Document:

Exhibit 10.3

 

TRANSITION SERVICES AGREEMENT

 

THIS
TRANSITION SERVICES AGREEMENT, dated as of September 9, 2005, is between Forest
Oil Corporation, a New York corporation (“Forest”), and SML Wellhead
Corporation, a Delaware corporation and a wholly owned subsidiary of Forest (“Spinco”).

 

WHEREAS, Forest,
Spinco, Mariner Energy, Inc., a Delaware corporation (the “Company”), and
MEI Sub, Inc., a Delaware corporation and wholly owned subsidiary of the
Company (“Merger Sub”), have entered into an Agreement and Plan of Merger,
dated as of September 9, 2005 (the “Merger Agreement”), pursuant to which,
at the Effective Time (as such term and other capitalized terms not defined
herein are defined in the Merger Agreement), Merger Sub will merge with and
into Spinco, with Spinco being the surviving corporation, and Spinco becoming a
wholly owned subsidiary of the Company (the “Merger”);

 

WHEREAS, this
Agreement and the other Transaction Agreements set forth certain transactions
that are conditions to consummation of the Merger;

 

WHEREAS,
Spinco and the Company have requested that Forest and one or more of Forest’s
Affiliates continue to provide certain services to Spinco and Spinco’s
Affiliates in order to assist it in the transition of the Spinco Business for a
period described herein following the Effective Time, and Forest has agreed to
provide the services described in this Agreement according to its terms and
conditions;

 

NOW,
THEREFORE, in consideration of the representations, warranties, covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties, intending to be legally bound hereby, agree as follows:

 

SECTION 1.  SERVICES PROVIDED BY FOREST TO SPINCO

 

In order to
continue the operation of the Spinco Business and to facilitate the orderly and
effective transition of the Spinco Business from Forest to Spinco, Forest and
its Affiliates shall use commercially reasonable efforts to provide Spinco and
its Affiliates with certain services (collectively, the “Services”) to the
extent such Services may be requested by Spinco from time to time for the term
of this Agreement.

 

The Services
are set forth in Exhibit A, a copy of which is attached to and made
a part of this Agreement.  The applicable
rates, fees and charges associated with each Service are also set forth in Exhibit A.  The provision by Forest of services not
specifically detailed in Exhibit A shall be mutually agreed upon by
the parties.

 

SECTION 2.  PERFORMANCE OF SERVICES

 

2.1                                 Manner of Performance.  Forest agrees that it shall use commercially
reasonable efforts to cause its personnel who previously provided the services
being requested herein to the Spinco Business prior to the Effective Time to perform
the Services with the same degree of care, 

 

 

skill,
confidentiality and diligence with which such personnel perform similar
services for Forest and its Affiliates, but in no event less than in
conformance with industry standards.  Forest
shall insure that Forest’s personnel occupying positions related to the support
of the Spinco Business shall devote sufficient time and effort as reasonably
required to perform the Services.  If a
dispute arises over the nature or quality of the Services, the prior practice
of Forest with respect to the Services, as determined from the books and
records of Forest relating to the Spinco Business, shall be conclusive as to
the nature and quality of the Services.

 

2.2                                 Provision of Information.  Any data, information, equipment or general
directions necessary for Forest or any of its Affiliates to perform the
Services shall be submitted by Spinco or its Affiliates in a timely manner.

 

2.3                                 Termination of Any Service.  The termination of any one or more of the
specific Services shall have no impact on Forest’s obligation to continue to
provide any other Services.

 

2.4                                 Laws and Regulations.  Spinco represents and agrees that it and its
Affiliates will use the Services provided hereunder only in accordance with all
applicable federal, state and local laws and regulations, and in accordance
with the conditions, rules, regulations and specifications which may be set
forth in any manuals, materials, documents or instructions provided to Spinco
and the Company on or prior to the date of this Agreement.

 

2.5                                 Modification of Service Levels.  Prior to the end of the first calendar month
following the Effective Time and prior to the end of every other calendar month
thereafter, the parties will review the Services provided to discuss whether
the Services will remain at the same level or decrease during the next
immediately succeeding month.  Spinco
will notify Forest in writing of any Service reduction or termination of
Services pursuant to Section 8.

 

SECTION 3.  CHARGES FOR SERVICES

 

From and after
the date of this Agreement and throughout the term of this Agreement, Spinco
agrees to pay to Forest on a monthly basis the service fees set forth on Exhibit A.  The parties agree that the amounts to be paid
for Services rendered hereunder are intended to both reasonably cover Forest’s
and its Affiliates’ costs in providing the Services
and be competitive with the amount charged by third parties for similar
services.  Monthly charges for a month
that includes the Effective Time or the termination date for this Agreement or
any individual Service shall be prorated, based on the number of days such
Services are provided in such partial month.

 

SECTION 4.  PAYMENT OF CHARGES AND REIMBURSEMENTS

 

On or before
the 15th day of each month during the term of this Agreement, Forest shall
submit to Spinco (or its designee) an invoice for the Services provided
hereunder during the immediately preceding calendar month representing amounts
determined in accordance with Section 3 above, if any.  Subject to Section 5.2, Spinco shall
remit payment within fifteen days after its receipt of such invoice.  Unless otherwise agreed to in writing, Spinco
shall remit all funds due under this Agreement to Forest (or its designee) by
wire transfer in immediately available 

 

2

 

funds based on
the instructions set forth in Exhibit B, a copy of which is
attached to and made a part of this Agreement.

 

SECTION 5.  RECORDS AND AUDITS

 

5.1                                 Records Maintenance and Audits.  All records and other information generated,
gathered or maintained by Forest in connection with its provision of the
Services pursuant to this Agreement shall be the proprietary material of
Spinco.  Forest shall provide Spinco the
originals of such records and other information, and any copies kept by Forest
with Spinco’s consent shall remain subject to the Confidentiality Agreement,
without regard to the termination or expiration date thereof.  Forest shall, for two years after the
termination of this Agreement, maintain records and other evidence sufficient
to accurately and properly calculate the amounts due determined in accordance
with Section 3 hereof.  Spinco or
its representatives shall have reasonable access, after requesting such access
in writing, during normal business hours to such records for the purpose of
auditing and verifying the accuracy of the invoices submitted regarding such
amounts due.  Any such audits performed
by or on behalf of Spinco shall be at Spinco’s sole cost and expense.  Forest shall fully cooperate with the
auditing party’s representatives to accomplish the audit.  Spinco shall have the right to audit Forest’s
books for a period of two years after the month in which the Services were
rendered.

 

5.2                                 Disputed Amounts.  In the event of a good-faith dispute as to
the amount and/or propriety of any invoices or any portions thereof submitted
pursuant to Sections 3 and 4, Spinco shall pay all charges on such invoice and
shall promptly notify Forest in writing of such disputed amounts.  So long as the parties are attempting in good
faith to resolve the dispute, neither party shall be entitled to terminate the
Services related to, or that are the cause of, the disputed amounts.

 

5.3                                 Undisputed Amounts.  Any statement or payment not disputed in
writing by Spinco within six months of the date of such statement shall be
considered final and no longer subject to adjustment.

 

SECTION 6.  CONFIDENTIALITY

 

Each party
acknowledges that in connection with its performance under this Agreement, it
may gain access to confidential material and information that is of a
proprietary, technical or business nature to the other party.  Therefore, each party agrees that the terms
of the Confidentiality Agreement shall apply, without regard to the termination
or expiration date thereof, to all such confidential material and information.

 

Following
termination of the Services hereunder, upon written request at any time by
either party, the parties shall account for and return to the other party or
destroy all papers, books, records and electronic records containing any such
confidential, technical, business or proprietary information.

 

3

 

SECTION 7.  TERM OF AGREEMENT

 

Unless sooner
terminated pursuant to Section 8 hereof, this Agreement shall be for a
term commencing on the date on which the Effective Time occurs and ending on
the last day of the sixth calendar month following the month in which the
Effective Time occurs.

 

SECTION 8.  TERMINATION

 

8.1                                 Termination of Agreement.  At any time, Spinco may terminate this
Agreement for any reason whatsoever by giving Forest at least thirty days’
prior written notice to that effect. 
Spinco shall pay Forest for all charges determined pursuant to Section 3
and incurred up to the date of such termination.  Subject to Section 5, Forest may also
terminate this Agreement if Spinco does not tender payment for the Services
within fifteen days after Spinco is given written notice of a failure to pay.

 

8.2                                 Termination of Services.  At any time or from time to time, Spinco may
terminate any one or more of the specific Services provided hereunder by giving
Forest at least thirty days’ prior written notice to that effect.  Either party may terminate any one or more of
the specific Services if the providing of such Service would violate any
applicable regulation, statute, ordinance or other law; provided,
however, that Forest shall give Spinco at least thirty business
days’ prior written notice when it intends to terminate any specific Services
for this reason.

 

SECTION 9.  MISCELLANEOUS

 

9.1                                 Force Majeure.  Forest shall not have any obligation to
perform any specific Service hereunder if its failure to do so is caused by or
results from any act of God, governmental action, natural disaster, strike,
terrorism, war, insurrection or other cause or circumstances beyond its
control, which acts or occurrences make it impossible for Forest to carry out
its obligations under this Agreement. 
During the term of the force majeure, Spinco shall not have an
obligation to pay for the specific Service that Forest does not provide as a
result of the force majeure.

 

9.2                                 Limitation of Liability.  EXCEPT FOR FAILURE TO COMPLY WITH THE
CONFIDENTIALITY PROVISIONS HEREIN AND FOR FRAUD, GROSS NEGLIGENCE, WILLFUL MISCONDUCT
OR INTENTIONAL BREACH, NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY
INCIDENTAL, INDIRECT, SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL LOSSES OR
DAMAGES OF ANY KIND OR NATURE WHATSOEVER, INCLUDING LOST PROFITS AND GOODWILL.  IN NO EVENT SHALL FOREST’S LIABILITY
HEREUNDER EXCEED THE TOTAL AMOUNT OF CASH COMPENSATION THAT FOREST IS PAID
UNDER THIS AGREEMENT.

 

9.3                                 Indemnification.  Each party shall release, defend (upon the
other party’s request), protect, indemnify and save the other party, its employees,
contractors, subcontractors (of any tier) and agents harmless from and against
all liability, claims, costs, expenses, demands, suits and causes of action of
every kind and character arising in favor of or against the first party, its
employees, contractors, subcontractors (of any tier) or agents, on account of
personal injuries to or death of any person, or damages to or the loss or
destruction of property, in anywise incident to or 

 

4

 

in connection
with or arising out of:  (a) the
presence of any of such party’s employees, contractors, subcontractors (of any
tier) or agents on the other party’s premises or (b) the negligent act or
omission of such party or its employees, contractors, subcontractors (of any
tier) or agents.  The foregoing shall not
be interpreted to require either party to indemnify the other party against the
gross negligence or willful misconduct of a party, its employees, contractors
or agents.

 

9.4                                 Independent Contractor:  The parties hereto agree that the Services
rendered by Forest or any of its Affiliates in the fulfillment of the terms and
obligations of this Agreement shall be as an independent contractor and not as
an employee, and with respect thereto, Forest, Forest’s Affiliates and their
respective employees, contractors or agents are not entitled to the benefits
provided by Spinco to its employees including, but not limited to, its group
insurance and participation in any employee benefit and pension plans
maintained by Spinco or any of its Affiliates. Further, nothing stated in this
Agreement shall be construed to make Forest or any of its Affiliates an agent,
partner or joint venturer of or with Spinco or any of its Affiliates.  No employee, contractor or agent of either Forest
or any of its Affiliates shall represent himself to third persons to be other
than an independent contractor of Spinco or any of its Affiliates, nor shall he
permit himself to offer or agree to incur or assume any obligations or
commitments in the name of Spinco or for Spinco without the prior consent and
authorization of Spinco.

 

9.5                                 Complete Agreement.  This Agreement and the Exhibits hereto, the
other Transaction Agreements and other documents referred to herein and therein
shall constitute the entire agreement between the parties hereto with respect
to the subject matter hereof and shall supersede all previous negotiations,
commitments and writings with respect to such subject matter.

 

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

 

9.7                                 Notices.  All notices and other communications required
or permitted to be given hereunder shall be in writing and shall be deemed given
upon (a) a transmitter’s confirmation of a receipt of a facsimile
transmission (but only if followed by confirmed delivery of a standard
overnight courier the following business day or if delivered by hand the
following business day), (b) confirmed delivery of a standard overnight
courier or when delivered by hand or (c) the expiration of five
business days after the date mailed by certified or registered mail
(return receipt requested), postage prepaid, to the parties at the following
addresses (or at such other addresses for a party as shall be specified by like
notice):

 

If to Forest
or any member of the Forest Group, to:

 

Forest Oil Corporation

1600 Broadway, Suite 2200

Denver, Colorado 80202

Attention:  General Counsel

Facsimile:  (303) 812-1510

 

5

 

with a copy
(which shall not constitute effective notice) to:

 

Vinson & Elkins L.L.P.

666 Fifth Avenue, 26th Floor

New York, NY 10103-0040

Attention:  Alan P. Baden

Facsimile:  (917) 849-5337

 

If to Spinco
or any member of the Spinco Group prior to the Distribution Date, to:

 

SML Wellhead Corporation

c/o Forest Oil Corporation

1600 Broadway, Suite 2200

Denver, Colorado 80202

Attention:  General Counsel

Facsimile:  (303) 812-1510

 

If to Spinco
or any member of the Spinco Group after the Distribution Date, to:

 

SML Wellhead Corporation

c/o Mariner Energy, Inc.

2101 CityWest Blvd.

Building 4, Suite 900

Houston, TX 77042

Attention:  General Counsel

Facsimile:  (713) 954-5555

 

with a copy
(which shall not constitute effective notice) to:

 

Baker Botts L.L.P.

910 Louisiana Street

Houston, Texas 77002

Attn:  Kelly B. Rose

Facsimile:  (713) 229-7996

 

or to such other address
as any party hereto may have furnished to the other parties by a notice in
writing in accordance with this Section.

 

9.8                                 Amendment and Modification.  This Agreement may be amended, modified or
supplemented only by a written agreement signed by all of the parties hereto,
with a Company Consent.

 

9.9                                 Successors and Assigns; No Third-Party Beneficiaries.  This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their successors and permitted assigns, but neither this Agreement nor any of
the rights, interests and obligations hereunder shall be assigned by any party
hereto without the prior written consent of the other party and Company
Consent.  Except for the provisions of Section 9.3,
which are also for the benefit of the indemnitees, this Agreement is solely for
the benefit of Forest, Spinco 

 

6

 

and the
Company and their respective Subsidiaries, Affiliates, successors and assigns,
and is not intended to confer upon any other Persons any rights or remedies
hereunder.  For the avoidance of doubt,
the parties agree that the Company shall be a third party beneficiary of this
Agreement.

 

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

 

9.11                           Interpretation.  The Article and Section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties hereto and shall not in any way affect the
meaning or interpretation of this Agreement.

 

9.12                           Severability.  If any provision of this Agreement or the
application thereof to any person or circumstance is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to persons or
circumstances other than those as to which it has been held invalid or
unenforceable, shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby, so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party.

 

9.13                           References; Construction.  References to any “Article,” “Exhibit,” “Schedule”
or “Section,” without more, are to Articles, Exhibits, Schedules and
Sections to or of this Agreement. 
Unless otherwise expressly stated, clauses beginning with the term “including”
or similar words set forth examples only and in no way limit the generality of
the matters thus exemplified.

 

9.14                           Termination.  Notwithstanding any provision hereof,
following termination of the Merger Agreement, this Agreement may be terminated
at any time prior to the Distribution Date by and in the sole discretion of the
Board of Directors of Forest.  In the
event of such termination, no party hereto or to any other Transaction
Agreement (other than the Merger Agreement) shall have any Liability to any
Person by reason of this Agreement or any other Transaction Agreement (other
than the Merger Agreement).

 

9.15                           Consent to Jurisdiction and Service of Process.  Each of the parties to this Agreement hereby
irrevocably and unconditionally (i) agrees to be subject to, and hereby
consent and submits to, the jurisdiction of the courts of the State of Delaware
and of the federal courts sitting in the State of Delaware, (ii) to the
extent such party is not otherwise subject to service of process in the State
of Delaware, hereby appoints the Corporation Trust Company as such party’s
agent in the State of Delaware for acceptance of legal process and (iii) agrees
that service made on any such agent set forth in (ii) above shall have the
same legal force and effect as if served upon such party personally within the
State of Delaware.

 

9.16                           Waivers.  Except as provided in this Agreement, no
action taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained in this Agreement.  The waiver 

 

7

 

by any party
hereto of a breach of any provision hereunder shall not operate or be construed
as a waiver of any prior or subsequent breach of the same or any other
provision hereunder.

 

9.17                           Specific Performance.  The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be entitled
to specific performance of the terms hereof, in addition to any other remedy at
law or in equity.

 

9.18                           Waiver of Jury Trial.  Each of the parties hereto irrevocably and
unconditionally waives all right to trial by jury in any litigation, claim, action,
suit, arbitration, inquiry, proceeding, investigation or counterclaim (whether
based in contract, tort or otherwise) arising out of or relating to this
Agreement or the actions of the parties hereto in the negotiation,
administration, performance and enforcement thereof.

 

[Signature page follows]

 

8

 

The parties
hereto have executed this Agreement on the date first above written, to be
effective as of the Effective Time.

 

 

	
   

  	
  FOREST OIL CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SML WELLHEAD CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  

 

9

 

EXHIBIT A

 

SERVICES
PROVIDED BY FOREST TO SPINCO

AND

APPLICABLE
RATES, FEES AND CHARGES

 

Forest shall perform or assist Spinco in performing, under the
direction of Spinco or the Company, any services requested by Spinco related to
the transition of the Spinco Business from Forest and its Affiliates to Spinco,
including but not limited to the following functions (the “Services”):

 

Accounting

 

•                  Forest agrees to provide the
necessary manpower, systems and other resources necessary to account for the
Spinco assets in the same manner and with the same level of diligence as when
the Spinco assets were owned by Forest.  Forest
shall perform all accounting responsibilities necessary to provide monthly
lease operating statements (LOS) by field (or lower classification down to the
well level if currently available) and summarized at the Spinco level both by
accounting date (Accounting Date LOS), activity date (Activity Date LOS).  Specifically, the accounting services to be
provided by Forest shall include, but not be limited to:

 

•                  General

 

•                  Assist in the transfer of all
pertinent electronic or computer system files, master files and historical
records as well as related physical files and source documents from Forest to
the Company

 

•                  Provide accounting output information
and reports (Accounting Date LOS, Activity Date LOS and related reports) in a
timely manner but no later than [the 25th day following the end of the calendar
month]

 

•                  Revenue Accounting

 

•                  Calculation and recording of monthly
accrued revenues to the well level and/or field level as appropriate

 

•                  Calculation and recording of monthly
accrued severance/production taxes as appropriate

 

•                  Calculation and recording of
associated state and federal royalty obligations and reconciliation of royalty
payable accounts

 

•                  Filing of all state and federal
regulatory reports, including MMS 2014 reports, OGAR reports, etc.

 

•                  Recording of actual revenue receipts
from purchasers against accounts receivables and reconciliation of all
receivables accounts

 

 

•                  Update gas imbalance and pay-out
schedules every other month

 

•                  Maintenance of all revenue, royalty
and division of interest master files

 

•                  Property and Joint Interest
Accounting

 

•                  Calculation and recording of monthly
accrued net lease operating expenses, work over costs, and ad valorem taxes to
the appropriate account code and well level and/or field level as appropriate

 

•                  Calculation and recording of monthly
accrued capital costs to the appropriate account code and well level and/or
field level as appropriate

 

•                  Preparation and transmission of joint
interest billings to partners on operated properties

 

•                  Recording of actual payments to
vendors and partners against accounts payable and reconciliation of all
payables accounts

 

•                  Handle and reconcile cash calls,
prepayments, JIB netting, AFE reporting and ancillary
accounting tasks associated with the Spinco Assets

 

•                  Maintenance of all working interest master
files

 

•                  Marketing

 

•                  Prepare and invoice purchasers for
sale of product

 

•                  Make gas nominations to purchasers

 

Information Technology

 

•                  Provide telecommunications and scada
support to remote sites (e.g., platforms)

 

•                  Provide network / systems
support to Metairie and Lafayette field offices

 

•                  Provide network / systems
support to corporate personnel supporting Gulf operations (e.g., accounting,
G&G, engineering, drilling, land, etc.)

 

•                  Provide electronic data files for
Gulf related data (e.g., production, A/P, A/R, suspense, DOI’s, G&G, etc.)

 

Real Property

 

•                  Maintenance and management of fee
property/lease file system, and administration of lease
payment/expiration/renewal system

 

•                  Document recordation

 

2

 

•                  MMS coordination, correspondence and
reporting

 

•                  Preparation of division orders

 

•                  List of pending transactions (e.g.,
Unocal)

 

Legal

 

•                  Investigation, negotiation,
settlement, preparation of releases and drafts relating to operations, environmental,
personal injury and other claims

 

•                  Coordination of property damage based
small claims actions resulting from operations

 

•                  Contract review and preparation

 

•                  Assistance with land, title and
regulatory matters

 

Operations/Reservoir Engineering

 

•                  Assistance in transitioning drilling
and workover operations and contracts

 

•                  Assistance with year end reserve
evaluation for purposes of preparation of Ryder Scott reserve report

 

•                  Assistance in reconciliation of
reserves for quarterly and bank reports

 

•                  Assistance with reconciliation of
reserves

 

The applicable rates, fees and charges to be paid to Forest shall be as
follows:

 

Spinco shall pay Forest for services provided under this Agreement
based on the time-writing of the Forest employees who perform the
services.  Time-writing shall be done
according to the hourly rates stated below. 
In addition to the hourly charges, Spinco shall reimburse Forest for all
out-of-pocket expenses (including without limitation reasonable travel
expenses) that Forest incurs in performing under this Agreement.

 

Accounting:

Clerk – Clerks and other administrative personnel will be billed at a
base rate of $19.28/hour plus a burden of 46.8% or $28.30/hour.  

Accountant – Accountants
will be billed at a base rate of $29.24/hour plus a burden of 52.0% or
$44.45/hour

Accounting Manager –
Accounting managers will be billed at a base rate of $38.11/hour plus a burden
of 54.7% or $58.95/hour.

Control Management – Control management will be billed at a base rate
of $55.53/hour plus a burden of 65% or $91.65/hour.

 

3

 

Marketing:

Clerk – Clerks and other administrative personnel will be billed at a
base rate of $24.33/hour plus a burden of 48.0% or $36.00/hour.

Marketing Representative
– Marketing representatives will be billed at a base rate of $69.74/hour plus a
burden of 64.4% or $114.70/hour.

 

Information Technology:

Support Specialist/Network Administrator – Support specialists and
network administrators will be billed at a base rate of $36.00/hour plus a
burden of 50.3% or $54.10/hour. 

Programmer – Programmers will be billed at a base rate of $41.80/hour
plus a burden of 50.8% or $63.05/hour. 

IT Manager – IT managers will be billed at a base rate of $58.08/hour
plus a burden of 65.4% or $96.05/hour. 

Records Management – will be billed at a base rate of $24.08/hour plus
a burden of 49.1% or $35.90/hour.  

 

Real Property:

Analyst – Analysts and administrative personnel will be billed at a
base rate of $29.44/hour plus a burden of 49.1% or $43.90/hour.

Landman – Landmen will be billed at a base rate of $57.53/hour plus a
burden of 70.0% or $97.80/hour. 

Land Manager – Land Managers will be billed at a base rate of
$77.74/hour plus a burden of 70.0% or $132.15/hour. 

 

Legal:

Paralegal – Paralegals will be billed at a base rate of $29.85/hour
plus a burden of 50.0% or $44.80/hour.  

Lawyer – Lawyers will be billed at a base rate of $83.04/hour plus a
burden of 70.2% or $141.35/hour. 

 

Operations/Reservoir Engineering:

Clerk – Clerks and other administrative personnel will be billed at a
base rate of $23.00/hour plus a burden of 46.9% or $33.78/hour. 

Engineering Technician – Engineering technicians will be billed at a
base rate of $36.06/hour plus a burden of 49.5% or $53.90/hour. 

Engineer – Engineers will be billed at a base rate of $64.90/hour plus
a burden of 64.6% or $106.80/hour. 

Engineering Manager – Engineering Managers will be billed at a base
rate of $83.29/hour plus a burden of 71.3% or $142.65/hour.

 

Executives:  All Functional Areas:  Base of $115.00/hour plus burden of 82.6% or
$210.00/hour.

 

In all instances, but subject to the availability of particular
employees and Forest’s need to conduct its own business in a prudent and
cost-effective manner, Forest shall utilize among 

 

4

 

personnel who are competent to perform the transition service in
question those employees who bill at the lowest rate.

 

5

 

EXHIBIT B

 

PAYMENT
INSTRUCTIONS

 

Until further notice, the following are wire transfer/ACH payment
instructions for payment to Forest (or its designee) owing under the terms of
the Transition Services Agreement:

 

Bank Name: 

Bank ABA #:

Account Name: 

Account #:  

Reference:  

 

6Exhibit 10.4

 

 

EMPLOYEE BENEFITS AGREEMENT

 

DATED AS OF SEPTEMBER 9, 2005

 

 

BETWEEN

 

 

FOREST OIL CORPORATION

 

 

AND

 

 

SML WELLHEAD CORPORATION

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I

  
	
  DEFINITIONS

  
	
   

  	
   

  	
   

  
	
  Section 1.1

  	
  General

  	
  1

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  
	
  EMPLOYEES; ASSUMPTION OF LIABILITIES

  
	
   

  	
   

  	
   

  
	
  Section 2.1

  	
  Employees

  	
  3

  
	
  Section 2.2

  	
  Assumption of
  Liabilities

  	
  4

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  
	
  FOREST STOCK OPTIONS

  
	
   

  	
   

  	
   

  
	
  Section 3.1

  	
  Vested Options

  	
  5

  
	
  Section 3.2

  	
  Unvested Options

  	
  5

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  
	
  GENERAL

  
	
   

  	
   

  	
   

  
	
  Section 4.1

  	
  Sharing of Employee
  Information

  	
  6

  
	
  Section 4.2

  	
  Non-Solicitation of
  Employees

  	
  6

  
	
  Section 4.3

  	
  Effect if
  Distribution Does Not Occur

  	
  6

  
	
  Section 4.4

  	
  Relationship of
  Parties

  	
  6

  
	
  Section 4.5

  	
  Indemnification

  	
  6

  
	
  Section 4.6

  	
  Survival

  	
  8

  
	
  Section 4.7

  	
  Notices

  	
  8

  
	
  Section 4.8

  	
  Interpretation

  	
  8

  
	
  Section 4.9

  	
  Governing Law

  	
  9

  
	
  Section 4.10

  	
  No Assignment

  	
  9

  
	
  Section 4.11

  	
  Third Party
  Beneficiary

  	
  9

  
	
  Section 4.12

  	
  Amendment

  	
  9

  
	
  Section 4.13

  	
  Termination

  	
  9

  
	
  Section 4.14

  	
  Counterparts

  	
  9

  

 

 

EMPLOYEE BENEFITS
AGREEMENT

 

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

 

RECITALS

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE I

DEFINITIONS

 

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

 

Affiliate:  has the meaning given in the Distribution
Agreement.

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Forest
Vacation Policy:  means
the Forest vacation policy.

 

Group:
has the meaning given in the Distribution Agreement.

 

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

 

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

 

Indemnitee:
has the meaning given in the Distribution Agreement.

 

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

 

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

 

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

 

2

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE II

EMPLOYEES; ASSUMPTION OF LIABILITIES

 

Section 2.1             Employees.

 

(a)                                  General.  Effective
as of the Distribution Date, Spinco Employees shall be employees of Spinco and
Retained Employees shall be employees of Forest.  Except as otherwise expressly provided herein
or as required by applicable law, effective as of the Distribution Date each
Spinco Employee shall be considered to have incurred a termination of
employment for purposes of all Forest Plans. 
Except as otherwise expressly provided herein, no provision of this
Agreement or the Distribution Agreement shall be construed to create any right,
or accelerate entitlement, to any compensation or benefit whatsoever on the
part of any Spinco Employee or other future, present, or former employee of Forest
or Spinco under any Forest Plan or otherwise.

 

3

 

(b)                                 No Right to Continued Employment.  Nothing contained in this
Agreement shall confer on any Spinco Employee or Forest Employee any right to
continued employment.

 

(c)                                  Forest Savings Plan. 
At the Distribution Date, to the extent doing so will not
adversely affect the tax-qualified status of the Forest Savings Plan, Spinco
Employees who are not 100% vested in their benefits in the Forest Savings Plan
will be 100% vested in their benefits accrued as of such date.  Effective as of the Distribution Date, Spinco
Employees shall be considered to have incurred a termination of employment for
purposes of the Forest Savings Plan; provided, however, that, due to the
pending transfer of assets and liabilities with respect to the Spinco Employees
from the Forest Savings Plan to the Company Savings Plan as contemplated in Section 6.8
of the Merger Agreement, a Spinco Employee shall be deemed to have not incurred
a termination of employment (unless such employee has also terminated
employment after the Distribution Date with Spinco, the Company and their
subsidiaries) for purposes of (i) outstanding loans under the Forest
Savings Plan as of the Distribution Date, (ii) the right to make
in-service withdrawals under the Forest Savings Plan, and (iii) the
entitlement to distributions upon termination of employment under the Forest
Savings Plan.

 

(d)                                 Forest Educational Assistance Plan. Effective
as of the Distribution Date, Spinco shall assume the liability under the Forest
Educational Assistance Plan for any and all educational assistance benefits
payable on and after the Distribution Date with respect to any Spinco Employee
who is enrolled in one or more classes on the Distribution Date and who may
become eligible for benefits under the Forest Educational Assistance Plan with
respect to such class or classes; provided, however, that Spinco shall not be
required to assume any such liability to the extent related to a semester
beginning after the semester during which the Distribution Date occurs.  The amount of, and eligibility of any such
Spinco Employee for, such benefits shall be determined by Spinco in accordance
with the terms of the Forest Educational Assistance Plan as in effect on the
Distribution Date.  After the semester
during which the Distribution Date occurs, Spinco shall cause the Spinco
Employees who are employed by Spinco, the Company or any of their Affiliates to
be eligible for participation in the Company’s educational assistance plan.

 

(e)                                  Forest Vacation Policy.  Effective as of the Distribution
Date, Spinco shall assume all liability with respect to any vacation which has
accrued, in respect of the calendar year in which the Distribution Date occurs,
for the benefit of any Spinco Employee as of the Distribution Date under the Forest
Vacation Policy.

 

(f)                                    Forest
and Spinco hereby agree to use commercially reasonable efforts to implement the
alternate procedure described in Section 5 of Revenue Procedure 2004-53.

 

Section 2.2             Assumption of Liabilities.

 

(a)                                  Assumption by Spinco. 
Subject to satisfaction by Forest of its obligations
hereunder, Spinco and its Affiliates hereby assume and agree to pay, perform,
fulfill and discharge, in accordance with their respective terms, as such
relate to the Spinco Employees, (i) all of the  liabilities relating to, arising out of, or
resulting from obligations, liabilities, and responsibilities expressly assumed
or retained by Spinco pursuant to this Agreement, regardless of when or where
such liabilities arose or arise or were or are incurred, (ii) all of the
liabilities 

 

4

 

relating to or arising from the Spinco Employees to
the extent arising from and after the Measurement Date and attributable
directly to the conduct of the Company, and (iii) all of the liabilities
of Forest or any of its Affiliates relating to or arising from the Spinco
Employees to the extent arising from and after the Distribution Date and
attributable to the conduct of the Spinco Business after the Distribution Date
(other than any such liabilities relating to benefits under the Forest Plans
that are not assumed by Spinco pursuant to the express terms of this Agreement,
the Distribution Agreement or the Merger Agreement) (collectively, the “Spinco
Employee Liabilities”).

 

(b)                                 Assumption by Forest. 
All liabilities relating to or arising from (i) the
Spinco Employees to the extent arising prior to the Distribution Date or
attributable to the conduct of the Spinco Business prior to the Distribution
Date (other than any such liabilities relating to, arising out of, or resulting
from obligations, liabilities, or responsibilities expressly assumed or
retained by Spinco pursuant to this Agreement, the Distribution Agreement or
the Merger Agreement, regardless of when or where such liabilities arose or
arise or were or are incurred) and (ii) the Retained Employees, shall be
assumed and retained by Forest, and Forest agrees to pay, perform, fulfill, and
discharge in accordance with their respective terms all of such liabilities,
regardless of when or where such liabilities arose or arise or were or are
incurred (“Retained Employee Liabilities”).

 

ARTICLE III

FOREST STOCK OPTIONS

 

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

 

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

 

5

 

ARTICLE IV

GENERAL

 

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

 

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

 

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

 

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

 

Section 4.5                                      Indemnification.

 

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

 

(b)                                 Indemnification
for matters subject to the Tax Sharing Agreement is governed by the terms,
provisions and procedures of the Tax Sharing Agreement and not by this Section 4.5.

 

(c)                                  Forest
shall, and shall cause the other Forest Indemnitees to, notify Spinco in
writing promptly after learning of any Third-Party Claim for which any Forest
Indemnitee intends to seek indemnification from Spinco under this
Agreement.  Spinco shall, and shall cause
the other Spinco Indemnitees to, notify Forest in writing promptly after
learning of any Third-

 

6

 

Party Claim for which any Spinco Indemnitee intends to
seek indemnification from Forest under this Agreement.  The failure of any Indemnitee to give such
notice shall not relieve any Indemnifying Party of its obligations under this Section 4.5
except to the extent that such Indemnifying Party is actually prejudiced by
such failure to give notice.  Such notice
shall describe such Third-Party Claim in reasonable detail and shall indicate
the amount (estimated if necessary) of the Indemnifiable Loss that has been
claimed against or may be sustained by such Indemnitee.

 

(d)                                 Except
as otherwise provided in paragraph (e) of this Section 4.5, an
Indemnifying Party may, by notice to the Indemnitee and to Forest, if Spinco is
the Indemnifying Party, or to the Indemnitee and Spinco, if Forest is the
Indemnifying Party, at any time after receipt by such Indemnifying Party of
such Indemnitee’s notice of a Third-Party Claim, undertake (itself or through
another member of the Group of which the Indemnifying Party is a member) the
defense or settlement of such Third-Party Claim, at such Indemnifying Party’s
own expense and by counsel reasonably satisfactory to the Indemnitee.  If an Indemnifying Party undertakes the
defense of any Third-Party Claim, such Indemnifying Party shall control the
investigation and defense or settlement thereof, and the Indemnitee may not
settle or compromise such Third-Party Claim, except that such Indemnifying Party
shall not (i) require any Indemnitee, without its prior written consent,
to take or refrain from taking any action in connection with such Third-Party
Claim, or make any public statement, which such Indemnitee reasonably considers
to be against its interests, or (ii) without the prior written consent of
the Indemnitee and of Forest, if the Indemnitee is a Forest Indemnitee, or the
Indemnitee and of Spinco, if the Indemnitee is a Spinco Indemnitee, consent to
any settlement that does not include as a part thereof an unconditional release
of the relevant Indemnitees from liability with respect to such Third-Party
Claim or that requires the Indemnitee or any of its Representatives or
Affiliates to make any payment that is not fully indemnified under this Agreement
or to be subject to any non-monetary remedy. 
Subject to the Indemnifying Party’s control rights, as specified herein,
the Indemnitees may participate in such investigation and defense, at their own
expense.  Following the provision of
notices to the Indemnifying Party, until such time as an Indemnifying Party has
undertaken the defense of any Third-Party Claim as provided herein, such
Indemnitee shall control the investigation and defense or settlement thereof,
without prejudice to its right to seek indemnification hereunder.

 

(e)                                  If
an Indemnitee reasonably determines that there may be legal defenses available
to it that are different from or in addition to those available to its
Indemnifying Party which make it inappropriate for the Indemnifying Party to
undertake the defense or settlement thereof, then such Indemnifying Party shall
not be entitled to undertake the defense or settlement of such Third-Party
Claim; and counsel for the Indemnifying Party shall be entitled to conduct the
defense of such Indemnifying Party and counsel for the Indemnitee (selected by
the Indemnitee) shall be entitled to conduct the defense of such Indemnitee, in
which case the reasonable fees, costs and expenses of such counsel for the
Indemnitee (but not more than one counsel reasonably satisfactory to the
Indemnifying Party) shall be paid by such Indemnifying Party, it being
understood that both such counsel shall cooperate with each other to conduct
the defense or settlement of such action as efficiently as possible.

 

(f)                                    In
no event shall an Indemnifying Party be liable for the fees and expenses of
more than one counsel for all Indemnitees (in addition to local counsel and its
own counsel, if 

 

7

 

any) in connection with any one action, or separate
but similar or related actions, in the same jurisdiction arising out of the
same general allegations or circumstances.

 

(g)                                 If
the Indemnifying Party undertakes the defense or settlement of a Third-Party
Claim, the Indemnitee shall make available to the Indemnifying Party and its
counsel all information and documents reasonably available to it which relate
to any Third-Party Claim, and otherwise cooperate as may reasonably be required
in connection with the investigation, defense and settlement thereof, subject
to the terms and conditions of a mutually acceptable joint defense agreement.

 

(h)                                 The
amount that any Indemnifying Party is or may be required to pay to any
Indemnitee pursuant to this Section 4.5 shall be reduced (retroactively or
prospectively) by any insurance proceeds or other amounts actually recovered
from third parties by or on behalf of such Indemnitee in respect of the related
Indemnifiable Losses.  The existence of a
claim by an Indemnitee for insurance or against a third party in respect of any
Indemnifiable Loss shall not, however, delay or reduce any payment pursuant to
the indemnification provisions contained herein and otherwise determined to be
due and owing by an Indemnifying Party. 
Rather the Indemnifying Party shall make payment in full of such amount
so determined to be due and owing by it and, if, and to the extent that, there
exists a claim against any third party (other than an insurer) in respect of
such Indemnifiable Loss, the Indemnitee shall assign such claim against such
third party to the Indemnifying Party. 
Notwithstanding any other provisions of this Agreement, it is the
intention of the parties hereto that no insurer or any other third party shall
be (i) entitled to a benefit it would not be entitled to receive in the
absence of the foregoing indemnification provisions or (ii) relieved of
the responsibility to pay any claims for which it is obligated.  If an Indemnitee shall have received the
payment required by this Agreement from an Indemnifying Party in respect of any
Indemnifiable Losses and shall subsequently actually receive insurance proceeds
or other amounts in respect of such Indemnifiable Losses, then such Indemnitee
shall hold such insurance proceeds in trust for the benefit of such Indemnifying
Party and shall pay to such Indemnifying Party a sum equal to the amount of
such insurance proceeds or other amounts actually received, up to the aggregate
amount of any payments received from such Indemnifying Party pursuant to this
Agreement in respect of such Indemnifiable Losses.

 

(i)                                     The
remedies provided in this Section 4.5 shall be cumulative and shall not
preclude assertion by any Indemnitee of any other rights or the seeking of any
other remedies against any Indemnifying Party. 
However, the procedures set forth in this Section 4.5 shall be the
exclusive procedures governing any indemnity action brought under this
Agreement, except as otherwise specifically provided in any of the other
Transaction Agreements.

 

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

 

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

 

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

 

8

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

9

 

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

 

	
   

  	
  FOREST OIL CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SML WELLHEAD CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

10

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