate with
other breaches would materially impair Buyer’s ability to consummate the
transactions contemplated by this Agreement or prevent the consummation of any
of the transactions contemplated hereby.


(ii)           As to 
Seller, any breach of Seller’s representations and warranties, which
individually or in the aggregate with other breaches would materially impair
Seller’s ability to consummate the transactions contemplated by this Agreement
or prevent the consummation of any of the transactions contemplated hereby.


(iii)          As to the Company, (A) any breach of
the Company’s representations and warranties which individually or in the
aggregate with other breaches, would result in a 



 4
 









decrease in the Company’s
value by an amount greater or equal to five percent (5%) of the Purchase Price,
or (B) any change in its financial condition or results of operations which has
or would, with the passage of time, result in a decrease in the Company’s value
by an amount greater or equal to five percent (5%) of the Purchase Price; provided,
however, that any effect, direct or indirect, occasioned by a decline in
the price of crude oil or natural gas, whether in global, national or local
markets shall be excluded from any Material Adverse Effect calculation
hereunder.


“Material Contracts” has the meaning specified in
Section 4.7.


“Membership Interests” has the meaning specified in
the preamble hereof.


“Notification Deadline” has the meaning specified in
Section 7.3(a).


“Official Action” shall mean any domestic or foreign
decision, order, writ, injunction, decree, judgment, award or any
determination, both as presently existing and effective or presently existing
and as may become effective in the future, by any court, administrative body,
or other tribunal.


“Oil and Gas Properties” means all right, title,
interest and estate, real or personal, recorded or unrecorded, movable or
immovable, tangible or intangible, in and to: (i) oil and gas leases, oil, gas
and mineral leases, subleases and other leaseholds, royalties, overriding
royalties, net profit interests, mineral fee interests, carried interests and
other properties and interests (the “Leases”) and the lands covered thereby (“Land(s)”)
and any and all oil, gas, water or injection wells thereon or applicable
thereto (the “Wells”); (ii) any pools or units which include all or a part of
any Land or include any Well (the “Units”) and including without limitation all
right, title and interest in production from any such Unit, whether such Unit
production comes from wells located on or off of the Lands, and all tenements,
hereditaments and appurtenances belonging to, used or useful in connection with
the Leases, Lands and Units; (iii) interests under or derived from all
contracts, agreements and instruments applicable to or by which such properties
are bound or created, to the extent applicable to such properties, including,
but not limited to, operating agreements, gathering agreements, marketing
agreements (including commodity swap, collar and/or similar derivative
agreements), transportation agreements, processing agreements, unitization,
pooling and communitization agreements, declarations and orders, joint venture
agreements, and farmin and farmout agreements; (iv) easements, permits,
licenses, servitudes, rights-of-way, surface leases and other surface rights
appurtenant to, and used or held for use to the extent applicable to such
properties; and (v) equipment, machinery, fixtures and other tangible personal
property and improvements located on or used or obtained in connection with
such properties.  Attached hereto as
Exhibit “A” is a description of the Oil and Gas Properties.  The respective “net revenue interest” and “working
interest” of the Company in the Oil and Gas Properties described on Exhibit “A”
(the “Ownership Interests”) shall be a part of the definition of “Oil and Gas
Properties.”


“Order” means any order, judgment, Injunction, ruling,
writ, award, decree, statute, law, ordinance, rule or regulation.



 5
 









“Ownership Interests” has the meaning specified in the
definition of “Oil and Gas Properties.”


“Party” mean Seller, the Company, FOC, the Buyer or
any permitted successor or assignee thereof.


“Permit” means any permit, license, certificate
(including a certificate of occupancy) registration, authorization,
application, filing, notice, qualification, waiver of any of the foregoing or
approval of a Governmental Authority.


“Permitted Liens” means:  (a) Liens for Taxes that are not yet due and
payable or that are being contested in good faith by appropriate proceedings
and as to which adequate reserves have been established in accordance with
GAAP, (b) operators’ liens and statutory liens for labor and materials, where
payment is not due (or that, if delinquent, are being contested in good faith);
(c) operating agreements, unit agreements, unitization and pooling designations
and declarations, gathering and transportation agreements, processing agreements,
gas, oil and liquids purchase, sale and exchange agreements and other
contracts, agreements and installments; (d) statutory or regulatory authority
of governmental agencies; (e) easements, surface leases and rights, plat
restrictions, pipelines, grazing, logging, canals, ditches, reservoirs,
telephone lines, power lines, railways and similar encumbrances that have not
materially affected or interrupted, and are not reasonably expected to
materially affect or interrupt, the claimed ownership of the party, the
operation of the Oil and Gas Properties or the receipt of production revenues
from the Oil and Gas Properties affected thereby; (f) liens, charges,
encumbrances and irregularities in the chain of title which, because of
remoteness in or passage of time, statutory cure periods, marketable title acts
or other similar reasons, have not materially affected or interrupted, and are
not reasonably expected to materially affect or interrupt, the claimed
ownership of the party, the operation of the Oil and Gas Properties or the
receipt of production revenues from the Oil and Gas Properties affected
thereby; and (g) other liens set forth in Schedule 4.21.


“Person” means any natural person, corporation,
partnership, limited liability company, trust, unincorporated organization,
Governmental Authority, or other entity.


“Property Taxes” means all federal, state or local
taxes, assessments, levies or other charges, which are imposed upon the Oil and
Gas Properties or other real and personal property owned by the Company,
including, without limitation, ad valorem, property, documentary or stamp, as
well as any interest, penalties and fines assessed or due in respect of any
such taxes, whether disputed or not.


“Production Taxes” means all federal, state or local
taxes, assessments, levies or other charges, which are imposed upon production
from the Oil and Gas Properties, including, without limitation, excise taxes on
production, severance or gross production, as well as any interest, penalties
and fines assessed or due in respect of any such taxes, whether disputed or
not.


“Purchase Price” has the meaning specified in Section
3.2.


“Real Property Leases” has the meaning specified in
Section 4.19.


“Related Party” means (i) any Affiliate of the Company
or Seller.



 6
 









“Schedule” means a disclosure schedule provided by
Seller to Buyer pursuant to this Agreement.


“Securities Act” means the Securities Act of 1933, as
amended.


“Seller” has the meaning specified in the preamble
hereof.


“Subsidiaries” means, with respect to any Person, each
entity as to which such Person (either alone or through or together with any
other Subsidiary) (i) owns beneficially or of record or has the power to vote
or control, 50% or more of the voting securities of such entity or of any class
of equity interests of such entity the holders of which are ordinarily entitled
to vote for the election of the members of the Board of Directors or other
persons performing similar functions, (ii) in the case of partnerships, serves
as a general partner, (iii) in the case of a limited liability company, serves
as a managing member or owns a majority of the equity interests or (iv)
otherwise has the ability to elect a majority of the directors, trustees or
managing members thereof.


“Taxes” means, collectively, Income Taxes, Property
Taxes and Production Taxes.


“Tax Return” means any return, report, information
statement, or similar statement required to be filed with respect to any Taxes
(including any attached schedules), including, without limitation, any
information return, claim for refund, amended return and declaration of
estimated Tax.


“Title Defect” has the meaning specified in Section
7.3(a).


“Title Defect Value” means, with respect to each Title
Defect, the reduction of the Allocated Value of the affected Ownership Interest
as a result of such Title Defect as determined in Section 7.3.


“Units” has the meaning specified in the definition of
“Oil and Gas Properties”.


“Wells” has the meaning specified in the definition of
“Oil and Gas Properties.”


ARTICLE
II


EFFECTIVE
DATE; CLOSING


2.1           Effective Date; Closing.  The effective date (for accounting purposes
only) of the transactions contemplated hereby shall be at 7:00 a.m., Alaska
Standard Time, on January 1, 2007 (the “Effective Date”).  The Closing of the transactions contemplated
hereby (the “Closing”) shall take place at the offices of Seller, 707
Seventeenth St., Suite 3600, Denver, CO 80202 at 10:00 a.m., Mountain Standard
Time, on the later of (i) two business days after satisfaction of all
conditions to Closing (including agreement of the Parties on all Purchase Price
adjustments pursuant to Section 3.4), or June 30, 2007 (the “Closing Date”).  Notwithstanding any provision herein to the
contrary, in no event shall the Closing occur later than July 31, 2007.



 7
 









2.2           Proceedings at Closing.  All proceedings to be taken and all documents
to be executed and delivered by all parties at the Closing shall be deemed to
have been taken and executed simultaneously, and no proceedings shall be deemed
taken nor any documents executed or delivered until all have been taken,
executed and delivered.


ARTICLE
III


SALE AND
PURCHASE OF MEMBERSHIP INTERESTS; CONSIDERATION


3.1           Sale and Purchase of Membership Interests.  On the Closing Date, subject to the terms and
conditions set forth herein, the Seller will sell, transfer, convey, assign and
deliver to Buyer, and Buyer will purchase from the Seller, the Membership
Interests.


3.2           Amount and Form of Consideration.  The total purchase price to be paid by Buyer
to Seller in consideration of the Membership Interests is FOUR HUNDRED TWENTY
MILLION DOLLARS AND NO/CENTS (US$420,000,000.00) (the “Base Purchase Price”),
subject to adjustment as provided in Section 3.4 (the Base Purchase Price, as
so adjusted, is the “Purchase Price”).


3.3           Payment of Consideration.


(a)           In consideration of the sale,
transfer, conveyance, assignment and delivery of the Membership Interests,
Buyer will, subject to adjustment pursuant to Section 3.4 hereof:


(i)            Pay the Seller a performance deposit
(the “Deposit”) in the amount of FOUR MILLION TWO HUNDRED THOUSAND DOLLARS AND
NO/CENTS (US$4,200,000.00) by wire transfer of immediately available funds upon
the execution of this Agreement;


(ii)           pay the Seller an amount equal to the
balance of the Purchase Price by wire transfer of immediately available funds
on the Closing Date; and


(b)           The Purchase Price shall be paid by
wire transfer of immediately available funds to Seller in accordance with the
instructions of Seller delivered to Buyer not later than 48 hours prior to the
Closing).


3.4           Price Adjustments. 
The Base Purchase Price will be adjusted:


(a)                                  Upward by the
amount of US$18,433,160 being consideration for the Company’s working capital
as at December 31, 2006;


(b)           downward as may be required in
Section 7.3 or 7.4;


(c)           downward by the amount of the
Deposit;



 8
 









(d)           downward by the amount of
$380,000,000, being $375,000,000 in debt as reflected on the December 31, 2006
balance sheet plus the $5,000,000 put premium which arises upon the early
termination of the Credit Agreement;


(e)           upward by the amount of any cash
equity contribution to the Company by Seller or FOC between the date hereof and
Closing, but solely to the extent such contribution (i) reduces the principal
or the put premium under the Credit Agreement or (ii) is made pursuant to
Section 7.02 of the First Lien Credit Agreement; and


(f)            upward or downward as may be
required in Section 13.3.


No later than ten days before Closing, Seller will
deliver to Buyer a statement setting forth the Purchase Price as adjusted
pursuant to this Section 3.4. Buyer shall have five days to review the
statement and, if Buyer agrees with Seller’s calculations, the Parties shall
proceed to Closing as scheduled. If Buyer disagrees with Seller’s calculations,
the Parties shall negotiate in good faith for five days to resolve their
differences. If the Parties still cannot agree after such five day period, they
shall proceed to mediation with a mutually agreeable mediator. If they cannot
agree on a mediator within five days, or if they are unable to reach agreement
within ten days after selecting a mediator, Closing shall proceed with the
Purchase Price adjusted per the adjustment demand of the Buyer.  The allocated value of the adjusted assets
subject to dispute, as set forth in Exhibit A-2, shall be placed by Buyer in an
interest-bearing escrow account pending resolution of the dispute, and,
following Closing, the Parties shall immediately refer the adjustment dispute
to binding arbitration.


Such arbitration shall be conducted in Houston, Texas
under the auspices of the US Chamber of Commerce (the “Chamber”).  It shall be conducted by a single arbitrator
chosen by mutual agreement of the Parties. 
Should the Parties fail to reach agreement on an arbitrator, an
arbitrator shall be chosen by the Chamber in accordance with their Rule of
Arbitration; provided that such arbitrator shall be an expert in the valuation
of oil & gas properties with at least 10 years of experience in the
industry and may, but need not, be an attorney. 
The arbitration shall be conducted with the greatest possible haste. The
award of the arbitrator shall be limited to an award to Seller of cash money,
bounded by the initial claims of the Parties as to the proper value of the
adjustments. Each Party shall bear its own costs, and the jointly incurred
arbitration fees shall be split equally between the Parties.


The foregoing arbitration clause shall apply only to
disputes as to potential Purchase Price adjustments made under this Section
3.4.


ARTICLE
IV


REPRESENTATIONS
AND WARRANTIES OF THE SELLER AND THE COMPANY


The Seller and the Company hereby represent and
warrant to Buyer as of the date hereof and as of the Closing Date as follows:


4.1           Organization and Power.  The Company is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Delaware and is 



 9
 









qualified and in good standing to transact
business in each jurisdiction in which such qualification is required by Law,
except where the failure to be so qualified would not have a Material Adverse
Effect.  The Company has all requisite
corporate power and authority to execute, deliver and perform its obligations
under this Agreement and to consummate the transactions contemplated
hereby.  The Company has heretofore delivered
to Buyer complete and correct copies of its constituent documents, each as
amended to date.


4.2           Authorizations; Execution and Validity.  The execution and delivery of this Agreement
by the Company, the performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
to be consummated by it, have been duly authorized by all necessary corporate
action and no other corporate action on the part of the Company is necessary
with respect thereto.  This Agreement has
been duly executed and delivered by the Company and, when duly and validly
executed and delivered by Buyer and Seller, will constitute a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and similar laws of general
applicability and by general principles of equity.


4.3           Capitalization.


(a)           The authorized equity ownership of
the Company consists solely of the Membership Interests, which are owned 100%
of record and beneficially, free and clear of any Liens (other than Liens that
shall be released at or prior to Closing) by Seller, and have been duly
authorized and validly issued, and are fully paid and non-assessable.  There are no outstanding options,
subscriptions, warrants, calls, commitments, pre-emptive rights or other rights
obligating the Company to issue or sell any Membership Interests or any
securities convertible into or exercisable for any Membership Interests, or
otherwise requiring Seller or the Company to give any Person the right to
receive any benefits or rights similar to any rights enjoyed by or accruing to
the holders of Membership Interests or any rights to participate in the equity
or net income of the Company.  All of the
issued Membership Interests of the Company were issued, and to the extent
purchased or transferred, have been so purchased or transferred, in compliance
with all applicable Laws, including federal and state securities laws, and any
preemptive rights and any other statutory or contractual rights of any Seller.


(b)           The Company has no Subsidiaries.  The Company does not own, directly or
indirectly, any capital of or other equity interest in or has any other
investment in or outstanding loans to any corporation, partnership or other
entity or organization.  There are no
stockholders’ agreements, voting trusts or other agreements or understandings
to which Seller or the Company is a party or by which either is bound with
respect to the transfer or voting of any Membership Interests.


4.4           Financial Statements; Other Financial Data.  Attached hereto on Schedule 4.4 are
correct and complete copies of (i) the audited balance sheet of the Company as
of December 31, 2006, together with the related audited statements of income
and retained earnings and of cash flows for the period ended December 31, 2006
and (ii) the unaudited balance sheet of the Company as of March 31, 2007,
together with the related unaudited statements of income and



 10















 


retained earnings and of cash flows for the quarter ended March 31,
2007 (the “Financial Statements”).  The
Financial Statements present fairly in all material respects the financial
position of the Company as of the dates indicated, and the results of its
operations for the respective periods indicated. The Financial Statements have
been prepared in conformity with GAAP.


4.5           Consents.  Schedule 4.5 sets forth the consents,
authorizations and approvals that must be obtained or waived prior to the
consummation or performance by the Company and Seller of the transactions
contemplated by this Agreement; excluding, therefrom any consents,
authorizations and approvals that the Buyer may be required to obtain in order
to lawfully conduct business in Alaska generally and to operate the Oil and Gas
Properties, specifically.


4.6           No
Defaults or Conflicts.  Neither the
execution and delivery by the Company of this Agreement nor the consummation or
performance by the Company of the transactions contemplated by this Agreement
to be consummated or performed by it (i) results or will result in any
violation of its constituent documents; (ii) subject to obtaining any required
consent under the Credit Agreement, violates or conflicts with, or constitutes
a breach of any of the terms or provisions of or a default under, or results in
the creation or imposition of any Lien upon any property or asset of the
Company, the trigger of any charge, payment or requirement of consent, or the
acceleration or increase of the maturity of any payment date under: (A) any
Contract or (B) any applicable Law or Order to which the Company or any of its
respective properties is subject.


4.7           Agreements,
Contracts and Commitments.  Except
for the Leases or the Units, all of which are listed on Exhibit “A,” the
Company has listed in Schedule 4.7 all leases, contracts, agreements and
instruments to which it is a party as of the date hereof (i) which is an
employment agreement between the Company, on the one hand, and its officers and
employees, on the other hand, (ii) which, upon Closing, will (either alone or
upon the occurrence of any additional acts or events, including the passage of
time) result in any material payment or benefit (whether of severance pay or
otherwise) becoming due, or the acceleration or vesting of any right to any
material payment or benefits, from Buyer or the Company to any officer,
director, consultant or employee of the Company, (iii) which involves payment
by or to the Company of more than US$250,000 or extends for a term of six
months or more, (iv) which expressly limits the ability of the Company to
compete in or conduct any line of business or compete with any Person or in any
geographic area or during any period of time, in each case, if such limitation
is or is reasonably likely to be material to the Company, (v) which is a
material joint venture agreement, joint operating agreement, partnership
agreement or other similar contract or agreement involving a sharing of profits
and expenses with one or more third Persons, (vi) the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement, or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement (including any stock option
plan, stock appreciation rights plan, restricted stock plan or stock purchase
plan) or (vii) which is a limited liability operating agreement or equity
holder rights agreement or which otherwise provides for the issuance of any
securities in respect of this Agreement (the “Material Contracts”).  The Company has not breached, nor to the
Company’s or Seller’s Knowledge is there any claim or any legal basis for a
claim that the Company or any third party has breached, any of the terms or
conditions of any Material 



 11
 









Contract, except where any such breach, whether considered individually
or in the aggregate, could not be reasonably expected to result in a Material
Adverse Effect.


4.8           Litigation.  There are no Legal Proceedings pending or, to
the Company’s Knowledge, threatened against or affecting the Company or any of
its assets that are reasonably likely to have a Material Adverse Effect on the
Company.  The Company is not subject to
any Order or Official Action.  There are
no Legal Proceedings pending against or, to the Company’s or Seller’s
Knowledge, threatened in writing against, the Company that questions the
validity or legality of any of this Agreement or any action taken or to be
taken by the Company in connection herewith or therewith.


4.9           Taxes.


(a)           Except
as disclosed on Schedule 4.9:


(i)            There are no Liens for Taxes upon
any of the properties or assets of the Company (except for Permitted Liens).


(ii)           No agreements relating to allocation
or sharing of, or liability or indemnification for, Taxes exist between the
Company and any other Person.  Any
internal tax allocation agreement shall terminate at the Closing.


(iii)          The Company is not a party to any
arrangement, nor does it hold any Oil and Gas Property in an entity treated as
a tax partnership for Tax purposes.


(iv)          Within the times and in the manner
prescribed by law, the Company has filed all federal, state and local tax
returns and all tax returns for foreign countries, provinces and other
governing bodies having jurisdiction to levy taxes upon it.


(v)           To
the Company’s and Seller’s knowledge, all tax returns filed by the Company for
the taxable years ending in 2000 through 2006 constitute complete and accurate
representations of their respective tax liabilities for such years and
accurately set forth all items (to the extent required to be included or
reflected in such returns) relevant to their future tax liabilities, including
the tax bases of its properties and assets.


(v)           The Company has not
waived or extended any applicable statute of limitations relating to the
assessment of federal, state, local or foreign taxes.


(vi)          No
examination of the federal, state, local or foreign tax returns of the Company
are currently in progress nor, to the Company’s and Seller’s knowledge, is any
such examination threatened.


(b)           The Company is a disregarded entity
for federal income tax purposes under Section 7701 of the Code.



 12
 









4.10         Fees.  The
Company has not paid or become obligated to pay any fee or commission to any
broker, finder or intermediary in connection with the transactions contemplated
hereby for which the Company or Buyer shall have liability following the
Closing.


4.11         Absence of Certain Changes or Events.  Except as set forth on Schedule 4.11,
as disclosed in the Financial Statements, since December 31, 2006, or otherwise
where the Buyer has consented in writing, (i) the Company has conducted its
business only in the ordinary course consistent with past practice in all
material respects, and (ii) there has not been any transaction or occurrence by
which the Company has:


(a)           suffered any Material Adverse Effect;


(b)           declared, set aside or paid any
dividend or other distribution (whether in cash, stock or property) with respect
to any of its outstanding Membership Interest, or made any redemption, purchase
or other acquisition of any of its equity securities;


(c)           other than the principal payment of
US$625,000 made under the Credit Agreement on March 30, 2007 and payments that
are within the scope of Section 3.4(e) above, cancelled or paid any Company
Debt (in any amount) or waived any receivables, claims or rights in excess of
US$100,000 individually or in the aggregate;


(d)           suffered any uninsured casualty loss
or damage in excess of US$100,000 individually or in the aggregate;


(e)           amended any material term of any
equity security or Material Contract of the Company;


(f)            hired any employees;


(g)           made any payments to any Affiliates
except in the ordinary course of business pursuant to the Intercompany Services
Agreement referred to in Section 10.1;


(h)           incurred any obligation to make
capital expenditures in excess of US$250,000 individually or in the aggregate;


(i)            sold, leased, encumbered or
otherwise disposed of, or agreed to sell, lease (whether such lease is an
operating or capital lease), encumber or otherwise disposed of any portion of
its assets, other than in the ordinary course of business consistent with past
practice;


(j)            amended any of its organizational
documents, including its limited liability company operating agreement;


(k)           adopted any plan or agreement of
merger or liquidation; or


(l)            made any change in its accounting
methods, principles or practices.



 13
 









4.12         Compliance with Laws. 
Schedule 4.12 lists all material Permits.  The Company holds all material Permits
necessary for the lawful conduct of its business and is in compliance in all
material respects, with all Laws and Orders applicable to its business and has
filed with the proper authorities all statements and reports required by the
Laws and Orders to which the Company or any of its properties or operations are
subject.  No claim has been made by any
Governmental Authority (and, to the Company’s and Seller’s Knowledge, no such
claim is anticipated) to the effect that the business conducted by the Company
fails to comply, in any respect, with any Law.


4.13         Transactions with Related Parties.  Except as set forth in Schedule 4.13:


(a)           No Related Party of the Company other
than Seller has entered into, or has had any direct or indirect financial
interest in, any Material Contract, transaction or business dealings involving
the Company;


(b)           No Related Party of the Company owns
or has any interest in, directly or indirectly, in whole or in part, any
tangible or intangible property used in the conduct of the business of the
Company; and


(c)           The Company has not, directly or
indirectly, guaranteed or assumed any indebtedness for borrowed money or
otherwise for the benefit of any Related Party of the Company.


4.14         Books and Records. 
The minute books and records of the Company are current as of the date
hereof (and shall be current as of the Closing) with respect to all
undertakings and authorizations, and contain a true, complete and correct record
of all actions taken at all meetings and by all written consents in lieu of
meetings of the Company’s board of directors, or any committees thereof, and
members of the Company.  The capital
ledger and related Membership Interest transfer records of the Company contain
a true, complete and correct record of the original issuance, transfer and
other capitalization matters of the Membership Interests.  The accounting, financial reporting, and
business books and records of the Company accurately and fairly reflect in all
material respects the business and condition of the Company and the
transactions and the assets and liabilities of the Company with respect
thereto.  Without limiting the generality
of the foregoing, the Company has not engaged in any transaction with respect
to its business or operations, maintained any bank account therefor or used any
funds of the Company in the conduct thereof except for transactions, bank
accounts and funds that have been and are reflected in the normally maintained
books and records of the business.


4.15         Information Furnished.  The Company has made available to Buyer and
its directors, officers, employees, counsel, representatives, financing
sources, customers, creditors, accountants and auditors, true and correct
copies of all agreements, documents, and other items listed on the Schedules to
this Agreement and all books and records of the Company.


4.16         Directors and Officers.  Schedule 4.16 lists all of the
directors and officers of the Company as of the Closing Date. The Company has
no employees.


4.17         Bank Accounts. 
Attached hereto as Schedule 4.17 is a list of all banks or other
financial institutions with which the Company has an account, showing the type
and account 



 14
 









number of each such account, and the names of
the persons authorized as signatories thereon or to act or deal in connection
therewith.


4.18         Owned Real Property. 
Other than the Oil and Gas Properties and those properties listed on Schedule
4.18, the Company does not own any real property.


4.19         Leased Real Property. 
Schedule 4.19 contains a complete and correct list of all real
property leases and any and all amendments thereto relating to the leased real
property to which the Company is a party or is bound (the “Real Property Leases”).  The Company has provided to Buyer correct and
complete copies of the Real Property Leases. 
Except as disclosed in Schedule 4.19, (i) each of the Real
Property Leases is in full force and effect, and, to the Company’s and Seller’s
Knowledge, is enforceable against the landlord which is party thereto in
accordance with its terms (except as such enforceability may be limited by
bankruptcy, insolvency, reorganization and similar laws affecting creditors
generally and by the availability of equitable remedies), (ii) there are no
subleases under the Real Property Leases and none of the Real Property Leases
has been assigned (other than collateral assignments to Company’s Senior Lender
which will be released in their entirety at or prior to the Closing), (iii) no
notices of default or notices of termination have been received by the Company
with respect to the Real Property Leases which have not been withdrawn or
canceled and (iv) the Company is not, and to the Company’s and Seller’s
Knowledge, no other party is, in default under any Real Property Lease.  To the Company’s and Seller’s Knowledge  there has been no receipt of any written
notice of a proceeding in eminent domain or other similar proceeding affecting
property listed on Schedule 4.19.


4.20         Intentionally left blank.


4.21         Title to Oil and Gas Properties.  The Company now has and will have at Closing
Defensible Title to all Oil and Gas Properties included in the Ownership
Interests.  Each Oil and Gas Property
included or reflected in the Ownership Interests entitles the Company to
receive not less than the undivided interest set forth in (or derived from) the
Ownership Interests of all Hydrocarbons produced, saved and sold from or
attributable to such Oil and Gas Property, and the portion of the costs and
expenses of operation and development of such Oil and Gas Property that is
borne or to be borne by the Company is not greater than the undivided interest
set forth in the Ownership Interests.  No
fact, circumstance or condition of the title to an Oil and Gas Property shall
be considered to effect a reduction in the value of the assets, unless due
consideration has been given to (a) the length of time that such Oil and Gas
Property has been producing Hydrocarbons and has been credited to and accounted
for by the Company and its predecessors in title, if any, and (b) whether any
such fact, circumstance or condition is of the type that can generally be
expected to be encountered in the area involved and is usually and customarily
acceptable to reasonable and prudent operators, interest owners and purchasers
engaged in the business of the ownership, development and operation of oil and
gas properties. All proceeds from the sale of the Company’s share of the
Hydrocarbons being produced from its Oil and Gas Properties are currently being
paid in full to the Company by the purchasers thereof on a timely basis, and
none of such proceeds are currently being held in suspense by such purchaser or
any other party.



 15
 









4.22         Environmental Matters.  Except as set forth in Schedule 4.22
or in the case of matters which have been resolved to the extent required by
Environmental Laws and for which no further remediation obligation or liability
under Environmental Laws exists:


(a)           the Company has conducted and
continues to conduct its business and operated its assets, and the condition of
each facility and property currently owned, leased and operated by the Company
is, in material compliance with all Environmental Laws;


(b)           the Company has not been notified by
any Governmental Authority or other third party that any of the operations or
assets of the Company is the subject of any investigation or inquiry by any
Governmental Authority evaluating whether any material remedial action is
needed to respond to a release or threatened release of any Hazardous Material
or to the improper storage or disposal (including storage or disposal at
offsite locations) of any Hazardous Material where such investigation or
inquiry remains unresolved as of the date hereof;


(c)           neither the Company nor, to the
Company’s and Seller’s Knowledge, any other Person has filed any notice under
any federal, state or local law indicating that (i) the Company is responsible
for the improper release into the environment, or the improper storage or
disposal, of any Hazardous Material, or (ii) any Hazardous Material is
improperly stored or disposed of upon any property of the Company;


(d)           the Company does not have any
material contingent liability in connection with (i) the release or threatened
release into the environment at, beneath or on any of the Oil and Gas Properties,
or (ii) the storage or disposal of any Hazardous Material;


(e)           the Company has not received any
claim, complaint, notice, inquiry or request for information with respect to
any alleged violation of any Environmental Law or regarding potential liability
under any Environmental Law relating to operations or conditions of any
facility or property (including off site storage or disposal of any Hazardous
Material from such facilities or property) currently or formerly owned, leased
or operated by the Company;


(f)            none of the Oil and Gas Properties
is listed on the National Priorities List pursuant to CERCLA or on the CERCLIS
or on any other federal or state list as sites requiring investigation or
cleanup;


(g)           the Company is not directly
transporting and is not directly arranging for the transportation of, any
Hazardous Material to any location which is listed on the National Priorities
List pursuant to CERCLA, on the CERCLIS, or on any similar federal or state
list or which is the subject of federal, state or local enforcement actions or
other investigations that may lead to material claims against the Company for
remedial work, damage to natural resources or personal injury, including claims
under CERCLA;


(h)           there are no sites, locations or
operations at which the Company is currently undertaking any remedial or
response action relating to any such disposal or release, as required by
Environmental Laws; and



 16
 









(i)            all underground storage tanks and
solid waste disposal facilities owned or operated by the Company are used and
operated in material compliance with Environmental Laws.


(j)            The Company and its Subsidiaries
have obtained and are in compliance with all material Permits under all
Environmental Laws required for the operation of the businesses of the Company
as currently conducted and, to the Knowledge of the Company and Seller, there
are no pending or threatened, actions or proceedings alleging violations of or
seeking to modify, revoke or deny renewal of any such Permits. Schedule 4.12
lists all such Permits.


4.23         Bonding Matters. 
Schedule 4.23 lists all of the bonds and other security
arrangements that Seller or Company maintains as to the Oil and Gas Properties
or any portion thereof.  No claim has
been made by any Governmental Authority that the Company has failed to comply
with any law or regulation governing the requirements of bonds as to the Seller’s
or Company’s operations of the Oil and Gas Properties.


4.24         Insurance.  Schedule
4.24 lists all of the insurance policies and coverages of any sort
maintained by the Company, Seller or any of their Affiliates which, any way,
affect the Company’s operations relating to the Oil and Gas Properties. Such
insurance coverage complies with all legal and customary requirements for a
business conducing operations such as those conducted by the Company on or
relating to the Oil and Gas Properties. The Company has complied in all
material respects with the terms and provisions of such policies. Between the
Effective Date and Closing, Seller shall insure that policies substantially
equivalent to those set forth on Schedule 4.24 shall remain in full
force and effect.


4.25         ERISA.  The Company does not employ and has not at any time employed
any individual. The Company neither maintains nor contributes to, nor has it
previously maintained or contributed to, any “employee benefit plans,” as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended (“ERISA”), whether or not subject to ERISA, and the Company has not,
nor will it have any liabilities or obligations with respect to employee
benefit plans maintained or contributed to or previously maintained or
contributed to by the Company or any trade or business, whether or not
incorporated that together with the Company would be deemed a “single employer”
within the meaning of Section 4001(a)(15) of ERISA, and the rules and
regulations promulgated thereunder.


4.26         Condition of Assets. 
The Company has maintained all of the Company’s tangible assets and
properties owned or leased on the date hereof in good working order and
operating condition, subject only to ordinary wear and tear.


4.27         Lease Operating Expenses.  The information provided to Buyer by Seller
and the Company with respect to the Company’s historical lease operating
expenses is accurate and complete in all material respects.


4.28         Hedging Transactions. 
Schedule 4.28 contains a complete and correct list of all Hedging
Transactions (including each outstanding commodity or financial hedging
position) entered into by or assigned to the Company or for the account of any
of its customers as of the 



 17
 









date of this Agreement (“Forest Hedges”).
All material Forest Hedges were, and any material Forest Hedges entered into
after the date of this Agreement will be, entered into in accordance with
applicable Laws, and in accordance with the investment, securities,
commodities, risk management and other policies, practices and procedures
employed by the Company, and were, and will be, entered into with
counterparties believed at the time and still believed to be financially
responsible and able to understand (either alone or in consultation with its
advisers) and to bear the risks of such material Forest Hedges. The Company
has, and will have, duly performed all of its obligations under the material
Forest Hedges to the extent that such obligations to perform have accrued, and,
to the Knowledge of the Company and Seller, there are and will be no breaches,
violations, collateral deficiencies, requests for collateral or demands for
payment, or defaults or allegations or assertions of such by any party
thereunder.


4.29         Prepayment Premium; Total Company Debt. The total of all
penalties, premiums, fees, cost reimbursements or other payments (other than
principal and accrued interest) payable as a result of the early termination of
the Credit Agreement due to the transactions contemplated by this Agreement do
not exceed US$5,000,000, and the total principal amount of Company Debt does
not exceed $375,000,000. The Company is current with respect to all interest
payments on Company Debt.


ARTICLE V


REPRESENTATIONS
AND WARRANTIES OF SELLER


Seller hereby represents and warrants to Buyer as
follows:


5.1           Organization and Good Standing.  Seller is duly organized, validly existing
and in good standing under the laws of Delaware and has all requisite power and
authority Seller to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby and thereby to
be consummated by it.  Seller is not a “foreign
person” within the meaning of Section 1445 of the Code.


5.2           Authorization of Agreement.  The execution and delivery of this Agreement
by Seller and the performance of the transactions contemplated herein by Seller
have been duly authorized by all necessary action, and no other action on the
part of Seller is necessary to authorize this Agreement or consummate the
transactions contemplated hereby.  This
Agreement has been duly and validly executed and delivered by Seller and
constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and similar laws
of general applicability and by general principles of equity.


5.3           Conflicts, Consents of Third Parties.  Neither the execution and delivery by Seller
of this Agreement nor consummation or performance by Seller of the transactions
contemplated hereby to be consummated or performed by Seller will: (a) violate
any Law, (b) violate its constituent documents, (c) violate any Order to which
Seller is a party or by which Seller is bound or (d) require any consent,
approval or authorization, except for those listed on Schedule 5.3.



 18
 









5.4           Brokers. 
Seller has not paid or become obligated to pay any fee or commission to
any broker, finder or intermediary in connection with the transactions
contemplated hereby for which the Buyer shall have any liability following the
Closing.


5.5           Litigation. 
As of the date of this Agreement there are no Legal Proceedings, or, to
the Knowledge of Seller, threatened against or affecting Seller that is
reasonably likely to have a Material Adverse Effect on Seller or the
transactions contemplated by this Agreement, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against Seller that is reasonably likely to have a Material Adverse Effect on
Seller or the transactions contemplated by this Agreement.


5.6           Ownership of Membership Interests.  Seller is the record and beneficial owner of
all of the Membership Interests, and those Membership Interests are owned by
Seller free and clear of all Liens (other than those that shall be released at
Closing), including, without limitation, voting trusts or stockholders
agreements.  Seller has full authority to
transfer pursuant to this Agreement all of the Membership Interests, free and
clear of all Liens (other than those that shall be released at Closing),
including, without limitation, voting trusts or stockholders agreements.


5.7           Tax Status.


(a)           Seller is a not a non-resident alien,
foreign corporation, foreign partnership, foreign trust, or foreign estate (as
those terms are defined in the Internal Revenue Code and income tax
regulations).


(b)           Seller shall provide to Buyer the
Certificate of Non-Foreign Status in the form set forth in Exhibit “B”.


(c)           Seller is a disregarded entity for
federal income tax purposes under Section 7701 of the Code, such that this
transaction will be treated, for federal income tax purposes, as a sale of
assets by its parent company, FOC.


5.8           Marketable Title. 
The delivery by Seller to Buyer at the Closing of the Membership
Interests vest Buyer at such time of delivery with good and marketable title to
all of the Membership Interests, free and clear of all Liens (other than
restrictions on transfer pursuant to applicable securities laws).


ARTICLE
VI


REPRESENTATIONS
AND WARRANTIES OF BUYER


Buyer hereby represents and warrants to Seller and the
Company as follows:


6.1           Organization and Good Standing.  Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware.  Prior to the Closing Date,
Buyer shall be duly qualified to do business in and specifically to operate oil
and gas properties in the State of Alaska. 
Buyer has all requisite power and authority to execute, deliver and 



 19
 









perform its obligations under this Agreement
and to consummate the transactions contemplated hereby and thereby to be
consummated by it.


6.2           Authorization of Agreement.  The execution and delivery of this Agreement
by Buyer and the performance of the transactions contemplated herein by the
Buyer have been duly authorized by all necessary action by the Buyer, and no
other action on the part of Buyer is necessary to authorize this Agreement or
to consummate the transactions contemplated hereby.  This Agreement has been duly and validly
executed and delivered by Buyer and constitutes a valid and binding obligation
of Buyer and is enforceable against Buyer in accordance with its terms, except
as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability and to
general principles of equity.


6.3           Conflicts, Consents of Third Parties.  Neither the execution and delivery by Buyer
of this Agreement nor consummation or performance by Buyer of the transactions
contemplated hereby to be consummated or performed by Buyer will: (a) violate
any Law, (b) violate the certificate of incorporation or bylaws of Buyer, (c)
violate any Order to which Buyer is a party or by which Buyer is bound (d)
violate any loan or credit agreement (subject to obtaining required consent
under its Credit and Guaranty Agreement dated November 30, 2006 with J. Aron
& Company (the “PERL Credit Agreement”)), note, bond, mortgage, indenture,
lease or other agreement, instrument, permit, concession, franchise, or license
applicable to Buyer, (iii) any joint venture or other ownership arrangement of
Buyer or (e) require any consent from, authorization or approval or other
action by, and no notice to or declaration, filing or registration with any
Governmental Authority, , except for those regulatory approvals and consents as
would be required of any company similarly situated.


6.4           No Default. 
Except as would not reasonably be expected to have a Material Adverse
Effect on Buyer, Buyer is not in default or violation of any term, condition or
provision of (a) the its constituent documents, (b) any loan or credit
agreement (subject to obtaining required consent under the PERL Credit
Agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license to which Buyer is now a
party or by which Buyer or any of its properties or assets is bound, or (c) any
Order applicable to Buyer.


6.5           Litigation. 
As of the date of this Agreement there is no suit, action or proceeding
pending, or, to the knowledge of Buyer, threatened against or affecting Buyer
that is reasonably likely to have a Material Adverse Effect on Buyer, nor is
there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against Buyer that is reasonably likely to
have a Material Adverse Effect on Buyer.


6.6           Investment Intent. 
Buyer is acquiring the Membership Interests for its own account and not
with a view towards distribution thereof within the meaning of Section 2(11) of
the Securities Act.


6.7           Disclosure of Information.  Buyer represents that it has had a full
opportunity to ask questions of and receive answers from the Company regarding
the Company and its business, assets, results of operation, and financial
condition.



 20















6.8           Funding Commitments.  Buyer has in place such financing commitments
as are necessary to pay the Closing Date Amounts in full at the Closing. Buyer
has provided evidence of such commitments on Schedule 6.8, which
commitments are subject to the terms and conditions set forth on Schedule
6.8 (the financing contemplated by such commitments is referred to herein
as the “Debt Financing”).


6.9           Brokers. 
Buyer has not paid or become obligated to pay any fee or commission to
any broker, finder or intermediary in connection with the transactions
contemplated hereby for which the Seller shall have any liability following the
Closing.


ARTICLE
VII


ADDITIONAL
AGREEMENTS


7.1           Further Actions. 
At any time from and after the Closing, at the request of a Party and
without further consideration, each other Party shall execute and deliver such
further agreements, certificates, instruments and documents and perform such
other actions as the requesting Party may reasonably request in order to fully
consummate the transactions contemplated hereby and carry out the purposes and
intent of this Agreement.


7.2           Conduct of Business Pending Closing.  Prior to the Closing Date, the Company will
(except as approved in writing by Buyer or otherwise permitted under this
Agreement):


(a)           carry on its business only in the
ordinary course and in a manner consistent with past practice;


(b)           maintain its properties and
facilities, including those held under leases, in their current good working
order and condition, ordinary wear and tear excepted;


(c)           not sell, lease, encumber or
otherwise dispose of, or agree to sell, lease (whether such lease is an
operating or capital lease), encumber or otherwise dispose of any portion of
its assets, other than in the ordinary course consistent with past practice;


(d)           use all commercially reasonable
efforts to maintain and preserve its business organization intact, retain its
present officers and maintain its relationships with suppliers, vendors,
customers, creditors and others having business relations with it;


(e)           not declare, set aside or pay any
dividend or other distribution (whether in stock or property) with respect to
any of its equity securities, or make any redemption, purchase or other
acquisition of any of its equity securities;


(f)            not issue any Membership Interests
or options, warrants or other rights to purchase Membership Interests, or any
securities convertible into, or exchangeable for Membership Interests;


(g)           not borrow any money or incur or
guarantee any indebtedness for borrowed money;



 21
 









(h)           not enter into or amend any material
contracts or agreements;


(i)            not amend its organizational
documents, including without limitation its limited liability operating
agreement;


(j)            not adopt any plan or agreement of
merger or liquidation;


(k)           not cancel or pay any Company Debt
(in any amount, but except for payments that are within the scope of Section
3.4(e) above) or waive any receivables, claims or rights in excess of
US$100,000 individually or in the aggregate;


(l)            not make any payments to any
Affiliates except in the ordinary course of business pursuant to the Contract
Operating Agreement referred to in Section 10.1;


(m)          not make any change in its accounting
methods, principles or practices


(n)           not enter into any commitments for
capital expenditures in excess of US$250,000 (with the exception of emergency
or lease-saving expenses, which shall be disclosed to Buyer as soon as is
practicable); and


(o)           not enter into any employment,
consulting or similar contract or agreement with any officer or director of the
Company, or hire any employees.


7.3           Title Defects.


(a)           Buyer must deliver to the Company in
writing at least three business days prior to the Closing Date (the “Notification
Deadline”) a written notice specifying each alleged defect associated with the
Ownership Interests in the Oil and Gas Properties that it asserts constitutes a
violation of the representations set forth in Section 4.21 (a “Title Defect”),
a description of each such Title Defect and Buyer’s proposed Title Defect Value
for such Title Defect.  If such notice is
not timely submitted, Buyer will be deemed to have waived any basis for an
adjustment based on a violation of the representations set forth in Section
4.21, as well as waived its basis for any claim or other assertion of rights or
damages based on a breach of such representations.


(b)           Buyer may request an adjustment to
the Base Purchase Price at any time on or before the Notification Deadline, if
the adjustment is based on a Title Defect. A notice requesting an adjustment
must be made in accordance with Section 7.3(a). 
If Buyer gives notice under subsection (a) above, the parties will meet
and use their best efforts to agree on the validity of the claim and, if
applicable, the amount of the adjustment, using the following criteria:


(i)            If the claim is based on the Company
owning a different net revenue interest than that shown on Exhibit “A”,
then the adjustment will be the absolute value of the number determined by the
following formula:



 22
 









Adjustment = A x (1-[B/C])


A  =        Allocated Value for the affected
Ownership Interest


B  =         Correct net revenue interest for the
affected Ownership Interest


C  =         Net revenue interest for the affected
Ownership Interest as shown on Exhibit “A”


(ii)           If the claim is based on an
obligation or burden that is liquidated, the adjustment will be the sum
necessary to remove the obligation or burden from the affected Ownership
Interest.


(iii)          If the claim is based on an obligation
or burden that is not liquidated, but can be estimated with reasonable
certainty, the adjustment will be the sum necessary to compensate Buyer for the
adverse economic effect on the affected Property.


(c)           If the amount of the adjustment for
each Title Defect cannot be determined based on the above criteria, and if
Buyer, Seller and the Company cannot otherwise agree on the amount of an
adjustment or the parties are unable to agree upon whether a Title Defect
exists, subject to the provisions of Section 7.3(d) below, the Parties shall
agree to resolve the dispute under the arbitration provisions in this
Agreement.


(d)           No adjustment to the Base Purchase
Price for Title Defects shall be made unless and until the aggregate value of
all Title Defects (herein called the “Aggregate Title Defect Value”) exceeds
one percent (1%) of the Base Purchase Price, and once the deductible is
exceeded, only the value of all Title Defects in excess of such deductible
shall be considered in applying this Section 7.3.


(e)           For purposes of this section, the
costs to cure a Title Defect under Section 7.3(b) above shall not be
counted towards the Aggregate Title Defect Value.


(f)            Seller may, at its sole option,
notify Buyer on or before the Closing that it elects to cure some or all of the
Title Defects.  No price adjustment will
be made for Title Defects that Seller elects to cure.  If any Title Defect is not cured prior to
Closing, an adjustment to the Base Purchase Price will be calculated under the
criteria set forth in this section, but only if the net amount of all adjustments
based on the Title Defects exceeds the Aggregate Title Defect Value.


(g)           If, prior to the Closing, any portion
of the Oil and Gas Properties or related equipment is destroyed or impaired by
fire or other casualty, Buyer may elect:


(i)            to treat such destruction or
impairment as a Title Defect in accordance with this Section 7.3, or


(ii)           to purchase the Membership Interests
notwithstanding any such destruction (without adjustment to the Purchase Price
therefor), in which case, Seller shall, at the Closing, pay to Buyer all sums
paid to the Company or Seller 



 23
 









by third-parties
(including insurance proceeds relating thereto) and assign to Buyer all sums to
which Seller is entitled, as the case may be, by reason of the destruction of
such Oil and Gas Properties or related equipment and shall assign, transfer and
set over unto the Company or Buyer all of the right, title and interest of
Seller in and to any unpaid awards or other payments from third-parties arising
out of the destruction of such Oil and Gas Properties or related equipment.


(h)           Notwithstanding anything to the
contrary in this Section 7.3, the adjustments attributable to the effects of
all Title Defects upon any Oil and Gas Property shall not exceed the Allocated
Value of such particular Oil and Gas Property.


(i)            All Title Defects not raised within
the time period provided in paragraph (b) above shall be waived by Buyer for
all purposes, including but not limited to Article XII.


7.4           Environmental Defects.


(a)           Buyer shall have the right to conduct
an environmental assessment of the Oil and Gas Properties during the period
beginning on the date of this Agreement and ending at the close of business on
the Notification Deadline.  The
confidentiality obligations of the Confidentiality Agreement shall be
applicable to all information acquired by Buyer in the course of its
environmental assessment.  During normal
business hours and after providing the Company and Seller reasonable prior
notice of any such activities, Buyer and its representatives shall be permitted
to enter upon the Oil and Gas Properties and all buildings and improvements
thereon, inspect the same, review files and generally conduct such tests,
examinations, and investigations as are consistent with the American Society
for Testing and Materials standard Phase I environmental audit and which have
been approved by Company in writing. 
Seller will have the right to (i) witness such investigation and (ii)
promptly receive a copy of all results, analyses and reviews.


(b)           Buyer will notify Seller on or before
the Notification Deadline of (i) the existence of any environmental condition
on the Oil and Gas Properties that Buyer reasonably believes constitutes a
breach of the Company’s representations and warranties set forth in Section
4.22 (“Environmental Defect”), and (ii) the estimated cost to remediate or cure
such condition on each individual Oil and Gas Property, determined utilizing
the most cost effective and appropriate method of cure or remediation available
under the circumstances.  With respect to
any Environmental Defect:


(i)            Seller shall have the right, but not
the obligation, to undertake such remedial action as may be required
Environmental Law as currently applied to cure by such Environmental Defect by
sending written notice of its binding commitment to effectuate such cure and
the details and timing of such curative action, and if such commitment is
reasonably satisfactory to Buyer, the Base Purchase Price would not be reduced
on account of such Environmental Defect



 24
 









(ii)           Buyer and Seller may also, upon their
mutual agreement, set the costs to cure the Environmental Defect and the Base
Purchase Price shall be reduced by such agreed costs while Buyer shall be
responsible for any cure; and


(iii)          If, within fifteen (15) days following
the notice of an Environmental Defect as to any Oil and Gas Property, Buyer and
Seller cannot reach mutual agreement as contemplated in Section 7.4(b)(i) or
(ii) above on either the value of an Environmental Defect or whether an
Environmental Defect exists, the Parties agree to resolve the dispute under the
arbitration provisions in this Agreement.


(c)           No adjustment to the Base Purchase
Price for Environmental Defects shall be made unless and until the aggregate
value of all Environmental Defects (herein called the “Aggregate Environmental
Defect Value”) exceeds one percent (1%) of the Base Purchase Price, and once
the deductible is exceeded, only the value of all Environmental Defects in
excess of such deductible shall be considered in applying this Section 7.4.


(d)           For purposes of this section, the
costs to cure an Environmental Defect determined under Section 7.4(b)(i) and
(ii) above shall not be counted towards the Aggregate Environmental Defect
Value.


(e)           Notwithstanding anything to the
contrary in this Section 7.4, the adjustments attributable to the effects of
all Environmental Defects upon any Oil and Gas Property shall not exceed the
Allocated Value of such particular Oil and Gas Property.


(f)            All Environmental Defects not raised
within the time period provided in paragraph (b) above shall be waived by Buyer
for all purposes, including but not limited to Article XII.


7.5           Gas Imbalances. 
Within 120 days after the Closing Date, Seller and Buyer shall, based
upon data available at that time, determine (a) the total amount of
overproduction of gas attributable to and accounted for under the name of the
Company and related to the Oil and Gas Properties (e.g., volumes of gas taken
from the Leases, or on lands unitized therewith, by the Company in excess of
those volumes which the Company would be entitled to receive) and (b) the total
amount of underproduction of gas attributable to and accounted for under the
name of the Company and related to the Oil and Gas Properties (e.g., volumes of
gas not taken from the Leases, or on lands unitized therewith, despite the
Company’s Ownership Interest in and right to receive such volumes).  If the total amount of overproduction (as so
determined) exceeds the total amount of underproduction (as so determined) the
Base Purchase Price shall be adjusted downward in an amount equal to US$5.72
per Mcf times such excess. If the total amount of underproduction (as so
determined) exceeds the total amount of overproduction (as so determined) the
Base Purchase Price shall be adjusted upward in an amount equal to  US$5.72 per Mcf times such excess. The amount
of any upward adjustment shall be paid by Buyer to Seller, or the amount of any
downward adjustment shall be paid by Seller to Buyer, within five days after
determination thereof. Notwithstanding the foregoing, only imbalances subject
to legally enforceable rights of recovery will be subject to the determination
hereunder.



 25
 









7.6           Access to Information.  Upon reasonable notice, the Company, FOC and
Seller shall afford to Buyer’s officers, employees, accountants, counsel and
other representatives access, from the date hereof until the Closing Date, to
all of the properties, books, contracts, commitments, files and records of the
Company and, to the extent that they pertain to the Oil and Gas Properties,
FOC, as well as to the Company’s, Seller’s and FOC’s officers and employees (to
the extent that any of FOC’s officers and employees are responsible for matters
pertaining to the Company or its assets and properties) and, during such
period, the Company shall furnish to Buyer (a) a copy of each material report,
schedule, registration statement and other document filed or received by it
during such period and (b) all other information concerning its business,
properties and personnel as Buyer may reasonably request. Buyer agrees that it
will not, and will cause its respective representatives not to, use any
information obtained pursuant to this Section 7.6 for any purpose unrelated to
the consummation of the transactions contemplated by this Agreement.  The Confidentiality Agreement shall apply
with respect to the information furnished thereunder and hereunder, and any
other activities contemplated thereby. Buyer shall indemnify, defend and hold
harmless the Company and the Seller from and against any and all claims,
actions, causes of action, demands, assessments, losses, damages, liabilities,
judgments, settlements, penalties, costs and expenses (including reasonable
attorneys’ fees and expenses), of any nature whatsoever asserted against or
suffered by the Company or the Seller relating to, resulting from or arising
out of the conduct of Buyer or its representatives in the course of any
examinations or inspections made by Buyer or its representatives under this
Section 7.6, except to the extent of gross negligence or wilfull misconduct on
the part of Company, or any of its employees, agents or Affiliates.


7.7           Regulatory Approvals.  Each Party hereto shall cooperate and use its
reasonable best efforts to promptly prepare and file all necessary
documentation to effect all necessary applications, notices, petitions, filings
and other documents, and use all commercially reasonable efforts to obtain (and
will cooperate with each other in obtaining) any consent, acquiescence,
authorization, order or approval of, and any exemption or nonopposition by, any
Governmental Entity required to be obtained or made by Company, the Seller or
Buyer or any of their respective Affiliates in connection with the transactions
contemplated hereby or the taking of any action contemplated thereby or by this
Agreement.


7.8           Agreement to Defend.  In the event any claim, action, suit,
investigation or other proceeding by any governmental body or other person or
other legal or administrative proceeding is commenced that questions the
validity or legality of the transactions contemplated hereby or seeks damages
in connection therewith, the parties hereby agree to cooperate and use their
commercially reasonable efforts to defend against and respond thereto.


7.9           Other Actions. 
Except as contemplated by this Agreement, neither the Company, the
Seller nor Buyer shall, nor permit any of its Affiliates to, take or agree or
commit to take any action that is reasonably likely to result in any of its
respective representations or warranties hereunder being untrue in any material
respect or in any of the conditions to the transactions contemplated hereby set
forth in Article VIII not being satisfied. 
Each of the parties agrees to use its reasonable best efforts to satisfy
the conditions to Closing set forth in this Agreement.


7.10         LIMITATION AND DISCLAIMER OF IMPLIED REPRESENTATIONS AND
WARRANTIES OF THE COMPANY AND SELLER. 
THE EXPRESS REPRESENTATIONS 



 26
 









AND WARRANTIES OF THE COMPANY AND SELLER
CONTAINED IN THIS AGREEMENT ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER
REPRESENTATIONS AND WARRANTIES, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE.  AT OR PRIOR TO CLOSING, BUYER SHALL HAVE
CONDUCTED SUCH INSPECTIONS OF THE COMPANY AND ITS ASSETS AS BUYER DEEMS
NECESSARY AND SHALL HAVE SATISFIED ITSELF AS TO THE CONDITION OF THE COMPANY AND
ITS ASSETS; HOWEVER, NO SUCH INSPECTION SHALL BE DEEMED BE IN LIEU OR
CONSTITUTE A WAIVER OF ANY EXPRESS REPRESENTATION OR WARRANTY CONTAINED IN THIS
AGREEMENT.  EXCEPT AS OTHERWISE PROVIDED
IN THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS AGREEMENT, THE COMPANY
AND SELLER MAKE NO WARRANTY OR REPRESENTATION, EXPRESS, IMPLIED, STATUTORY OR
OTHERWISE, AS TO THE ACCURACY OR COMPLETENESS OF ANY DATA, REPORTS, RECORDS,
PROJECTIONS, INFORMATION OR MATERIALS NOW, HERETOFORE OR HEREAFTER FURNISHED OR
MADE AVAILABLE TO BUYER OR ITS REPRESENTATIVES BY THE COMPANY, SELLER OR BY THE
AGENTS OR REPRESENTATIVES OF EITHER; ANY AND ALL SUCH DATA, RECORDS, REPORTS,
PROJECTIONS, INFORMATION AND OTHER MATERIALS FURNISHED BY THE COMPANY, SELLER
OR BY THE AGENTS OR REPRESENTATIVES OF EITHER OR OTHERWISE MADE AVAILABLE TO
BUYER OR BUYER’S REPRESENTATIVES ARE PROVIDED TO OR FOR THE BENEFIT OF BUYER AS
A CONVENIENCE, AND SHALL NOT CREATE OR GIVE RISE TO ANY LIABILITY OF OR AGAINST
THE COMPANY, SELLER OR ANY AGENT OR REPRESENTATIVE OF EITHER; AND ANY RELIANCE
ON OR USE OF THE SAME SHALL BE AT BUYER’S SOLE RISK.


7.11         Change of Company Name.  Each of Buyer and the Company undertakes and
agrees that promptly after the Closing, it will take all actions necessary to
change the name of the Company to delete the use of the name “Forest”, any
derivative thereof and/or any logos or trademarks related thereto by sixty (60)
days after Closing.


7.12         Account Signatories. 
Seller shall cause the Company to change the names of the accounts and
the names of the officers, employees, agents or other similar representatives
of the Company, as designated by Buyer at or prior to the Closing, who
thereafter shall be authorized to transact business with respect to the
accounts, safe deposit boxes, lock boxes or other relationships with the banks,
trust companies, securities brokers and other financial institutions set forth
in Schedule 4.17.


7.13         Cooperation with Financing.  In order to assist with obtaining financing
for the transactions contemplated by this Agreement, the Company shall provide
and shall use their commercially reasonable best efforts to cause its
representatives (including legal and accounting advisors) to provide all
cooperation reasonably requested by Buyer in connection with such financing,
including, but not limited to, (i) assisting Buyer and its financing sources in
preparing any offering document and materials for rating agency presentations,
(ii) furnishing information for the preparation of financial statements, pro
forma statements and other financial data customarily included in offerings of
the type contemplated by the financing, and (iii) cooperation with prospective
lenders in performing their due diligence. 
Buyer shall use its commercially reasonable best efforts to obtain the
Debt Financing (or, if the Debt Financing is not available to 



 27
 









Buyer, alternative acquisition financing
sufficient to fund the transactions contemplated by this Agreement) and to
obtain the required consent under Buyer’s Credit and Guaranty Agreement dated
November 30, 2006 with J. Aron & Company (the “PERL Credit Agreement”).


7.14         Hedge
Assumption. Between the date hereof and the Closing Date, Seller and FOC will
use reasonable commercial efforts, at no cost to Seller or FOC, to assist Buyer
in finalizing its hedging strategy following Closing, including efforts to
assign and novate all of the Forest Hedges to a financial counterparty of Buyer’s
choosing.  In the event that Buyer fails
to so novate and assign all of the Forest Hedges, Buyer shall have the
following option: Between the date of execution hereof and five business days
prior to Closing, Buyer shall elect either:


(a)           To have the Company assign and
novate, at no cost and with no further liability or obligation to Buyer or the
Company, all of the Forest Hedges to FOC; or


(b)           To have the
Company assign and novate, at no cost and with no further liability or
obligation to Buyer or the Company, all of the Forest Hedges to FOC, whereupon
FOC shall immediately enter into identical transactions (each, a “Mirror Hedge”)
with Buyer, each of which shall be supported by customary derivative agreements
and shall provide Buyer the same economic benefits, rights and obligations that
the Company would have under all of the Forest Hedges but for the novation to
FOC; provided, however, that such Mirror Hedge shall have a term
of no more than 60 days.


ARTICLE
VIII


CONDITIONS
TO CLOSING


8.1           Buyer’s Conditions. 
Unless otherwise waived in writing prior to the Closing, the obligation
of Buyer to complete the Closing is subject to fulfillment prior to or at the
Closing of each of the following conditions:


(a)           No Legal
Proceeding. 
At
the Closing, no Legal Proceeding shall be pending or threatened seeking to
enjoin or prevent, nor shall an Injunction, Order or Official Action have been
issued prohibiting consummation of the transactions contemplated hereby.


(b)           Bank
Accounts. 
Seller
shall have caused the Company to change the authorized account signatories as
contemplated by Section 7.12.


(c)           Fulfillment
of Obligations.  Seller shall have duly performed or complied with all
of the obligations and covenants to be performed or to which compliance is
required under the terms of this Agreement at or prior to the Closing Date.


(d)           Accuracy
of Representations and Warranties.  The representations and warranties of the Company and
Seller set forth herein shall be true and correct (without giving effect to any
limitation as to “materiality” or “Material Adverse Effect” set forth therein)
at and as of the Closing Date, as if made at and as of such time except where
the failure of such representations and warranties to be so true and correct
(without giving effect to any limitation as to “materiality” or “Material
Adverse Effect” set forth therein) 



 28
 









individually or in
the aggregate has not had, and would not be reasonably likely to have or result
in, a Material Adverse Effect on the Company.


(e)           Closing Deliveries.  Seller or the Company as is appropriate shall have
delivered at or before Closing all of the items listed in Section 9.1.


(f)            Other Items.  Buyer shall have received (i) the proceeds of
the Debt Financing or alternative financing sufficient to fund the transactions
contemplated by this Agreement, and (ii) the required consent under the PERL
Credit Agreement.


8.2           Seller’s Conditions.  Unless otherwise waived in writing prior to
Closing, the obligation of Seller to complete the Closing is subject to
fulfillment prior to or at Closing of each of the following conditions.


(a)           No Legal
Proceedings. 
At
the Closing, no Legal Proceeding shall be pending or threatened seeking to
enjoin or prevent, nor shall an Injunction, Order or Official Action have been
issued prohibiting consummation of the transactions contemplated hereby.


(b)           Accuracy
of Representations and Warranties.  The representations and warranties of Buyer set forth
herein shall be true and correct (without giving effect to any limitation as to
“materiality” or “Material Adverse Effect” set forth therein) at and as of the
Closing Date, as if made at and as of such time except where the failure of
such representations and warranties to be so true and correct (without giving
effect to any limitation as to “materiality” or “Material Adverse Effect” set
forth therein) individually or in the aggregate has not had, and would not be
reasonably likely to have or result in, a Material Adverse Effect on Buyer.


(c)           Closing
Deliveries. 
Buyer
shall have delivered at or before Closing all of the items listed in Section
9.2.


ARTICLE
IX


DELIVERIES
AT CLOSING


9.1           Deliveries by Seller to Buyer.  At the Closing, Seller or the Company as is
appropriate shall deliver, or shall cause to be delivered, to Buyer the
following:


(a)           appropriate evidence of the
Membership Interests, and such instruments or documents evidencing the sale,
assignment, transfer and conveyance by the Seller to Buyer of the Membership
Interests in accordance with the terms hereof;


(b)           a certificate of both the Company and
the Seller, dated as of the Closing Date, setting forth those resolutions
authorizing the consummation of the transactions contemplated hereby, and
certifying that such resolutions were duly adopted and have not been rescinded
or amended as of the Closing Date;



 29
 









(c)           certificate of both the Company and
the Seller attesting as to the incumbency and signature of each officer of the
Company and the Seller, as applicable, who shall execute this Agreement and any
other agreement in connection herewith on behalf of the Company or the Seller,
as the case may be, and certifying as being complete and correct the copies
attached to such certificate of the Company’s constituent documents, each as in
effect on such date;


(d)           a certificate of existence of the
Company from the Secretary of State of the State of Delaware and a certificate
of the good standing of the Company from State of Delaware, and a certificate
of qualification of the Company as an entity authorized to do business in
Alaska, in each case dated as of a date not earlier than 10 days prior to the
Closing Date;


(e)           the originals of all minute books,
Membership Interests transfer records, electronic data and corporate and all
other records of the Company, including but not limited to, all land,
geological, engineering and geophysical work files relating to the Company’s
Oil and Gas Properties;


(f)            pay-off letters from Credit Suisse,
JP Morgan Chase and any other providers of Company Debt in form and substance
satisfactory to Buyer and its financing source, specifying, among other things,
that all of the Credit Agreement and all other loan documents related thereto
shall be canceled upon payment of the pay-off amounts set forth therein,
together with evidence that all Liens in favor of Credit Suisse, JP Morgan and
any other secured lenders have been or, upon payment of the pay-off amounts set
forth therein will be, released (the “Pay-off Letters”);


(g)           general releases of claims against
the Company, in form and substance satisfactory to Buyer and its financing
source, from Seller, FOC and their Affiliates, and all officers and directors
of the Company;


(h)           the resignation of each of the
present directors and officers of the Company; and


(i)            all consents or waivers referred to
on Schedule 4.5.


9.2           Deliveries by Buyer to Seller and the Company.  At the Closing, in addition to making the
payments described in Sections 3.2 and 3.3, Buyer shall deliver to Seller the
following:


(a)           a certificate of a duly authorized
representative of Buyer, dated the Closing Date, authorizing the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby, and certifying that such authorizations are in full force and effect
and have not been rescinded or amended as of the Closing Date;


(b)           evidence satisfactory to Seller
indicating (i) payment in full of the amounts reflected in the Pay-off Letters
or (ii) a complete and general release of the Seller and FOC from all
liabilities and obligations under the Company Debt; and



 30















(c)           a certificate of a duly authorized
representative of Buyer attesting as to the incumbency and signature of each
person who shall execute this Agreement or any other material document related
to this transaction.


ARTICLE X


TRANSITION
OPERATIONS


10.1         Transition Operations.  With respect to any portion of the Oil and
Gas Properties operated by Company or its agent, after Closing and until such
time as Buyer may be recognized and approved by the applicable federal or state
agency as Operator of such portion of the Oil and Gas Properties, FOC shall
operate such portion of the Oil and Gas Properties for the account of Buyer,
under the terms of the Intercompany Services Agreement listed on Schedule
4.7 between the Company and FOC.  In
connection with such operations under the Intercompany Services Agreement, the
Company shall pay FOC consistent with the provisions of thereof, plus an
additional fee equal to US$200,000 per month, provided that such additional
fees shall begin to accrue from the first day of the first month beginning at
least 90 days after Closing. Upon Buyer being recognized as operator as to all
of the Oil and Gas Properties, Buyer shall deliver to FOC written notice of its
intention to assume operations, designating the date of its intended assumption.  On such date, the Intercompany Services
Agreement shall immediately terminate and be of no further force and effect,
with no further liability thereunder on the part of either Buyer or the
Company, except for reimbursements and a pro rata portion of the operating fee
for the period through the date of termination and any indemnity protections
that survive termination per the terms of the Intercompany Services Agreement.


ARTICLE
XI


TERMINATION


11.1         Termination. 
This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Closing Date:


(a)           by mutual written consent of the
Company, Seller and Buyer;


(b)           by any of the Company, Seller or
Buyer if any Governmental Entity shall have issued any Injunction or taken any
other action permanently restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated hereby and such Injunction or
other action shall have become final and nonappealable;


(c)           (i) by Seller in the event of a
material breach by the Buyer of one or more provisions of this Agreement, in
particular the representations and warranties in Article VI above and (ii) by
Buyer in the event of a material breach by either the Seller or the Company of
one or more provisions of this Agreement, in particular the representations and
warranties in Articles IV and V above;


(d)           by Seller or Buyer if the total
amount of uncured and unwaived Title Defects and/or Environmental Defects
exceeds 10% of the Base Purchase Price;



 31
 









11.2      Effect of Termination.


(a)           In the event of termination of this
Agreement by Seller pursuant to Section 11.1(c)(i) above or if all other
Closing conditions have been satisfied (other than those that can only be
satisfied at Closing), except that the condition in Section 8.1(f) has not been
satisfied, Seller shall be entitled to retain the Deposit, together with any
interest earned thereon. This shall be in the nature of liquidated damages for
Buyer’s breach, and not a penalty. If the Closing does not occur by July 31,
2007 or is terminated as a result of a breach by Buyer as contemplated by
Section 11.1(c)(i) above or if the failure to close is the result of the
condition in Section 8.1(f) not being satisfied as contemplated above, the
Seller’s retention of the Deposit is Seller’s sole remedy against the
Buyer.  However, if this Agreement does
not close on the date specified above or is terminated due the negligence,
fault or willful failure of the Seller or for the reasons described in Section
11.1(a), (b), (c)(ii), or (d), the Deposit, together with any interest earned
thereon shall be delivered to Buyer.


(b)           In the event of termination of this
Agreement by any party hereto as provided in Section 11.1, this Agreement shall
forthwith become void and there shall be no liability or obligation on the part
of any Party hereto except (i) under the Confidentiality Agreement, (ii) with
respect to this Section 11.2, the second and third sentences of Section 7.6,
and Section 14.10, and (iii) to the extent that such termination results from
the willful breach by a Party hereto of any of its representations and
warranties or of any of its covenants or agreements contained in this
Agreement.


ARTICLE
XII


INDEMNIFICATION


12.1         Seller and FOC Indemnification.  Subject to the limitations set forth in
Section 12.4 hereof, the Seller and FOC hereby jointly and severally agree to
indemnify and hold Buyer and each of its Affiliates, and the officers,
directors, employees and agents thereof, harmless from and against any and all claims,
judgments, causes of action, liabilities, obligations, guarantees, damages,
losses, deficiencies, costs, penalties, interest and expenses, including
without limitation, cost of investigation and defense, and reasonable attorneys’
fees and expenses, net of any collected insurance proceeds (collectively, “Losses”),
arising out of, based upon, attributable to or resulting from any, breach of a
representation, warranty, agreement or covenant of the Company or Seller
contained in or made pursuant to this Agreement (without giving effect to any
limitation as to “materiality” or “Material Adverse Effect” set forth therein).


12.2         Buyer Indemnification.  Buyer hereby agrees to indemnify and hold
Seller, the Company, each of their respective Affiliates and each of their
respective officers, directors, employees and agents harmless from and against
any and all Losses arising out of, based upon, attributable to or resulting
from any breach of any representation, warranty, agreement or covenant on the
part of Buyer contained in or made pursuant to this Agreement (without giving
effect to any limitation as to “materiality” or “Material Adverse Effect” set
forth therein).



 32
 









12.3         Indemnification Procedures.


(a)           If any third party asserts any claim
against a Party to this Agreement which, if successful, would entitle the Party
to indemnification under this Article XII (the “Indemnified Party”), it shall
give notice of such claim to the Party from whom it intends to seek
indemnification (the “Indemnifying Party”) and the Indemnifying Party shall
have the right to assume the defense and, subject to Section 12.3(b),
settlement of such claim at its expense by representatives of its own choosing
acceptable to the Indemnified Party (which acceptance shall not be unreasonably
withheld).  The failure of the
Indemnified Party to notify the Indemnifying Party of such claim shall not
relieve the Indemnifying Party of any liability that the Indemnifying Party may
have with respect to such claim, except to the extent that the defense is materially
prejudiced by such failure.  The
Indemnified Party shall have the right to participate in the defense of such
claim at its expense (which expense shall not be deemed to be a Loss), in which
case the Indemnifying Party shall cooperate in providing information to and
consulting with the Indemnified Party about the claim.  If the Indemnifying Party fails or does not
assume the defense of any such claim within 20 days after written notice of
such claim has been given by the Indemnified Party to the Indemnifying Party,
the Indemnified Party may defend against or, subject to Section 12.3(b), settle
such claim with counsel of its own choosing at the expense (to the extent
reasonable under the circumstances) of the Indemnifying Party.


(b)           If the Indemnifying Party does not
assume the defense of a claim involving the asserted liability of the
Indemnified Party under this Article XII, no settlement of such claim shall be
made by the Indemnified Party without the prior written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld or
delayed.  If the Indemnifying Party
assumes the defense of such a claim, (i) no settlement thereof may be effected
by the Indemnifying Party without the Indemnified Party’s consent unless (A)
there is no finding or admission of any violation of Law or any violation of
the rights of any Person and no effect on any other claim that may be made
against the Indemnified Party, (B) the sole relief
provided is monetary damages that have been paid in full by the Indemnifying
Party and (C) the
settlement includes, as an unconditional term thereof, the giving by the
claimant or the plaintiff to the Indemnified Party of a release in form and
substance reasonably satisfactory to the Indemnified Party, from all liability
in respect of such claim, and (ii) the Indemnified Party shall have no
liability with respect to any compromise or settlement thereof effected without
its consent.


12.4         Limits on Indemnification.  Notwithstanding anything to the contrary
contained in this Agreement:


(a)           Seller shall not have any obligation
to provide indemnification for Losses arising out of breaches of
representations and warranties, unless the amount of all such Losses pursuant
to Section 12.1 exceeds US$250,000 (the “Basket Amount”).  The maximum aggregate amount for which Seller
may be liable under this Article XII for breaches of representations and
warranties shall be limited to twenty-five percent (25%) of the Base Purchase
Price. This paragraph (a) shall not apply to Losses suffered by a Buyer
Indemnified Party pursuant to Sections 4.3, 4.4 (but at only as to the last
sentence thereof), 4.8, 4.9, 4.10, 4.11, 4.13, 4.25, 5.4, 5.6, 5.7 and 5.8.



 33
 









(b)           Buyer shall not have any obligation
to provide indemnification for Losses pursuant to Section 12.2 arising out of
or related to breaches of representations and warranties unless the aggregate
amount of all such Losses pursuant to such Section exceeds the Basket Amount in
which case Buyer shall be only liable to Seller for the amount of such Losses
that exceed the Basket Amount.  The
maximum aggregate amount for which Buyer may be liable under this Article XII
shall be limited to twenty-five percent (25%) of the Base Purchase Price.


(c)           Except for the representations and
warranties of (i) the Company in Sections 4.21 and 4.22, the exclusive remedies
for which are provided in Sections 7.3 and 7.4, respectively, (ii) Seller
contained in Section 5.6, which shall survive indefinitely, and Section 4.25,
which shall survive until the expiration of the applicable statute of
limitations, the respective representations of the Company, Seller and Buyer
contained in this Agreement shall survive the Closing for a period of one year,
and thereafter none of the Company, Seller or Buyer shall have any liability
whatsoever (whether pursuant to this Agreement or otherwise) with respect to
such representation or warranty.  This
Section 12.4(c) shall have no effect upon any other obligations of the parties
hereto under this Agreement, whether to be performed before, at or after the
Closing, which shall survive until fulfilled or the expiration in accordance
with their terms.


(d)           Any payments made to Seller, the
Company or the Buyer pursuant to this Article XII shall constitute an
adjustment of the Purchase Price for Tax purposes and shall be treated as such
by the Buyer and Seller on their Tax Returns.


(e)           An Indemnifying Party shall not be
liable under this Article XII for Losses resulting from any event relating
to a breach of a representation or warranty if the Indemnifying Party can
establish that the Indemnified Party had actual knowledge on or before the
Closing Date of such event.


(f)            Notwithstanding anything else
contained in this Article XII, Seller hereby agrees to indemnify and hold Buyer
and each of its Affiliates (including the Company), and the officers,
directors, employees and agents thereof, harmless from and against any and all
Losses arising from any litigation (i) which arises out of actions, conduct or
events which occur prior to the Effective Date or (ii) that was not disclosed
to Buyer and which arises out of actions, conduct or events that occurred
between the Effective Date and the Closing Date.  This indemnity shall be subject to the
procedures of Section 12.3, and shall survive indefinitely.


ARTICLE
XIII


TAXES


13.1         Sales and Use Taxes; Property Taxes.  The Purchase Price, as adjusted herein, is
exclusive of any sales taxes and other transfer taxes in connection with the
sale of the Membership Interests.  Buyer
shall bear the cost of all applicable sales taxes, real property transfer
taxes, and filing and recording fees payable as a result of the transfer of the
Membership Interests.  If at any time
after the Closing, Seller or any Affiliate shall become liable for taxes or 



 34
 









fees for which Buyer is responsible under
this paragraph, Buyer shall promptly reimburse Seller or such Affiliate for
such taxes and fees, including any penalties and interest thereon.  Buyer shall defend, indemnify and hold Seller
harmless with respect to the payment of any such taxes and fees, including any
interest or penalties assessed thereon.


13.2         Tax Proceedings. 
In the event Seller receives notice of any payments due, claim,
adjustment or other proceeding relating to Real or Personal Property Taxes for
the year in which the Effective Date occurs, Seller shall notify Buyer in
writing within 30 days of receiving notice thereof.  As to any such taxes Buyer shall, at Buyer’s
expense, control or settle the contest of such examination, claim, adjustment,
or other proceeding, and shall indemnify Seller against all losses, damages,
costs, expenses, liabilities, claims, demands, penalties, fines, assessments,
settlements, and any related expenses in connection therewith.  If, on execution of this Agreement, Seller or
the Company is actively disputing any Real or Personal Property Tax assessments
involving the Oil and Gas Properties for the year in which the Effective Date
occurs, Seller shall fully inform Buyer of the basis for, and status of, the
dispute and shall permit Buyer to direct and/or participate in the dispute to
the full extent permitted by law.


13.3         Real and Personal Property Taxes.  All ad valorem taxes, real property taxes and
personal property taxes (“Real and Personal Property Taxes”) for the year in
which the Effective Date occurs shall be apportioned as of the Effective Date
between Seller and Buyer.  Seller shall
be liable for the portion of such Real and Personal Property Taxes based upon
the number of days in the year occurring prior to the Effective Date, and Buyer
shall be liable for the portion of such taxes based upon the number of days in
the year occurring on and after the Effective Date.  At least 5 days prior to Closing, Seller will
provide Buyer with the amount of Real and Personal Property Taxes paid by
Seller with respect to the year which includes the Effective Date and the  amount of such Taxes allocable to Buyer,
which amount shall be deducted from the Purchase Price at Closing.


13.4         Property Tax Reporting.  Company has, or will have, filed any such
renditions, reports, or returns required to be filed with respect to Real and
Personal Property Taxes before Closing. 
Buyer shall file all reports and returns required to be filed or
submitted after Closing that are incident to Real and Personal Property Taxes
assessed for the year in which the Effective Date occurs but that are not
submitted by Seller prior to the Closing Date. 
Buyer shall pay any assessed Real and Personal Property Taxes assessed
after Closing and shall invoice Seller for its allocable share of such taxes,
if any, pursuant to Section 13.3 above, which invoice shall be paid promptly by
Seller.


13.5         Production Taxes. 
All Production Taxes (including deductions, credits or refunds
pertaining thereto) attributable to the ownership or operation of, or
production and revenue from, the Oil and Gas Properties prior to the Effective
Date are Seller’s responsibility, and shall be allocated to and paid by Seller.
All Production Taxes (including deductions, credits or refunds pertaining
thereto) attributable to the ownership or operation of, or production and
revenue from, the Oil and Gas Properties on and after the Effective Date are
the responsibility of Buyer, and shall be allocated to and paid by Buyer.
Production Taxes will be allocated by the Parties so that the Party which is
entitled to the revenue from production shall bear the burden of the Production
Tax in respect thereto.  Notwithstanding
the foregoing, any excess Production Tax credits 



 35
 









available to the Company or Seller, but unused
as of Closing shall accrue to the Company or Buyer to the extent permitted by
applicable law.


13.6         Income Taxes.  Seller
shall be responsible for Income Taxes imposed on Seller to the extent they
relate to any period, whether before, on, or after the Effective Date, and all
items of deduction, credit, loss or gain or refund pertaining to Income Taxes
imposed on Seller shall remain and belong to Seller, no matter when received,
assessed or paid.  Buyer shall be responsible
for Income Taxes imposed on Buyer to the extent they relate to any period,
whether before, on, or after the Effective Date, and all items of deduction,
credit, loss or gain or refund pertaining to Income Taxes imposed on Buyer
shall remain and belong to Buyer, no matter when received, assessed or paid.


13.7         Purchase Price Allocation.  The allocation of the Purchase Price in
accordance with Exhibit A-2 is intended to comply with the allocation method
required by Section 1060 of the Code. 
Buyer and Seller shall cooperate to comply with all substantive and
procedural requirements of Section 1060 and the Treasury Regulations
thereunder, including without limitation the filing by Buyer and Seller of IRS
Form 8594 with their federal income tax returns for the taxable year in which
the Closing occurs.  Buyer and Seller
agree that neither will take, nor will they permit any Affiliate to take, a
position for income tax purposes that is inconsistent with the allocation of
the Purchase Price.


ARTICLE
XIV


GENERAL


14.1         Governing Law; Choice of Forum.  This Agreement shall be governed and
interpreted in accordance with the laws of the State of Delaware, without
regard to the conflict of law principles thereof.  Any dispute arising hereunder shall be
brought, if at all, in the state or federal courts located in Delaware. Each
party agrees not to assert any argument of inconvenient forum in response to
the filing of an action in any such court.


14.2         Amendments. 
This Agreement may only be amended by an instrument in writing executed
by Company, Buyer and Seller.


14.3         Waivers.  The
observance of any term of this Agreement may be waived (either generally or in
a particular instance and either retroactively or prospectively) by the party
entitled to enforce such term, but such waiver shall be effective only if it is
in a writing signed by the party entitled to enforce such term and against
which such waiver is to be asserted. 
Unless otherwise expressly provided in this Agreement, no delay or
omission on the part of any party in exercising any right or privilege under
this Agreement shall operate as a waiver thereof, nor shall any waiver on the
part of any party of any right or privilege under this Agreement operate as a
waiver of any other right or privilege under this Agreement nor shall any
single or partial exercise of any right or privilege preclude any other or
further exercise thereof or the exercise of any other right or privilege under
this Agreement.


14.4         Notices.  Any
notice or other communications required or permitted hereunder shall be in
writing and shall be sufficiently given (and shall be deemed to have been duly
given 



 36
 









upon receipt) if sent by overnight mail,
registered mail or certified mail, postage prepaid, or by hand, to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice):


(a)                                   If to Buyer,
to:

111 W. Ocean Boulevard

Suite 1240

Long Beach, CA 9080

Attn: President

Tel.: 562.628.1531

Fax: 562.628.1536


(b)           If to Seller and/or the Company, to:


707 Seventeenth Street

Suite 3600

Denver, CO 80202

Attn: General Counsel

Tel.: 303.812.1701

Fax: 303.812.1445


14.5         Successors and Assigns, Parties in Interest.  This Agreement shall be binding upon and
shall inure solely to the benefit of the parties hereto and their respective
successors, legal representatives and permitted assigns.  Neither this Agreement nor any rights or
obligations hereunder may be assigned without the written consent of the other
parties, which consent shall not be unreasonably withheld, except that Buyer
may make an assignment of its rights hereunder to its financing source for
collateral security purposes.  Nothing in
this Agreement, express or implied, is intended to or shall confer upon any
Person, other than the parties hereto and their respective successors, legal
representatives and permitted assigns, any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement, and no Person shall be
deemed a third party beneficiary under or by reason of this Agreement.


14.6         Severability. 
If any provision of this Agreement or the application of any such
provision to any Person or circumstance, shall be declared judicially to be
invalid, unenforceable or void, such decision shall not have the effect of
invalidating or voiding the remainder of this Agreement, it being the intent
and agreement of the parties that this Agreement shall be deemed amended by
modifying such provision to the extent necessary to render it valid, legal and
enforceable while preserving its intent or, if such modification is not possible,
by substituting therefor another provision that is valid, legal and enforceable
and that achieves the same objective.


14.7         Entire Agreement. 
This Agreement (including the Confidentiality Agreement, the Exhibits
and Schedules hereto, and the documents and instruments executed and delivered
in connection herewith) constitutes the entire agreement among the parties with
respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings, whether written or oral, among
the parties or any of them with respect to the subject matter hereof, and there
are no representations, understandings or agreements relating to 



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the subject matter hereof that are not fully
expressed in this Agreement and the documents and instruments executed and
delivered in connection herewith.  All
Exhibits and Schedules attached to this Agreement are expressly made a part of,
and incorporated by reference into, this Agreement.


14.8         Schedules. 
Nothing in the Schedules is intended to broaden the scope of any
representation or warranty contained in the Agreement or to create any covenant
unless clearly specified to the contrary herein.  Any disclosure on one Schedule shall be
deemed to be disclosed on all Schedules and under the Agreement.  Inclusion of any item in the Schedules (a)
shall be deemed to be disclosure of such item on all Schedules and under the
Agreement, (b) does not represent a determination that such item is material
nor shall it be deemed to establish a standard of materiality, (c) does not
represent a determination that such item did not arise in the ordinary course
of business, (d) does not represent a determination that the transactions
contemplated by the Agreement require the consent of third parties and (e)
shall not constitute, or be deemed to be, an admission to any third party
concerning such item.  The Schedules
include descriptions of instruments or brief summaries of certain aspects of
the Company and its business and operations. 
The descriptions and brief summaries are not necessarily complete and
are provided in the Schedules to identify documents or other materials
previously delivered or made available.


14.9         Remedies.  Each
of the parties hereto acknowledges and agrees that (i) the provisions of this
Agreement are reasonable and necessary to protect the proper and legitimate
interests of the other parties hereto, and (ii) the other parties hereto would
be irreparably damaged in the event any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached.  It is accordingly agreed that
the parties hereto shall be entitled to preliminary and permanent injunctive
relief to prevent breaches of the provisions of this Agreement by other parties
hereto without the necessity of proving actual damages upon posting of a
suitable bond, and to enforce specifically the terms and provisions hereof and
thereof, which rights shall be cumulative and in addition to any other remedy
to which the parties hereto may be entitled hereunder or at law or equity.


14.10       Expenses.  The
Seller, on the one hand, and Buyer, on the other hand, shall bear their
respective expenses (including, without limitation, fees and disbursements of
counsel, accountants and other experts) incurred in connection with the
preparation, negotiation, execution, delivery and performance of this
Agreement, each of the other documents and instruments executed in connection
with or contemplated by this Agreement and the consummation of the transactions
contemplated hereby and thereby.


14.11       Release of Information; Confidentiality.  The parties shall cooperate with each other
in releasing information concerning this Agreement and the transactions
contemplated hereby.  No press releases
or other public announcements concerning the transactions contemplated by this
Agreement shall be made by any party without prior consultation with and
written consent of each other party, except for any legally required
communication by any party and then only with prior consultation and at least
12 hours notice together with copies of all drafts of the proposed text, prior
to the time the communication is made public.


14.12       Certain Construction Rules.  The article and section headings and the
table of contents contained in this Agreement are for convenience of reference
only and shall in no way 



 38
 









define, limit, extend or describe the scope
or intent of any provisions of this Agreement. 
Whenever the context may require, any pronoun used in this Agreement
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns, pronouns and verbs shall include the plural and vice
versa.  In addition, as used in this
Agreement, unless otherwise provided to the contrary, (a) all references to
days, months or years shall be deemed references to calendar days, months or
years and (b) any reference to a “Section,” “Article,” or “Schedule” shall be
deemed to refer to a section or article of this Agreement or an Exhibit or
Schedule attached to this Agreement.  The
words “hereof”, “herein”, and “hereunder” and words of similar import referring
to this Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement.  Unless
otherwise specifically provided for herein, the term “or” shall not be deemed
to be exclusive.


14.13       Counterparts. 
This Agreement may be executed (including by facsimile transmission) in
multiple counterparts, each of which shall be deemed an original and all of
which taken together shall constitute one instrument binding on all the
parties, notwithstanding that all the parties are not signatories to the
original or the same counterpart.


[Signatures contained on following page]



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*              *              *


IN WITNESS WHEREOF, this Agreement has been duly
executed as of the date first above written.


	
  

  	
   

  	
   

  	
  BUYER:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  PACIFIC ENERGY RESOURCES LTD.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ DARREN KATIC

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
  Darren Katic

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  COMPANY:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  FOREST ALASKA OPERATING LLC

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ GLEN J. MIZENKO

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Glen J. Mizenko

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Vice President, Business Development

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SELLER:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  FOREST ALASKA HOLDING LLC

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ CYRUS D. MARTER IV

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Cyrus D. Marter IV

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Vice President & Secretary

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FOC (for purposes of Sections 7.6, 7.14, 10.1 and
  Article XII only): 

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  FOREST OIL CORPORATION

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ DAVID H. KEYTE

  	
   

  	
   

  	
   

  
	
    

  	
  Name:

  	
  David H. Keyte

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Executive Vice President & Chief Financial
  Officer

  	
   

  	
   

  	
   

  



 



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