Document:

Exhibit 10.1

 

AMENDMENT NUMBER 8 TO 

RECEIVABLES PURCHASE AGREEMENT

 

THIS AMENDMENT NUMBER 8 TO RECEIVABLES PURCHASE AGREEMENT, dated as of May 16, 2013 (this “Amendment”), is entered into by and among FOUNTAIN CITY FINANCE, LLC, a Delaware limited liability company (the “Seller”), BANK OF AMERICA, NATIONAL ASSOCIATION, a national banking association (“Bank of America”), as a Bank and as the agent (the “Agent”) for the Investors and the Banks, DST SYSTEMS, INC., a Delaware corporation (“DST Systems”), as the Parent and the Servicer and each of the parties named on Schedule I hereto as Originators.  Capitalized terms used and not otherwise defined herein are used as defined in the Receivables Purchase Agreement (as defined below).

 

WHEREAS, the parties hereto entered into that certain Receivables Purchase Agreement, dated as of May 21, 2009 (as amended through the date hereof, the “Receivables Purchase Agreement”); and

 

WHEREAS, the parties hereto desire to amend the Receivables Purchase Agreement in certain respects as provided herein;

 

NOW THEREFORE, in consideration of the premises and the other mutual covenants contained herein, the parties hereto agree as follows:

 

SECTION 1.                            Amendments.  Effective as of the Effective Date (as defined below), the following amendments are made to the Receivables Purchase Agreement:

 

(a)                                 The definition of “Commitment Termination Date” in Section 1.01 of the Receivables Purchase Agreement is hereby amended by deleting, in its entirety, the date “May 16, 2013” therein and replacing, in its entirety, such date with “May 15, 2014”.

 

(b)                                 The definition of “Concentration Limit” in Section 1.01 of the Receivables Purchase Agreement is hereby deleted in its entirety and replaced as follows:

 

“Concentration Limit” means, on any day, the following:

 

(a)                                 with respect to the percentage of the Net Eligible Receivables Outstanding Balance comprised of the Aggregate Outstanding Balance of Eligible Receivables for any Obligor and such Obligor’s Subsidiaries and Affiliates, taken together, 3.75%; provided, however, that the Concentration Limit for any Obligor may exceed 3.75%, subject to specific Obligor debt ratings as set forth below:

 

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Obligor’s Debt Rating
    	
 
    	
Concentration Limit
    
	
At least BBB by S&P and Baa2 by Moody’s
    	
 
    	
15.0% of the Net Eligible Receivables Outstanding Balance
    
	
At least BBB- by S&P and Baa3 by Moody’s
    	
 
    	
7.50% of the Net Eligible Receivables Outstanding Balance
    

 

provided that in the case of an Obligor with any Affiliated Obligor, the Concentration Limit shall be calculated as if such Obligor and such Affiliated Obligor are one Obligor; and provided further that if on any date, an Obligor is split-rated, then the applicable Concentration Limit shall be calculated on the lower of the S&P or Moody’s rating;

 

(b)                                 with respect to the percentage of the Net Eligible Receivables Outstanding Balance comprised of the Aggregate Outstanding Balance of all Eligible Receivables the Obligors of which do not have a billing address in the United States (or Puerto Rico), 3.75% of the Net Eligible Receivables Outstanding Balance;

 

(c)                                  with respect to the percentage of the Net Eligible Receivables Outstanding Balance comprised of the Aggregate Outstanding Balance of all Unbilled Receivables, 25.0% of the Net Eligible Receivables Outstanding Balance; and

 

(d)                                 with respect to the percentage of the Net Eligible Receivables Outstanding Balance comprised of the Aggregate Outstanding Balance of the Deemed Non-Affiliate Receivables of any single Deemed Non-Affiliate, 3.75% and, with respect to the percentage of the Net Eligible Receivables Outstanding Balance comprised of the Aggregate Outstanding Balance of all Deemed Non-Affiliate Receivables, 5.0%.

 

(c)                                  The definition of “Dynamic Dilution Reserve Percentage” in Section 1.01 of the Receivables Purchase Agreement is hereby amended and restated in its entirety as follows:

 

“Dynamic Dilution Reserve Percentage” means, as of any date, the product of (a) the sum of (i) the product of (x) 2.0, multiplied by (y) the average of the Dilution Ratios for each of the twelve most recently ended calendar months, plus (ii) the Dilution Volatility Ratio as at the last day of the most recently ended calendar month, multiplied by (b) the Dilution Horizon Ratio as of such date.

 

(d)                                 The definition of “Dynamic Loss Reserve Percentage” in Section 1.01 of the Receivables Purchase Agreement is hereby amended and restated in its entirety as follows:

 

“Dynamic Loss Reserve Percentage” means, as of any date, the product of (i) 2.0, multiplied by (ii) the Loss Horizon Ratio as of such date multiplied by (iii) the

 

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highest of the Three-Month Loss Ratios calculated for each of the twelve most recently ended calendar months.

 

(e)                                  The definition of “Eligible Receivable” in Section 1.01 of the Receivables Purchase Agreement is amended by deleting the proviso after subsection (xxvi) and deleting and restating, each in its entirety, subsections (i), (iii) and (vi) of such definition as follows:

 

(i)                                     the Obligor of which either (A) has a billing address in the United States (including, without limitation, Puerto Rico), or (B) does not have a billing address in the United States (including, without limitation, Puerto Rico); provided that, in the case of a Receivable with an Obligor that does not have a billing address the United States (or Puerto Rico), the Outstanding Balance of such Receivable when added to the Aggregate Outstanding Balance of all Receivables the Obligors of which do not have a billing address in the United States or Puerto Rico does not cause the percentage of the Net Eligible Receivables Outstanding Balance comprised of the Aggregate Outstanding Balance of all Eligible Receivables the Obligors of which do not have a billing address in the United States (or Puerto Rico) to exceed the percentage set forth in clause (b) of the definition of “Concentration Limit” above;

 

*                                         *                                         *

 

(iii)                               which, if an Affiliate of any Originator or the Seller originated such Receivable, is a Deemed Non-Affiliate Receivable; provided that the Outstanding Balance of such Receivable (A) when added to the Aggregate Outstanding Balance of the Deemed Non-Affiliate Receivables of any single Deemed Non-Affiliate or (B) when added to the Aggregate Outstanding Balance of all Deemed Non-Affiliate Receivables, does not cause either the percentage of the Net Eligible Receivables Outstanding Balance comprised of the Aggregate Outstanding Balance of the Deemed Non-Affiliate Receivables of any single Deemed Non-Affiliate or the percentage of the Net Eligible Receivables Outstanding Balance comprised of the Aggregate Outstanding Balance of all Deemed Non-Affiliate Receivables, as appropriate, to exceed the related percentage set forth in clause (d) of the definition of “Concentration Limit” above;

 

*                                         *                                         *

 

(vi) which is a Billed Receivable or an Unbilled Receivable; provided that, in the case of any Unbilled Receivable, the Outstanding Balance of such Receivable when added to the Aggregate Outstanding Balance of all Unbilled Receivables does not cause the percentage of the Net Eligible Receivables Outstanding Balance comprised of the Aggregate Outstanding Balance of all Unbilled Receivables to exceed the percentage set forth in clause (c) of the definition of “Concentration Limit” above;

 

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(f)                                   The definition of “External Rating” in Section 1.01 of the Receivables Purchase Agreement is hereby deleted in its entirety.

 

(g)                                  The definition of “Yield Reserve” in Section 1.01 of the Receivables Purchase Agreement is hereby amended and restated in its entirety as follows:

 

“Yield Reserve” means, at any time, an amount equal to (a) the product of (i) (A) 2.0 multiplied by (B) the Days Sales Outstanding as of such date of calculation, multiplied by (ii) the Default Rate in effect on such date of calculation, divided by (b) the product of (i) 360 multiplied by (ii) the Net Receivables Pool Balance as of such date of calculation.

 

(h)                                 Section 2.08(a) of the Receivables Purchase Agreement is hereby amended and restated in its entirety as follows:

 

(a) If Bank of America, any Investor, any Bank, any entity which purchases or enters into a commitment to purchase Receivable Interests or interests therein, or any of their respective Affiliates (each an “Affected Person”) determines at any time that (i) the adoption of any Law or any guideline or request from any Official Body (whether or not having the force of law) or change in any of the foregoing or (ii) the compliance, application or implementation by the Affected Person with any Law or any guideline or request from any Official Body (whether or not having the force of law), including, for the avoidance of doubt, BASEL II or the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), affects or would affect the amount of the capital required or expected to be maintained by such Affected Person or imposes or would impose any other condition the result of which is to increase the cost to the Affected Person of performing its obligations or to reduce the rate of return on a Affected Person’s capital or assets as a consequence of its obligations and such Affected Person determines that the amount of such change in capital, increase in cost or reduction in return is based upon the existence of any commitment to make purchases of or otherwise to maintain the investment in Receivables or interests therein related to this Agreement or to the funding thereof and other commitments of the same type, then, upon demand by such Affected Person (with a copy to the Agent), the Seller shall immediately pay to the Agent for the account of such Affected Person (as a third-party beneficiary), from time to time as specified by such Affected Person, additional amounts sufficient to compensate such Affected Person in the light of such circumstances, to the extent that such Affected Person reasonably determines such increase in capital to be allocable to the existence of any of such commitments. A certificate as to such amounts submitted to the Seller and the Agent by such Affected Person shall be conclusive and binding for all purposes, absent manifest error.

 

(i)                                     Section 5.01(x) of the Receivables Purchase Agreement is hereby deleted in its entirety.

 

4

 

(j)                                    Schedule III (Addresses) of the Receivables Purchase Agreement is hereby amended by adding the following Originator under the heading “Originators” and directly beneath “CFG Output LLC”:

 

DST Intellisource, LLC

 

(k)                                 Schedule IV (UCC Information) of the Receivables Purchase Agreement is hereby amended by adding the following information under the heading “Originator UCC Information”:

 

	
Name:
    	
 
    	
DST Intellisource, LLC
    
	
Address:
    	
 
    	
333   West 11th Street, Kansas City, MO 64105
    
	
Jurisdiction   of Organization:
    	
 
    	
Delaware
    
	
UCC   Filing Office:
    	
 
    	
Delaware   Secretary of State
    

 

(l)                                     The definition of “Consolidated EBITDA” in Annex F of the Receivables Purchase Agreement is hereby amended and restated in its entirety as follows:

 

“Consolidated EBITDA” means for any period for the Consolidated Parties on a consolidated basis, the sum (without duplication) of (a) Consolidated Net Income, plus (b) an amount which, in the determination of Consolidated Net Income, has been deducted for (i) Consolidated Interest Expense, (ii) income taxes, (iii) depreciation, amortization and other non-cash charges, including (x) non-cash stock compensation expense and (y) unrealized losses on assets including but not limited to investment impairments in the Parent’s income statements, (iv) extraordinary, unusual and otherwise non-recurring losses or charges, including losses on Dispositions that are outside the ordinary course of business, (v) transaction fees and expenses incurred in connection with the Credit Agreement, the Loan Documents and the syndicated credit facility evidenced thereby, and (vi) all cash losses on Dispositions of Non-Operating Assets made on or after October 1, 2012, minus (c) to the extent included in calculating such Consolidated Net Income, (i) all non-cash gains on assets including but not limited to unrealized gains on Investments, (ii) extraordinary, unusual and otherwise non-recurring gains, including gains on Dispositions that are outside the ordinary course of business and (iii) all cash gains on Dispositions of Non-Operating Assets made on or after October 1, 2012.

 

(m)                             The definition of “Disposition” in Annex F of the Receivables Purchase Agreement is hereby amended by adding the following sentence immediately to the end thereof:

 

For the avoidance of doubt, the term “Disposition” excludes any sale, lease, transfer or other disposition (including, without limitation any liquidation of or return of or on an investment made by a Consolidated Party) by any Person which is not a Consolidated Party.

 

5

 

(n)                                 The definition of “Maturity Date” in Annex F of the Receivables Purchase Agreement is hereby amended and restated in its entirety as follows:

 

“Maturity Date” means July 1, 2015.

 

(o)                                 Annex F of the Receivables Purchase Agreement is hereby amended by adding the following definition immediately after the definition of “Monetized Marketable Securities”:

 

“Non-Operating Assets” means real property (excluding the Parent’s primary data centers in Kansas City, Missouri and St. Louis, Missouri), Marketable Securities and other securities (including limited partnership interests) of the Parent or any of its Subsidiaries in each case that are not material to the investment recordkeeping and output solutions operating business units of the Parent and its Subsidiaries taken as a whole.

 

(p)                                 The definition of “Pro Forma Basis” in Annex F of the Receivables Purchase Agreement is hereby amended as follows:

 

(i)                                     deleting the second sentence of such definition in its entirety and replacing such sentence with the following:

 

“As used herein, “transaction” shall mean (a) any Disposition (other than an Excluded Disposition or Dispositions of Non-Operating Assets) or (b) any Acquisition.

 

(ii)                                  deleting the phrase “for purposes of any such calculation in respect of any Disposition” in clause (i) of such definition and replacing it with “for purposes of any such calculation in respect of any Disposition (but excluding any Disposition of Non-Operating Assets)”.

 

SECTION 2.                            Effective Date.  This Amendment shall become effective as of the date (the “Effective Date”) on which the last of the following shall occur: (a) this Amendment shall have been executed and delivered by a duly authorized officer of each party hereto and (b) the Agent shall have received the Commitment Fee payable by the Seller under the Fourth Amended and Restated Fee Letter, dated as of the date hereof.

 

SECTION 3.                            Miscellaneous.

 

(a)                                 References in Receivables Purchase Agreement.  Upon the effectiveness of this Amendment, each reference in the Receivables Purchase Agreement to “this Agreement”, “hereunder”, “hereof”, “herein”, or words of like import shall mean and be a reference to the Receivables Purchase Agreement as amended hereby, and each reference to the Receivables Purchase Agreement in any other Transaction Document or any other document, instrument or agreement, executed and/or delivered in connection with any Transaction Document shall mean and be a reference to the Receivables Purchase Agreement as amended hereby.

 

(b)                                 Effect on Receivables Purchase Agreement.  Except as specifically amended hereby, the Receivables Purchase Agreement shall remain in full force and effect.  This

 

6

 

Amendment shall not constitute a novation of the Receivables Purchase Agreement, but shall constitute an amendment thereof.

 

(c)                                  No Waiver.  The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of any Person under the Receivables Purchase Agreement or any other document, instrument or agreement executed in connection therewith, nor constitute a waiver of any provision contained therein.

 

(d)                                 Fees and Expenses.  The Seller and DST Systems agree to pay all costs, fees, and expenses (including, without limitation, reasonable attorneys’ fees and time charges of attorneys) incurred by the Agent and/or the Investor in connection with the preparation, execution and enforcement of this Amendment.

 

(e)                                  Successors and Assigns.  This Amendment shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.

 

(f)                                   Counterparts.  This Amendment may be executed in any number of counterparts, and by the different parties hereto on the same or separate counterparts, each of which shall be deemed to be an original instrument but all of which together shall constitute one and the same agreement.  Delivery of an executed counterpart of a signature page by facsimile or other electronic means shall be effective as delivery of a manually executed counterpart of this Amendment.

 

(g)                                  Headings.  The descriptive headings of the various sections of this Amendment are inserted for convenience of reference only and shall not be deemed to affect the meaning or construction of any of the provisions hereof.

 

(h)                                 Amendments.  This Amendment may not be amended or otherwise modified except as provided in the Receivables Purchase Agreement.

 

(i)                                     GOVERNING LAW.  THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THE CONFLICTS OF LAW PRINCIPLES THEREOF OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).

 

7

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered by their duly authorized officers as of the date hereof.

 

	
SELLER:
    	
FOUNTAIN   CITY FINANCE, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    	
/s/ Gregg Wm. Givens
    
	
 
    	
 
    	
Name:
    	
Gregg Wm. Givens
    
	
 
    	
 
    	
Title:
    	
Treasurer
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
PARENT:
    	
DST SYSTEMS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    	
/s/ Gregg Wm. Givens
    
	
 
    	
 
    	
Name:
    	
Gregg Wm. Givens
    
	
 
    	
 
    	
Title:
    	
Vice President and Chief Accounting
    
	
 
    	
 
    	
 
    	
Officer
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
SERVICER:
    	
DST SYSTEMS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    	
/s/ Gregg Wm. Givens
    
	
 
    	
 
    	
Name:
    	
Gregg Wm. Givens
    
	
 
    	
 
    	
Title:
    	
Vice President and Chief Accounting
    
	
 
    	
 
    	
 
    	
Officer
    

 

[Signatures continued on next page]

 

[Signature Page to Amendment 8 to Receivables Purchase Agreement (DST)]

 

 

	
ORIGINATORS:
    	
DST SYSTEMS, INC.
    
	
 
    	
DST OUTPUT, LLC
    
	
 
    	
DST OUTPUT CENTRAL, LLC
    
	
 
    	
DST OUTPUT EAST, LLC
    
	
 
    	
DST OUTPUT WEST, LLC
    
	
 
    	
DST TECHNOLOGIES, INC.
    
	
 
    	
DST MAILING SERVICES, INC.
    
	
 
    	
DST OUTPUT ELECTRONIC SOLUTIONS, INC.
    
	
 
    	
DST WORLDWIDE SERVICES, LLC
    
	
 
    	
DST RETIREMENT SOLUTIONS, LLC
    
	
 
    	
ARGUS HEALTH SYSTEMS, INC.
    
	
 
    	
DST DIRECT, LLC
    
	
 
    	
DST HEALTH SOLUTIONS, LLC
    
	
 
    	
DST GLOBAL SOLUTIONS NORTH AMERICA, LLC
    
	
 
    	
ISPACE SOFTWARE TECHNOLOGIES, INC.
    
	
 
    	
DST BROKERAGE SOLUTIONS, LLC
    
	
 
    	
FINIX PROFESSIONAL SERVICES, LLC
    
	
 
    	
CONVERGE SYSTEMS, LLC
    
	
 
    	
NEWKIRK PRODUCTS, INC.
    
	
 
    	
LTM PUBLISHING, INC.
    
	
 
    	
MCKAY HOCHMAN CO., INC.
    
	
 
    	
THIRD PARTY EDUCATIONAL SYSTEMS, INC.
    
	
 
    	
CFG OUTPUT LLC
    
	
 
    	
DST   INTELLISOURCE, LLC
    
	
 
    	
DST HEALTHCARE HOLDINGS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    	
/s/ Gregg Wm. Givens
    
	
 
    	
 
    	
Name:
    	
Gregg Wm. Givens
    
	
 
    	
 
    	
Title:
    	
Assistant Treasurer
    

 

[Signatures continued on next page]

 

[Signature Page to Amendment 8 to Receivables Purchase Agreement (DST)]

 

 

	
AGENT:
    	
BANK   OF AMERICA, NATIONAL ASSOCIATION,
    
	
 
    	
as   Agent
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    	
/s/   Jeremy Grubb
    
	
 
    	
 
    	
Name:
    	
Jeremy   Grubb
    
	
 
    	
 
    	
Title:
    	
Vice   President
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
BANK:
    	
BANK   OF AMERICA, NATIONAL ASSOCIATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    	
/s/   Jeremy Grubb
    
	
 
    	
 
    	
Name:
    	
Jeremy   Grubb
    
	
 
    	
 
    	
Title:
    	
Vice   President
    

 

[End of Signatures]

 

[Signature Page to Amendment 8 to Receivables Purchase Agreement (DST)]Exhibit 10.1

 

Forest Oil Corporation

 

Annual Incentive Plan

 

2013

 

 

 

 

 

Forest Oil Corporation

2013 Annual Incentive Plan

 

Summary

 

Plan Objectives

 

The Annual Incentive Plan (the “Plan”) has been designed to meet the following objectives:

 

·                  Provide an annual incentive plan framework that is performance-driven and focused on objectives that are critical to the Company’s success.

 

·                  Offer competitive cash compensation opportunities to employees.

 

·                  Reward outstanding achievement.

 

Basic Plan Concept

 

The Plan provides annual incentive awards, which will be determined primarily on the basis of the Company’s consolidated results on selected financial and operating performance measures as well as business unit or department performance objectives.  Individual performance will also be considered in determining the actual participant award payout.  The Company shall have the flexibility to adjust individual awards to reflect individual or team performance.

 

Performance Measures and Weights

 

Each year the Company will establish the threshold, target and outstanding performance levels on each performance measure and its appropriate weighting, subject to the confirmation of the Compensation Committee of the Board of Directors (the “Committee”).  These performance measures and their weighting will be reviewed (and modified, if appropriate) in light of changing Company priorities and strategic objectives.

 

The Company has also established performance objectives for each business unit and department for 2013, the achievement of which will be determined by the President and Chief Executive Officer (the “CEO”) at year end, subject to the confirmation of the Committee.

 

The 2013 performance measures and their relative weightings are described below.

 

Plan Administration

 

The Plan will be administered by the Committee and the CEO (for all positions except his own).  Certain elements of the Plan administration will be delegated to the senior Human Resources executive of the Company.  The Executive Vice President and Chief

 

 

Financial Officer will verify the performance calculation for the performance and operating measures in consultation with the Senior Vice President, Chief Accounting Officer, Corporate Controller & Treasurer and the Senior Vice President, Corporate Engineering and Technology, who shall be responsible for the estimation of the Company’s oil and gas reserves. The Internal Audit Director will be responsible for auditing the Production, Reserve Additions, Rate of Return on Drilling Capital, Capital Budget Adherence calculations, and any numerical, calculated metrics embedded within the Business Unit/Department Perfromance Objectives and measurement thereof, including any adjustments approved by the Board during the course of the plan year, and will provide his opinion that such calculations are accurate or his opinion setting forth discrepancies to the Committee and the Audit Committee.

 

Actual performance goals, standards, award determinations and modifications to the Plan design must be approved by the Committee.

 

	
Measure
    	
 
    	
Weighting
    	
 
    
	
Production
    	
 
    	
25
    	
%
    
	
Reserve Additions
    	
 
    	
12.5
    	
%
    
	
Capital Budget Adherence
    	
 
    	
12.5
    	
%
    
	
Rate of Return on Drilling Capital
    	
 
    	
25
    	
%
    
	
Business Unit/Department Performance Objectives
    	
 
    	
25
    	
%
    
	
Total Financial and Operating Objectives
    	
 
    	
100
    	
%
    

 

Once the total bonus pool has been established following the performance calculations, the CEO shall have the discretion to distribute bonus monies within business units and the corporate group or to move monies from one group to another, and to allocate incentive monies to individuals, based on his assessment (with advice of senior management) as to individual or group performance.

 

Targets

 

Targets for the Plan will be set consistent with the following:

 

·                  Threshold — Minimum level at which payout occurs.

·                  Target — Level at which the participant receives the target award percentage.

·                  Outstanding — Level at which the participant receives 200% of the target award percentage.

 

Completion percentages between Threshold, Target and Outstanding will be determined, with the exception of those for Business Unit and Department Performance Objectives, by straight-line interpolation.

 

A Completion Percentage for each business unit and department with regard to its Business Unit/Department Performance Objectives will be assigned at year end by the CEO following a thorough review of its activities and accomplishments.  The assigned Completion Percentage on Business Unit/Department Performance Objectives for each business unit or department will be included in the calculation of the Overall Completion

 

 

Percentage for that business unit or department in the same manner as is the Completion Percentage on other performance measures.

 

Targets shall be adjusted for material changes made during the year to the business plan or scope thereof, including the capital expenditure budget.

 

Maximum Completion

 

Completion of each financial and operating measure as well as completion for the total Plan will be limited to 200% of target.

 

Performance Levels

 

Performance levels will be set for individual measures.  Results below Threshold will equate to a zero completion percentage. Results above Outstanding will equate to a 200% completion percentage.

 

Completion Calculation

 

Completion percentages for each individual measure will be equal to the completion percentage of the measure times the weighting for that measure. The overall completion percentage for the Plan for financial and operating measures and business unit and department objectives will be the sum of the weighted completion percentages for each individual measure.

 

Property Sales

 

In computing results, non-budgeted property sales are not to be considered.  To avoid non-budgeted property sales from affecting results, they will be incorporated into performance measures as though they had been budgeted.

 

Participants

 

The CEO shall determine which employees are to be participants in the Plan.  If a participant’s employment with the Company terminates for any reason prior to payment, no bonus award will be paid.

 

The target award percentage for the CEO and other officers of the Company are established by the Committee. Any changes to target award percentages for Company officers are subject to the approval of the Committee. The CEO is authorized to establish and adjust at his discretion the target award percentages for non-officer Plan participants. All awards to officers under the Plan are subject to approval of the Committee.

 

Plan participants who change positions and/or have their individual target incentive levels changed during the Plan year will have their award prorated accordingly.  All awards paid will be rounded to the nearest $100. Incentive compensation awards will be 

 

 

calculated based upon the participant’s base salary in effect at the end of the Plan year or earned salary during the Plan year if the participant was a new hire during the year.

 

Committee and Board of Directors’ Discretion

 

The granting of any and all incentive compensation awards is at the full discretion of the Committee and/or the Forest Oil Corporation Board of Directors.

 

 

Forest Oil Corporation

2013 Annual Incentive Plan

Operating Measure

Production

 

Objective

 

Measure net production growth on an annual basis.  Each business unit will be given an aggregate net production goal, and the Plan participants in each business unit will be judged against whether their business unit achieved its individual goal.  The business unit production goals, when added together, shall reflect Forest’s annual net production growth goal and be consistent with the 2013 Business Plan.  Participants in the corporate departments will be judged against whether the entire Company achieved its annual net production growth goal, measured on a per diluted share basis.

 

Definition

 

Net production for each business unit and the Company equals total net production (after royalty and other burdens) equal to that set forth in the 2013 Business Plan. Production growth per diluted share for the entire Company is calculated by dividing the quotient of the Company’s production during 2013 and the average number of diluted shares of the Company’s common stock outstanding on the last day of each month in 2013 by the quotient of the Company’s production during 2012 and the average number of diluted shares of the Company’s common stock outstanding on the last day of each month in 2012.  For purposes of computing equivalent production, the following economic ratios will apply (a) 15:1 for oil/condensate to gas and (b) 7.5:1 for natural gas liquids to gas.

 

Should a business unit overspend budgeted Capex, the Production target will be proportionately adjusted.

 

Targets

 

The threshold, target, and outstanding objectives for the business units and the Company are shown in Attachment 1A.

 

 

Forest Oil Corporation

2013 Annual Incentive Plan

Operating Measure

Reserve Additions

 

Objective

 

Measure proved reserves growth on an annual basis.  Each business unit will be given an aggregate goal for adding proved reserves during the year, and the Plan participants in each business unit will be judged against whether their business unit achieved its individual goal.  The business unit proved reserve additions goals, when added together, shall reflect Forest’s annual proved reserves growth goal and be consistent with the 2013 Business Plan.  Participants in the corporate departments will be judged against whether the entire Company achieved its annual proved reserves growth goal, measured on a per diluted share basis.

 

Definition

 

Reserves growth per diluted share for the Company is calculated by dividing the quotient of the Company’s U.S. proved developed reserves (as defined herein) added during the year and the average number of diluted shares of the Company’s common stock outstanding on the last day of each month in 2013 by the quotient of the Company’s U.S. proved producing reserves (as defined herein) at the end of 2012 and the average number of diluted shares of the Company’s common stock outstanding on the last day of each month in 2012. Proved developed reserves added will be equal to the proved developed extensions/discoveries (PBUD, PSUD, PBBP, and PSBP converted to PDP) plus the proved undeveloped conversions drilled and completed or recompleted (PUD and PDBP converted to PDP) during the year. New proved undeveloped extensions and discoveries are excluded from the calculation. The calculation of reserves only captures wells drilled, completed and put on production during calendar year 2013. For purposes of computing equivalent reserves, the following economic ratios will apply (a) 15:1 for oil/condensate to gas and (b) 7.5:1 for natural gas liquids to gas.

 

Targets

 

The threshold, target, and outstanding objectives for the business units and the Company are shown in Attachment 1B.

 

 

Forest Oil Corporation

2013 Annual Incentive Plan

Financial Measure

Capital Budget Adherence

 

Objective

 

Measure adherence to the Board-approved 2013 Capital Budget.

 

Definition

 

The approved 2013 Capital Budget is as follows:

 

	
Development Capital (Drilling and Completions):
    	
 
    	
$
    	
317 Million
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Non-Drilling Capital:
    	
 
    	
 
    	
 
    
	
Leasehold, Seismic, Maintenance and P&A:
    	
 
    	
$
    	
22 Million
    	
 
    
	
Capitalized Overhead:
    	
 
    	
$
    	
23 Million
    	
 
    
	
Total Capital Budget:
    	
 
    	
$
    	
362 Million
    	
 
    

 

The actual dollar amount of capital expenditures will be compared to the approved target for capital expenditures to determine the performance on this objective. At year end the actual expenditures will be calculated as a percent of target expenditures which will equal the completion percentage for the Capital Adherence Objective.

 

Targets

 

Measured against Approved 2013 Capital Budget:

 

·                  Target equal to 100% of Business Plan objective

 

The Committee will consider results against performance on the Production and Reserves targets in determining the final completion percentage on this objective at year end. The Committee has the discretion to award from 0% to 200% achievement on this objective based on its review of the capital program, revisions approved by the Board throughout the year, and operating results.

 

The target levels of achievement are shown in Attachment 1C.

 

 

Forest Oil Corporation

2013 Annual Incentive Plan

Operating Measure

Rate of Return on Drilling Capital

 

Objective

 

Measure the annual pre-tax rate-of-return (“ROR”) achieved through the deployment of approved drilling and completion capital.

 

Definition

 

Pre-tax rate-of-return on all capital projects during the year related to drilling, completion and recompletion projects, but excluding acquisitions, land lease, seismic, maintenance and P&A, and capitalized G&A, equity compensation, and interest. The effect of the Company’s joint venture with Schlumberger will be included in the calculated results.  Undrilled proved undeveloped reserves added as a result of drilling will not be included in the calculation. Proved undeveloped locations drilled during the year will be captured in the calculation if the wells are completed and put on production. Only wells completed and put on production during calendar year 2013 will be included in the calculation. Actual costs are to be used in the calculation and the future cash flow will be calculated using the capital justification priced deck (that utilized for the Investment Results Report (“IRR”). In evaluating the accomplishment of this objective, the Compensation Committee will take into account all revisions to estimated proved reserves made in 2013.

 

Targets

 

The threshold, target, and outstanding objectives for the Company are shown in Attachment 1D.

 

 

Forest Oil Corporation

2013 Annual Incentive Plan

Operating Measure

Business Unit and Department Performance Objectives

 

Objective

 

Measure the achievement of key objectives that are established for each business unit and department for each year.

 

Definition

 

Objectives that are high-impact, tied to the strategic objectives of the Company, and key to the success of each business unit or department will be established by management and approved by the CEO.  Objectives will be established for each corporate staff department that directly support the achievement of business unit and other staff department objectives.  Established objectives are specific to each business unit or department, well-defined and to the extent possible, measurable. Objectives for each business unit and department will be submitted to the Committee for their review.

 

Targets

 

Performance Objectives will be established for the Mid-Continent Region and Southern Region business units as well as for each corporate administrative or support department. Awards to business unit and department participants will be based on the achievement of performance objectives established for the business unit or department in which they work.

 

At year-end 2013 the achievement of performance objectives for each business unit as well as for each corporate administrative or support department will be evaluated and assigned a completion percentage by the CEO over a range of 0 — 200%.  This completion percentage will be multiplied by the 25% relative weighting for Business Unit/Department Performance Objectives and included in the calculation of the overall completion percentage for the business unit or department.

 

A corporate objective tied to the Company’s ratio of net debt-to-proved developed reserves (on an adjusted equivalents basis, using an oil/condensate-to-gas ratio of 15:1 and an NGLs-to-gas ratio of 7.5:1) will be included for certain positions and departments including that of the CEO and the Executive Vice President & Chief Financial Officer. Selected corporate departments will also have a capital discipline objective.

 

 

Attachment 1

 

2013

 

	
Goal Description
    	
 
    	
Weighting
    	
 
    	
Target
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Production
    	
 
    	
25
    	
%
    	
See Attachment 1A
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Reserve Additions
    	
 
    	
12.5
    	
%
    	
See Attachment 1B
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Capital Budget Adherence
    	
 
    	
12.5
    	
%
    	
See Attachment 1C
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Rate of Return on Drilling Capital
    	
 
    	
25
    	
%
    	
See Attachment 1D
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Business Unit/Department Objectives
    	
 
    	
25
    	
%
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Total Weighting
    	
 
    	
100
    	
%
    	
 
    	
 
    

 

 

Attachment 1A

 

2013 Production

 

	
Business Unit
    	
 
    	
Threshold
    	
 
    	
Target
    	
 
    	
Outstanding
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Company (% Growth/Share)
    	
 
    	
-8
    	
%
    	
2
    	
%
    	
12
    	
%
    
	
Total (BCFE)
    	
 
    	
107.3
    	
 
    	
119.3
    	
 
    	
131.2
    	
 
    
	
Gas (MMCF)
    	
 
    	
46,712
    	
 
    	
51,902
    	
 
    	
57,092
    	
 
    
	
Oil/Condensate (MBbls)
    	
 
    	
2,761
    	
 
    	
3,068
    	
 
    	
3,375
    	
 
    
	
NGL (MBbls)
    	
 
    	
2,561
    	
 
    	
2,846
    	
 
    	
3,131
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Mid-Continent Region (BCFE)
    	
 
    	
89.1
    	
 
    	
99.0
    	
 
    	
108.9
    	
 
    
	
Gas (MMCF)
    	
 
    	
44,656
    	
 
    	
49,618
    	
 
    	
54,580
    	
 
    
	
Oil/Condensate (MBbls)
    	
 
    	
1,702
    	
 
    	
1,891
    	
 
    	
2,080
    	
 
    
	
NGL (MBbls)
    	
 
    	
2,527
    	
 
    	
2,808
    	
 
    	
3,089
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Southern Region (BCFE)
    	
 
    	
18.2
    	
 
    	
20.2
    	
 
    	
22.2
    	
 
    
	
Gas (MMCF)
    	
 
    	
2,056
    	
 
    	
2,284
    	
 
    	
2,512
    	
 
    
	
Oil/Condensate (MBbls)
    	
 
    	
1,059
    	
 
    	
1,177
    	
 
    	
1,295
    	
 
    
	
NGL (MBbls)
    	
 
    	
34
    	
 
    	
38
    	
 
    	
42
    	
 
    

 

Awards to participants in the Mid-Continent and Southern business units will be based on the performance of the business unit in which they work.  Awards to participants in the corporate departments will be based on total Company results.

 

The Threshold, Target and Outstanding objectives are directly related to the 2013 capital expenditures plan of $362 million, as approved by the Forest Oil Corporation Board of Directors.  To the extent that (i) the Company incurs more or less than $362 million in capital expenditures in 2013, or (ii) oil and gas prices are materially different from those assumed in the foregoing plan, management and the Compensation Committee may adjust the objectives appropriately.

 

For purposes of computing equivalent production, the following economic ratios will apply (a) 15:1 for oil/condensate to gas and (b) 7.5:1 for natural gas liquids to gas.

 

 

Attachment 1B

 

2013 Reserve Additions

 

	
Business Unit
    	
 
    	
Threshold
    	
 
    	
Target
    	
 
    	
Outstanding
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Company (%Growth/Share)
    	
 
    	
8
    	
%
    	
12
    	
%
    	
16
    	
%
    
	
Total (BCFE)
    	
 
    	
189.1
    	
 
    	
222.5
    	
 
    	
255.9
    	
 
    
	
Gas (MMCF)
    	
 
    	
45,790
    	
 
    	
53,871
    	
 
    	
61,952
    	
 
    
	
Oil/Condensate (MBbls)
    	
 
    	
7,758
    	
 
    	
9,127
    	
 
    	
10,496
    	
 
    
	
NGL (MBbls)
    	
 
    	
3,595
    	
 
    	
4,229
    	
 
    	
4,864
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Mid-Continent Region (BCFE)
    	
 
    	
121.5
    	
 
    	
142.9
    	
 
    	
164.4
    	
 
    
	
Gas (MMCF)
    	
 
    	
44,431
    	
 
    	
52,272
    	
 
    	
60,113
    	
 
    
	
Oil/Condensate (MBbls)
    	
 
    	
3,430
    	
 
    	
4,035
    	
 
    	
4,641
    	
 
    
	
NGL (MBbls)
    	
 
    	
3,413
    	
 
    	
4,015
    	
 
    	
4,617
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Southern Region (BCFE)
    	
 
    	
67.6
    	
 
    	
79.6
    	
 
    	
91.5
    	
 
    
	
Gas (MMCF)
    	
 
    	
1,359
    	
 
    	
1,599
    	
 
    	
1,839
    	
 
    
	
Oil/Condensate (MBbls)
    	
 
    	
4,328
    	
 
    	
5,092
    	
 
    	
5,856
    	
 
    
	
NGL (MBbls)
    	
 
    	
182
    	
 
    	
214
    	
 
    	
247
    	
 
    

 

Awards to participants in the Mid-Continent Region and Southern Region business units will be based on the performance of the business unit in which they work.  Awards to participants in corporate departments will be based on total Company results.

 

The Threshold, Target, and Outstanding objectives are directly related to the 2013 capital expenditures plan of $362 million as approved by the Forest Oil Corporation Board of Directors.  To the extent that (i) the Company incurs more or less than $362 million in capital expenditures in 2013, or (ii) oil and gas prices are materially different from those assumed in the foregoing plan, management and the Compensation Committee may adjust the objectives appropriately.

 

For purposes of computing equivalent reserves, the following economic ratios will apply (a) 15:1 for oil/condensate to gas and (b) 7.5:1 for natural gas liquids to gas.

 

 

Attachment 1C

 

2013 Capital Budget Adherence

 

($MM)

 

	
 
    	
 
    	
Target
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Company
    	
 
    	
$
    	
361.9
    	
 
    
	
Development Capital (Drilling and Completions):   $311 Million
    	
 
    	
 
    	
 
    
	
Leasehold, Seismic, Maintenance and P&A: $22   Million
    	
 
    	
 
    	
 
    
	
Capitalized Overhead: $23 Million 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Mid-Continent   Region
    	
 
    	
$
    	
242.5
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Southern   Region
    	
 
    	
$
    	
119.4
    	
 
    

 

Board-approved adjustments to the approved 2013 Capital Budget or work program upon which the approved budget is based will result in corresponding adjustments to the target measures. At the Company level, the Board must approve changes to each category of expense under the capital budget before such an adjustment will occur.

 

Awards to participants in the Mid-Continent and Southern Region business units will be based on the performance of the business unit in which they work.  Awards to participants in corporate departments will be based on total Company results.

 

 

Attachment 1D

 

2013 Rate-of-Return on Company Drilling Capital

 

	
 
    	
 
    	
Threshold
    	
 
    	
Target
    	
 
    	
Outstanding
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Company
    	
 
    	
15
    	
%
    	
20
    	
%
    	
25
    	
%
    

 

The Rate-of-Return (“ROR”) on Drilling Capital results for the Company will comprise the consolidated results of the Mid-Continent Region and Southern Region business units.

 

Awards to participants in the Mid-Continent Region and Southern Region business units as well as participants in corporate departments will be based on total Company results.

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