Document:

Exhibit 10.2

 

FOREST OIL CORPORATION

PERFORMANCE UNIT INDUCEMENT AWARD AGREEMENT

 

October 1, 2012

 

To: Patrick R. McDonald

 

Forest Oil Corporation, a New York corporation (the “Company”), is pleased to grant you an award (the “Award”) to receive an aggregate of 145,000 performance units (each, a “Performance  Unit”) in respect of the period September 12, 2012 through September 11, 2015 (the “Performance  Period”). The Award is subject to your acceptance of and agreement to all the applicable terms, conditions and restrictions described in this Performance Unit Inducement Award Agreement (this “Agreement”).

 

This Agreement sets forth the terms of the agreement between you and the Company with respect to the Performance Units. By accepting this Agreement, you agree to be bound by all of the terms hereof.

 

1.                                       Overview of Performance Units.

 

(a)                                Performance Units Generally.  Each Performance Unit represents a contractual right to receive one share of the Company’s common stock (the “Common  Stock”), subject to the terms and conditions of this Agreement; provided that, based on the relative achievement against the performance objective outlined in Section 2 below (the “Performance  Objective”), the number of shares of Common Stock that may be deliverable hereunder in respect of the Performance Units may range from 0% to 200% of the number of Performance Units stated in the preamble to this Agreement (such stated number of Performance Units hereafter called the “Initial  Performance  Units”). Your right to receive Common Stock in respect of Performance Units is generally contingent, in whole or in part, upon (i) the achievement of the Performance Objective and (ii) except as provided in Section 4 or Section 5, your continued employment with the Company through the date of the Committee’s (as defined below) certification as set forth in Section 2.

 

(b)                               Dividend Equivalents.  With respect to each outstanding Performance Unit, the Company shall credit a book entry account with an amount equal to the amount of any cash dividend paid during the Performance Period on one share of Common Stock. The amount credited to such book entry account shall be payable to you at the same time or times, and subject to the same terms and conditions as are applicable to, your Performance Units; provided that, if more than the Initial Performance Units shall become payable in accordance with this Agreement, then the maximum amount payable in respect of such dividend equivalents shall be the amount credited to your book entry account. Dividends and distributions payable on Common Stock other than in cash will be addressed in accordance with Section 9 hereof.

 

 

(c)                                  Definition of Committee.  As used in this Agreement, the term “Committee” initially means the Compensation Committee of the board of directors of the Company (the “Board”).  You agree that any dispute or disagreement which may arise in connection with this Agreement shall be resolved by the Committee.  The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Agreement in the manner and to the extent the Committee shall deem expedient to carry the Agreement into effect.  The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Agreement in the manner and to the extent the Committee shall deem expedient to carry the Agreement into effect.  Any interpretation made by the Committee of the terms of this Agreement and any determination made by the Committee under this Agreement may be made in the sole discretion of the Committee and shall be final, binding and conclusive.

 

2.                                         Total Shareholder Return Objective.  The Performance Objective with respect to the Initial Performance Units is based on Total Shareholder Return. “Total Shareholder Return” shall mean, as to the Company and each of the Peer Companies (as defined below), the annualized rate of return shareholders receive through stock price changes and the assumed reinvestment of dividends paid over the Performance Period. Dividends per share paid other than in the form of cash shall have a value equal to the amount of such dividends reported by the issuer to its shareholders for purposes of Federal income taxation. For purposes of determining the Total Shareholder Return for the Company and each of the Peer Companies, the change in the price of the Company’s Common Stock and of the common stock of each Peer Company, as the case may be, shall be based upon the average of the closing stock prices of the Company and such Peer Company over the 20 trading days immediately preceding each of the start (the “Initial Value”) and the end of the Performance Period. The Initial Value of the Common Stock to be used to determine Total Shareholder Return over the Performance Period is $7.6115 per share. Achievement with respect to this Performance Objective shall be determined by the Committee based on the Company’s relative ranking in respect of the Performance Period with regard to Total Shareholder Return as compared to Total Shareholder Return of the Peer Companies, and shall be determined in accordance with the applicable table as set forth in Appendix A hereto (subject to adjustment as provided in Appendix A hereto). The applicable table shall be determined based on the number of Peer Companies for the Performance Period. A company shall be a “Peer Company” if it (i) is one of the companies listed on Appendix A hereto and (ii) has a class of common equity securities listed to trade under Section 12(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) during each day of the Performance Period. As soon as administratively practicable following the end of the Performance Period (but in no event later than the 15th day of the third calendar month following the calendar month in which the Performance Period ends), the Committee shall certify whether and to the extent that the Performance Objective has been achieved and will determine, in the manner described above, the number of Performance Units, if any, determined to be earned pursuant to the applicable table under Appendix A (as adjusted in the manner provided therein).  Notwithstanding the foregoing, the Committee, in its sole discretion, may provide for a reduction in value of the Award during the Performance Period.  The number of Performance Units, if any, determined by the Committee pursuant to the preceding provisions of this Section 2 shall be referred to as the “Earned Performance Units.”

 

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3.                                     Conversion of Performance Units; Delivery of Common Stock with respect to Performance Units.  Unless an earlier date applies pursuant to Sections 4(a), 4(b) or 5(b), payment in respect of Earned Performance Units shall be made not later than the 15th day of the third calendar month following the calendar month in which the Performance Period ends. All payments in respect of Earned Performance Units shall be made in freely transferable shares of Common Stock. Neither this Section 3 nor any action taken pursuant to or in accordance with this Section 3 shall be construed to create a trust of any kind. Any shares of Common Stock issued to you pursuant to this Agreement in settlement of Earned Performance Units shall be in book entry form registered in your name. Any fractional Earned Performance Units shall be rounded up to the nearest whole share of Common Stock.

 

4.                                     Termination of Employment.

 

(a)                                Death or Disability.  In the event that your employment with the Company terminates during the Performance Period due to your death or Disability (as defined below), then the date of such termination of your employment shall be deemed the end of the Performance Period and you will be issued a number of shares of Common Stock equal to the product of:

 

(i)                                     the number of Initial Performance Units (subject to adjustment as set forth in Section 9); and

 

(ii)                                  a fraction (A) the numerator of which is the number of full months during the Performance Period during which you were employed by the Company (counting the month in which your termination of employment occurs as a full month) and (B) the denominator of which is thirty-six (36).

 

Distribution of shares of Common Stock determined to be earned by reason of this Section 4(a) shall be made not later than the 15th day of the third calendar month following your death or Disability.

 

(b)                             Involuntary Termination.  In the event that your employment with the Company terminates during the Performance Period due to your Involuntary Termination (as defined below), then you will be issued a number of shares of Common Stock equal to the number of Performance Units that would have become Earned Performance Units in accordance with the provisions of Section 2 assuming that:

 

(i)                                     the Performance Period ended on the date of your Involuntary Termination; and

 

(ii)                                  the determination of whether, and to what extent, the Performance Objective is achieved, is based on actual performance against the stated performance criteria through the date of your Involuntary Termination.

 

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Distribution of shares of Common Stock in respect of the Performance Units determined to be earned by reason of this Section 4(b) shall be made not later than the 15th day of the third calendar month following the Involuntary Termination of your employment.

 

(c)                              Other Termination of Employment.  Unless otherwise determined by the Committee at or after grant, in the event that your employment with the Company terminates prior to the end of the Performance Period for any reason other than those listed in Sections 4(a) or 4(b), all of your Performance Units shall terminate and automatically be canceled upon such termination of employment.

 

(d)                                 Definitions of Disability and Involuntary Termination.  As used in this Agreement, the terms “Disability” and “Involuntary Termination” shall have the meanings given such terms in the Severance Agreement between you and the Company in effect as of the grant date specified above, as the same may be amended or superseded from time to time (the “Severance Agreement”).

 

(e)                                Termination of Employment.  For all purposes of this Agreement, you will be considered to have terminated from employment with the Company when you incur a “separation from service” within the meaning of Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (the “Code”), and applicable administrative guidance thereunder.

 

5.                                     Change in Control.

 

(a)                                Continuous Employment.  Notwithstanding the provisions of Section 1 through Section 4 hereof or the terms of the Severance Agreement, if you have been continuously employed from the grant date specified above until the date that a Change of Control (as defined below) occurs (the “Change of Control Date”), and either (x) in connection with the Change of Control, the Successor Corporation (as defined below) does not assume, convert or replace this Agreement with an agreement substantially the same in all material economic respects, or (y) this Agreement is assumed, converted or replaced by the Successor Corporation in connection with a Change of Control but you are Involuntarily Terminated at any time following such Change of Control but before the 15th day of the third calendar month following the calendar month in which the Performance Period ends, then, you will be issued a number of shares of Common Stock equal to the number of Performance Units that would have become Earned Performance Units in accordance with the provisions of Section 2 and determined as follows:

 

(i)                                     if the payment pursuant to this Section 5(a) is being made because the Successor Corporation has not assumed, converted or replaced this Agreement with an agreement substantially the same in all material respects, the payment of shares of Common Stock or cash shall be determined assuming that:

 

(A)                              the Performance Period ended on the Change of Control Date; and

 

(B)                                the determination of whether, and to what extent, the Performance Objective is achieved, is based on actual performance against the stated performance criteria through the Change of Control Date; or

 

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(ii)                                  if the payment pursuant to this Section 5(a) is being made due to you being Involuntarily Terminated following the Change of Control but before the 15th day of the third calendar month following the calendar month in which the Performance Period ends, the payment of shares of Common Stock or cash shall be determined assuming that:

 

(A)                              the Performance Period ended on the date of your Involuntary Termination; and

 

(B)                              the determination of whether, and to what extent, the Performance Objective is achieved, is based on actual performance against the stated performance criteria through the date of your Involuntary Termination.

 

(b)                               Time and Form of Payment.  Any shares of Common Stock issuable pursuant to this Section 5 shall be issued immediately following (and not later than five business days after) the later of (x) the Change of Control Date for which the Successor Corporation did not assume, convert or replace this Agreement or (y) the date of your Involuntary Termination and shall be fully earned and freely transferable as of such issuance date. Notwithstanding anything else contained in this Section 5 to the contrary (other than Section 5(d)), if the Change of Control involves a merger, reclassification, reorganization or other similar transaction pursuant to which the Common Stock is exchanged for stock of the surviving corporation in such merger, the successor to the corporation or the direct or indirect parent of such a corporation (collectively, the “Successor Corporation”), then you shall receive, instead of each share of Common Stock otherwise deliverable hereunder, the same consideration (whether stock, cash or other property) payable or distributable in such transaction in respect of a share of Common Stock. Any property distributed pursuant to this Section 5(b), whether in shares of the Successor Corporation or otherwise, shall in all cases be freely transferable without any restriction (other than any such restriction that may be imposed by applicable law), and any securities issued hereunder shall be registered to trade under the Exchange Act, and shall have been registered under the Securities Act of 1933, as amended (the “Securities Act”).

 

(c)                                  Definition of Change of Control.  As used in this Agreement, the term “Change of Control” shall have the meaning given such term in the Severance Agreement.

 

(d)                               Alternative Form of Payment.  Notwithstanding anything else contained in this Section 5 to the contrary, the Committee may elect, at its sole discretion by resolution adopted prior to the Change of Control Date, to have the Company satisfy your rights in respect of the Performance Units (as determined pursuant to the foregoing provisions of this Section 5), in whole or in part, by having the Company make a cash payment to you in respect of all such Performance Units or such portion of such Performance Units as the Committee shall determine. Any cash payment for any Performance Unit shall be made at the same time any issuance of shares of Common Stock would otherwise have occurred in accordance with this Section 5 and the amount of any such cash payment shall be equal to the Fair Market Value of the number of shares of Common Stock into which it would convert, determined as of the payment date.

 

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(e)                                  Definition of Fair Market Value.  As used in this Agreement, “Fair Market Value” means, as of any specified date, the mean of the high and low sales prices of the Common Stock on a national stock exchange, as reported on the stock exchange composite tape on that date (or such other reporting service approved by the Committee) or, if no prices are reported on that date, on the last preceding date on which such prices of the Common Stock are so reported.  If the Common Stock is traded over the counter at the time a determination of its fair market value is required to be made hereunder, its fair market value shall be deemed to be equal to the average between the reported high and low or closing bid and asked prices of Common Stock on the most recent date on which Common Stock was publicly traded.  In the event Common Stock is not publicly traded at the time a determination of its value is required to be made hereunder, the determination of its fair market value shall be made by the Committee in such manner as it deems appropriate and as is consistent with the requirements of section 409A of the Code.

 

6.                                       Forfeiture under Certain Circumstances.  Notwithstanding any provision herein to the contrary, the Committee may terminate your Award if it determines that you have engaged in material misconduct. Material misconduct includes conduct adversely affecting the Company’s reputation, financial condition, results of operations or prospects, or which constitutes fraud or theft of Company assets.  If such material misconduct results, directly or indirectly, in any restatement of the Company’s financial information after an amount has been paid to you with respect to the Award, then the Committee also may require you to reimburse the Company for all or a portion of such payment amount. In addition, if there is a material restatement of the Company’s financial statements that affects the financial information used in the determination of the amount paid to you under the Award, then the Committee may take such action, in its sole discretion, as it deems necessary to adjust such amount.

 

7.                                     Nontransferability of Awards.  The Performance Units granted hereunder may not be sold, transferred, pledged, assigned, encumbered or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Following your death, any shares distributable (or cash payable) in respect of Performance Units will be delivered or paid, at the time specified in Section 3, Section 4 or, if applicable, Section 5, to your beneficiary in accordance with, and subject to, the terms and conditions hereof.

 

8.                                     Beneficiary Designation.  You may from time to time name any beneficiary or beneficiaries (who may be named contingently or successively) to whom shall be delivered or paid under this Agreement following your death any shares that are distributable or cash payable hereunder in respect of your Performance Units at the time specified in Section 3, Section 4 or, if applicable, Section 5. Each designation will revoke all prior designations, shall be in a form prescribed by the Committee, and will be effective only when filed in writing with the Committee during your lifetime. In the absence of any such effective designation, shares issuable and cash payable in connection with your death shall be paid to your surviving spouse, if any, or otherwise to your estate.

 

9.                                     Adjustments in Respect of Performance Units.  In the event of any common stock dividend or common stock split, recapitalization (including, but not limited to, the payment of an extraordinary dividend), merger, consolidation, combination, spin-off, distribution of assets to stockholders (other than cash dividends), exchange of shares, or other similar corporate

 

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change with regard to the Company or any Peer Company, appropriate adjustments shall be made by the Committee to the Initial Value of the corresponding common stock, and, if any such event occurs with respect to the Company, in the aggregate number of Performance Units subject to this Agreement. The Committee’s determination with respect to any such adjustment shall be conclusive.

 

10.                                 Effect of Settlement.  Upon conversion into shares of Common Stock (or Successor Corporation common stock) pursuant to Section 3, Section 4 or Section 5, a cash settlement of your rights, at the election of the Committee at its sole discretion pursuant to Section 5(d), or a combination of the issuance of Common Stock and the payment of cash in accordance with any applicable provisions of this Agreement, all of your Performance Units subject to the Award shall be cancelled and terminated. If and to the extent that you are still employed at the end of the Performance Period, and none of your Performance Units shall have become earned in accordance with the terms of this Agreement, all such Performance Units subject to the Award shall be cancelled and terminated.

 

11.                               Furnish Information.  You agree to furnish to the Company all information requested by the Company to enable it to comply with any reporting or other requirements imposed upon the Company by or under any applicable statute or regulation.

 

12.                               Remedies.  The parties to this Agreement shall be entitled to recover from each other reasonable attorneys’ fees incurred in connection with the enforcement of the terms and provisions of this Agreement whether by an action to enforce specific performance or for damages for its breach or otherwise.

 

13.                               Information Confidential.  As partial consideration for the granting of the Award hereunder, you hereby agree with the Company that you will keep confidential all information and knowledge, except that which has been disclosed in any public filings required by law, that you have relating to the terms and conditions of this Agreement; provided, however, that such information may be disclosed as required by law and may be given in confidence to your spouse, tax and financial advisors, or to a financial institution to the extent that such information is necessary to secure a loan.

 

14.                               Payment of Taxes.  The Company may from time to time require you to pay to the Company (or an Affiliate (as defined below) if you are an employee of an Affiliate) the amount that the Company deems necessary to satisfy the Company’s or its Affiliate’s current or future obligation to withhold federal, state or local income or other taxes that you incur as a result of the Award. With respect to any required tax withholding, unless another arrangement is permitted by the Company in its discretion, the Company shall withhold from the shares of Common Stock to be issued to you the number of shares necessary to satisfy the Company’s obligation to withhold taxes, that determination to be based on the shares’ Fair Market Value at the time as of which such determination is made. In the event the Company subsequently determines that the aggregate Fair Market Value of any shares of Common Stock withheld as payment of any tax withholding obligation is insufficient to discharge that tax withholding obligation, then you shall pay to the Company, immediately upon the Company’s request, the amount of that deficiency. “Affiliate” means any corporation, partnership, limited liability

 

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company or partnership, association, trust, or other organization which, directly or indirectly, controls, is controlled by, or is under common control with, the Company.  For purposes of the preceding sentence, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any entity or organization, shall mean the possession, directly or indirectly, of the power (i) to vote more than 50% of the securities having ordinary voting power for the election of directors of the controlled entity or organization or (ii) to direct or cause the direction of the management and policies of the controlled entity or organization, whether through the ownership of voting securities or by contract or otherwise.

 

15.                                 Other Laws.  The Company shall not be obligated to issue any common stock pursuant to this Agreement at any time when the shares covered by this Agreement have not been registered under the Securities Act of 1933, as amended, and such other state and federal laws, rules, and regulations as the Company or the Committee deems applicable and, in the opinion of legal counsel for the Company, there is no exemption from the registration requirements of such laws, rules, and regulations available for the issuance and sale of such shares.

 

16.                               Right of the Company and Affiliates to Terminate Your Employment.  Nothing contained in this Agreement shall confer upon you the right to continue in the employ of the Company or any Affiliate, or interfere in any way with the rights of the Company or any Affiliate to terminate your employment at any time.

 

17.                                 No Liability for Good Faith Determinations.  Neither the Company nor the members of the Board and the Committee shall be liable for any act, omission or determination taken or made in good faith with respect to this Agreement or the Performance Units granted hereunder.

 

18.                               No Guarantee of Interests.  The Board, the Committee and the Company do not guarantee the Common Stock of the Company from loss or depreciation.

 

19.                               Company Records.  Records of the Company or its Affiliates regarding your period of employment, termination of employment and the reason therefore, leaves of absence, re-employment, and other matters shall be conclusive for all purposes hereunder, unless determined by the Company to be incorrect.

 

20.                               Severability.  If any provision of this Agreement is held to be illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions hereof, but such provision shall be fully severable and this Agreement shall be construed and enforced as if the illegal or invalid provision had never been included herein.

 

21.                               Notices.  Whenever any notice is required or permitted hereunder, such notice must be in writing and personally delivered or sent by mail. Any such notice required or permitted to be delivered hereunder shall be deemed to be delivered on the date on which it is personally delivered, or, whether actually received or not, on the third business day after it is deposited in the United States mail, certified or registered, postage prepaid, addressed to the person who is to receive it at the address which such person has theretofore specified by written notice delivered in accordance herewith. The Company or you may change, at any time and from

 

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time to time, by written notice to the other, the address which it or you had previously specified for receiving notices.

 

The Company and you agree that any notices shall be given to the Company or to you at the following addresses:

 

	
Company:
    	
Forest   Oil Corporation
    
	
 
    	
Attn:   Corporate Secretary
    
	
 
    	
707   17th Street, Suite 3600
    
	
 
    	
Denver,   Colorado 80202
    

 

Holder:                                                         At your current address as shown in the Company’s records.

 

22.                                 Waiver of Notice.  Any person entitled to notice hereunder may waive such notice in writing.

 

23.                               Successor.  This Agreement shall be binding upon you, your legal representatives, heirs, legatees and distributees, and upon the Company, its successors and assigns.

 

24.                               Headings.  The titles and headings of Sections and paragraphs are included for convenience of reference only and are not to be considered in construction of the provisions hereof.

 

25.                               Governing Law.  All questions arising with respect to the provisions of this Agreement shall be determined by application of the laws of the State of New York except to the extent New York law is preempted by federal law. The obligation of the Company to sell and deliver Common Stock hereunder is subject to applicable laws and to the approval of any governmental authority required in connection with the authorization, issuance, sale, or delivery of such Common Stock.

 

26.                               Execution of Receipts and Releases.  Any payment of cash or any issuance or transfer of shares of Common Stock or other property to you, or to your legal representative, heir, legatee or distributee, in accordance with the provisions hereof, shall, to the extent thereof, be in full satisfaction of all claims of such persons hereunder. The Company may require you or your legal representative, heir, legatee or distributee, as a condition precedent to such payment or issuance, to execute a release and receipt therefore in such form as it shall determine.

 

27.                               Amendment.  This Agreement may be amended at any time unilaterally by the Company provided that such amendment is consistent with all applicable laws and does not reduce any rights or benefits you have accrued pursuant to this Agreement. This Agreement may also be amended at any time unilaterally by the Company to the extent the Company believes in good faith that such amendment is necessary or advisable to bring this Agreement into compliance with any applicable laws, including Section 409A of the Code.

 

28.                                 Inducement Award.  This Award is granted in accordance with exemption for employment inducement awards set forth under Section 303A.08 of the New York Stock Exchange Listed Company Manual, and has not been approved by the Company’s shareholders.

 

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29.                               Agreement Respecting Securities Act.  You represent and agree that you will not sell the Common Stock that may be issued to you pursuant to your Performance Units except pursuant to an effective registration statement under the Securities Act or pursuant to an exemption from registration under the Securities Act (including Rule 144).

 

30.                               No Shareholder Rights.  The Performance Units granted pursuant to this Agreement do not and shall not entitle you to any rights as a shareholder of Common Stock until such time as you receive shares of Common Stock pursuant to this Agreement. Your rights with respect to the Performance Units shall remain forfeitable at all times prior to the date on which rights become earned in accordance with this Agreement.

 

31.                                 Parachute Payment.  If, in connection with a Change of Control, the accelerated vesting of one or more Performance Units pursuant to this Agreement comprises part of any “parachute payment” as defined in Code Section 280G(a)(2), the number of Performance Units to which such accelerated vesting would otherwise apply may be reduced in accordance with Section 5 of the Severance Agreement.

 

[Signature page follows]

 

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If you accept this Performance Unit Award Agreement and agree to its terms and conditions, please so confirm by signing and returning the duplicate of this Agreement enclosed for that purpose.

 

	
 
    	
 
    	
Very   Truly Yours,
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
FOREST   OIL CORPORATION
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/   Cyrus D. Marter IV
    
	
 
    	
 
    	
Name:
    	
Cyrus   D. Marter IV
    
	
 
    	
 
    	
Title:
    	
SVP.   GC and Secretary
    
	
 
    	
 
    	
Date:
    	
October   1, 2012
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
ACKNOWLEDGED   AND AGREED:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/   Patrick R. McDonald
    	
 
    	
 
    
	
Name:
    	
Patrick   R. McDonald
    	
 
    	
 
    

 

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Appendix A

 

Determination of Performance Units Earned

 

Peer Companies:                                                                                                    SM Energy Company

Exco Resources, Inc.

Ultra Petroleum Corporation

Cimarex Energy Company

Range Resources Corporation

Cabot Oil & Gas Corporation

Comstock Resources, Inc.

Quicksilver Resources, Inc.

Bill Barrett Corporation

Rosetta Resources

Swift Energy Company

Berry Petroleum Corporation

 

Percentage of Initial Performance Units Earned:

 

	
The
    Company’s
   Rank Among
    	
 
    	
No. of Peer Companies
    	
 
    
	
Peers
    	
 
    	
12
    	
 
    	
11
    	
 
    	
10
    	
 
    	
9
    	
 
    	
8
    	
 
    	
7
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
1
    	
 
    	
200
    	
%
    	
200
    	
%
    	
200
    	
%
    	
200
    	
%
    	
200
    	
%
    	
200
    	
%
    
	
2
    	
 
    	
183
    	
%
    	
182
    	
%
    	
180
    	
%
    	
178
    	
%
    	
175
    	
%
    	
171
    	
%
    
	
3
    	
 
    	
167
    	
%
    	
164
    	
%
    	
160
    	
%
    	
156
    	
%
    	
150
    	
%
    	
143
    	
%
    
	
4
    	
 
    	
150
    	
%
    	
145
    	
%
    	
140
    	
%
    	
133
    	
%
    	
125
    	
%
    	
114
    	
%
    
	
5
    	
 
    	
133
    	
%
    	
127
    	
%
    	
120
    	
%
    	
111
    	
%
    	
100
    	
%
    	
86
    	
%
    
	
6
    	
 
    	
117
    	
%
    	
109
    	
%
    	
100
    	
%
    	
89
    	
%
    	
75
    	
%
    	
57
    	
%
    
	
7
    	
 
    	
100
    	
%
    	
91
    	
%
    	
80
    	
%
    	
67
    	
%
    	
50
    	
%
    	
28
    	
%
    
	
8
    	
 
    	
83
    	
%
    	
73
    	
%
    	
60
    	
%
    	
45
    	
%
    	
25
    	
%
    	
0
    	
%
    
	
9
    	
 
    	
67
    	
%
    	
55
    	
%
    	
40
    	
%
    	
22
    	
%
    	
0
    	
%
    	
 
    	
 
    
	
10
    	
 
    	
50
    	
%
    	
36
    	
%
    	
20
    	
%
    	
0
    	
%
    	
 
    	
 
    	
 
    	
 
    
	
11
    	
 
    	
33
    	
%
    	
18
    	
%
    	
0
    	
%
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
12
    	
 
    	
17
    	
%
    	
0
    	
%
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
13
    	
 
    	
0
    	
%
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

Adjustment Rules:

 

Notwithstanding the table above, the following additional rules shall apply in determining the Percentage of Initial Performance Units Earned under the applicable table:

 

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1.                                      If the Total Shareholder Return of one or more Peer Companies included in the applicable table above is within one percentage point of the Company’s Total Shareholder Return, then such table shall be applied by averaging the percentages that would apply under such table based on the Company’s actual rank against the Peer Companies and as if the Company’s ranking was switched with each such Peer Company that is within such one percentage point range;

 

2.                                      If the Company’s Total Shareholder Return is negative, then the percentage shall be the percentage determined under the table above (determined after adjustment pursuant to clauses 1 and 2 of this paragraph, as applicable).

 

13Exhibit 10.1

 

RESTRICTED STOCK INDUCEMENT AGREEMENT

 

THIS RESTRICTED STOCK INDUCEMENT AGREEMENT (this “Agreement”) is made as of the          day of                   , 20    , between Forest Oil Corporation, a New York corporation (the “Company”), and                          (the “Employee”).

 

1.                                      Award. As of the date of this Agreement,            shares of the Company’s common stock, par value $.10 per share (the “Restricted Stock”), shall be issued as hereinafter provided in the Employee’s name subject to certain restrictions thereon, in consideration of services to be provided by the Employee to the Company in the future. The Restricted Stock shall be issued upon acceptance of this Agreement by the Employee and upon satisfaction of the conditions of this Agreement.

 

2.                                      Restricted Stock. The Employee hereby accepts the Restricted Stock when issued and agrees with respect thereto as follows:

 

(a)                                  Forfeiture Restrictions.  The Restricted Stock may not be sold, assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered or disposed of to the extent then subject to the Forfeiture Restrictions (as hereinafter defined), and in the event of termination of the Employee’s employment with the Company for any reason other than death, Disability, or Involuntary Termination (as such terms are hereinafter defined), the Employee shall, for no consideration, forfeit to the Company all Restricted Stock to the extent then subject to the Forfeiture Restrictions.  The prohibition against transfer and the obligation to forfeit and surrender Restricted Stock to the Company upon termination of employment are herein referred to as the “Forfeiture Restrictions.” The Forfeiture Restrictions shall be binding upon and enforceable against any transferee of Restricted Stock. For purposes of this Agreement, the following capitalized words and terms shall have the meanings indicated below:

 

(i)                                     “Affiliate” shall mean any corporation, partnership, limited liability company or partnership, association, trust, or other organization which, directly or indirectly, controls, is controlled by, or is under common control with, the Company.  For purposes of the preceding sentence, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any entity or organization, shall mean the possession, directly or indirectly, of the power (i) to vote more than 50% of the securities having ordinary voting power for the election of directors of the controlled entity or organization or (ii) to direct or cause the direction of the management and policies of the controlled entity or organization, whether through the ownership of voting securities or by contract or otherwise.

 

(ii)                                  “Board” shall mean the Board of Directors of the Company.

 

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

 

(iv)                              “Committee” shall initially mean the compensation committee of the Board.

 

 

(v)                                 “Corporate Change” shall have the meaning given to “Change of Control” in the Severance Agreement.

 

(vi)                              “Disability” shall have the meaning given such term in the Severance Agreement.

 

(vii)                           “Involuntary Termination” shall have the meaning set forth in the Severance Agreement.

 

(viii)                        “Section 16 Person” shall mean an officer, director or affiliate of the Company or a former officer, director or affiliate of the Company who is subject to section 16 of the Securities Exchange Act of 1934, as amended.

 

(ix)                                “Severance Agreement” shall mean the Severance Agreement by and between the Employee and the Company in effect as of the date hereof, as may be amended or superseded from time to time.

 

(b)                                 Lapse of Forfeiture Restrictions.  The Forfeiture Restrictions shall lapse as to the Restricted Stock in accordance with the following schedule provided that the Employee has been continuously employed by the Company from the date of this Agreement through the lapse date:

 

	
 
    	
 
    	
Percentage of Total Number of
    
	
 
    	
 
    	
Shares of Restricted Stock as to
    
	
Lapse Date
    	
 
    	
Which Forfeiture Restrictions Lapse
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    

 

Notwithstanding the foregoing, the Forfeiture Restrictions shall lapse as to all of the Restricted Stock then subject to the Forfeiture Restrictions on (i) the date of a Corporate Change if the successor entity does not assume, convert or replace the Restricted Stock governed by this Agreement with an equity or equity-based award that is substantially the same in all material economic respects, (ii) the date the Employee’s employment with the Company is terminated by reason of death, Disability or Involuntary Termination, or (iii) at the Committee’s discretion, as of the date determined by the Committee.  For the avoidance of doubt, if, in connection with a Corporate Change, the successor entity assumes, converts or replaces this Agreement with an agreement that is the same in all material respects, any Forfeiture Restrictions continuing after such Corporate Change with respect to such assumed, converted or replaced award shall lapse on the date of Employee’s Involuntary Termination following such a Corporate Change.

 

(c)                                  Certificates.  A certificate evidencing the Restricted Stock shall be issued by the Company in Employee’s name, pursuant to which Employee shall have all of the rights of a shareholder of the Company with respect to the Restricted Stock, including, without limitation, voting rights and the right to receive dividends; provided, however, that dividends paid in shares of the Company’s stock shall be subject to the Forfeiture Restrictions. The Employee may not

 

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sell, transfer, pledge, exchange, hypothecate or otherwise dispose of the Restricted Stock until the Forfeiture Restrictions have expired and a breach of the terms of this Agreement shall cause a forfeiture of the Restricted Stock.  The Company, in its discretion, may elect to complete the delivery of the Restricted Stock by means of electronic, book-entry statement, instead of issuing physical share certificates.

 

Certificates, if any, shall be delivered upon issuance to the Secretary of the Company or to such other depository as may be designated by the Committee as a depository for safekeeping until the forfeiture of such Restricted Stock occurs or the Forfeiture Restrictions lapse pursuant to the terms of this award.  Upon the lapse of the Forfeiture Restrictions, the Company shall cause a new certificate or certificates to be issued without legend (except for any legend required pursuant to applicable securities laws or any other agreement to which the Employee is a party) in the name of the Employee in exchange for the certificate evidencing the Restricted Stock, or, as may be the case, it shall issue appropriate instructions to the transfer agent if the electronic, book-entry method is utilized.  In any event, the Company, in its discretion, may elect to deliver the shares in certificate form or electronically to a brokerage account established for the Employee’s benefit at a brokerage financial institution selected by the Company.  At the Company’s request, the Employee shall deliver to the Company a stock power, endorsed in blank, relating to the Restricted Stock and the Employee agrees to complete and sign any other documents and take additional action that the Company may request to enable it to deliver the Restricted Stock on the Employee’s behalf.

 

(d)                                 Corporate Acts.  The existence of the Restricted Stock shall not affect in any way the right or power of the Board or the shareholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, any merger or consolidation of the Company, any issue of debt or equity securities, the dissolution or liquidation of the Company or any sale, lease, exchange or other disposition of all or any part of its assets or business or any other corporate act or proceeding. The prohibitions of Section 2(a) hereof shall not apply to the transfer of Restricted Stock pursuant to a plan of reorganization of the Company, but the stock, securities or other property received in exchange therefore shall also become subject to the Forfeiture Restrictions and provisions governing the lapsing of such Forfeiture Restrictions applicable to the original Restricted Stock for all purposes of this Agreement and the certificates representing such stock, securities or other property shall include a legend to show such restrictions.

 

(e)                                  No Effect on Right or Power.  Nothing contained in this Agreement shall be construed to prevent the Company or any Affiliate from taking any action which is deemed by the Company or such Affiliate to be appropriate or in its best interest, whether or not such action would have an adverse effect on this Award.  Neither the Employee, nor his or her beneficiary or any other person shall have any claim against the Company or any Affiliate as a result of any such action.

 

3.                                      Withholding of Tax.  To the extent that the receipt of the Restricted Stock or the lapse of any Forfeiture Restrictions results in compensation income or wages to the Employee for federal, state or local income tax purposes, the Employee shall deliver to the Company at the time of such receipt or lapse, as the case may be, such amount of shares of common stock of the Company or money as the Company may require to meet its obligation under applicable tax laws

 

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or regulations, in accordance with the sub-sections below.

 

(a)                                  Non Section 16 Persons.  The Employee shall automatically surrender to the Company shares of stock of the Company subject to this Agreement and with respect to which the Forfeiture Restrictions lapse (valued at their fair market value on the date of surrender of such shares) to satisfy any tax required to be withheld by reason of compensation income or wages resulting under this Agreement, unless the Employee elects to deliver to the Company a check in the amount of the required taxes at the time of the lapse of the Forfeiture Restrictions.  An election pursuant to the preceding sentence shall be referred to herein as a “Withholding Election,” and the Company retains the right to impose conditions on the withholding election right.  All Withholding Elections shall be made by written notice to the Company at its principal executive office addressed to the attention of the Secretary.  So long as the Employee is not a Section 16 Person, the Employee may revoke such election by delivering to the Secretary written notice of such revocation at least 5 business days prior to the date such election is implemented through actual surrender or withholding of shares of stock of the Company.

 

(b)                                 Section 16 Persons.  Notwithstanding the foregoing, if the Employee is a Section 16 Person, the Employee must provide the Company with an election form that must:

 

(i)                                     be in writing, signed, irrevocable and delivered at least six months prior to the date any tax withholding is required by reason of this Agreement (the “Withholding Date”) and either (1) authorize the surrender to the Company by the Employee of shares of stock of the Company subject to this Agreement and with respect to which the Forfeiture Restrictions lapse sufficient to satisfy any tax required to be withheld by reason of compensation income or wages resulting under this Agreement, or (2) confirm that the Employee will deliver to the Company a check in the amount of the required taxes at the time of the lapse of the Forfeiture Restrictions, or

 

(ii)                                  (a) be approved by the Committee, either before or after such election is made, (b) be made, and the Withholding Date occur, during a period beginning on the third business day following the date of release by the Company for publication of quarterly and annual summary statements of sales and earnings and ending on the thirtieth day following such date, and (c) be made more than six months after the effective date of this Agreement.

 

(c)                                  If the Employee fails to pay the required amount to the Company or fails to make an election pursuant to the foregoing sub-sections (a) or (b) (including in the event of any lapse of Forfeiture Restrictions for any reason identified in Section 2(b)(ii) above prior to the date that an election is required to be made pursuant to sub-section (b), and the Employee has not made such an election) the Company is authorized to withhold from any cash remuneration (or, if the Employee is not a Section 16 Person, stock remuneration, including withholding any Restricted Stock distributable to the Employee under this Agreement) then or thereafter payable to the Employee any tax required to be withheld by reason of compensation income or wages resulting under this Agreement or the disposition of Restricted Stock acquired under this Agreement.

 

(d)                                 For purposes hereof, withholding shall be based on the Fair Market Value (hereinafter defined) of the common stock of the Company (“Common Stock”) on the date prior

 

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to the date on which the Forfeiture Restrictions lapse.  As used in this Agreement, “Fair Market Value” means, as of any specified date, the mean of the high and low sales prices of the Common Stock on a national stock exchange, as reported on the stock exchange composite tape on that date (or such other reporting service approved by the Committee) or, if no prices are reported on that date, on the last preceding date on which such prices of the Common Stock are so reported.  If the Common Stock is traded over the counter at the time a determination of its fair market value is required to be made hereunder, its fair market value shall be deemed to be equal to the average between the reported high and low or closing bid and asked prices of Common Stock on the most recent date on which Common Stock was publicly traded.  In the event Common Stock is not publicly traded at the time a determination of its value is required to be made hereunder, the determination of its fair market value shall be made by the Committee in such manner as it deems appropriate and as is consistent with the requirements of section 409A of the Code.

 

4.                                      Status of Stock.  The Employee agrees that the Restricted Stock issued under this Agreement will not be sold or otherwise disposed of in any manner which would constitute a violation of any applicable federal or state securities laws. The Employee also agrees that (i) certificates, if any, representing the Restricted Stock may bear such legend or legends as the Committee deems appropriate in order to reflect the Forfeiture Restrictions and to assure compliance with applicable securities laws, (ii) the Company may refuse to register the transfer of the Restricted Stock on the stock transfer records of the Company if such proposed transfer would constitute a violation of the Forfeiture Restrictions or, in the opinion of counsel satisfactory to the Company, of any applicable securities law, and (iii) the Company may give related instructions to its transfer agent, if any, to stop registration of the transfer of the Restricted Stock.

 

5.                                      Other Terms and Conditions.  The Employee shall have the right to receive dividends with respect to Restricted Stock subject to this Agreement, to vote Restricted Stock subject thereto, and to enjoy all other shareholder rights, except that (i) the Employee shall not be entitled to delivery of the stock certificate until the Forfeiture Restrictions have expired, and (ii) the Company shall retain custody of the stock until the Forfeiture Restrictions have expired, (iii) a breach of the terms and conditions of this Agreement shall cause a forfeiture of the Restricted Stock Award, and (v) with respect to the payment of any dividend with respect to shares of Restricted Stock subject to this Agreement directly to the Employee, each such dividend shall be paid no later than the end of the calendar year in which the dividends are paid to holders of the Company’s common stock or, if later, the fifteenth day of the third month following the date the dividends are paid to shareholders of such class of shares.

 

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6.                                      Employment Relationship.  For purposes of this Agreement, the Employee shall be considered to be in the employment of the Company as long as the Employee remains an employee of either the Company, an Affiliate, or any successor entity.  Without limiting the scope of the preceding sentence, it is expressly provided that the Employee shall be considered to have terminated employment with the Company at the time of the termination of the “Affiliate” status of the entity or other organization that employs the Employee.  Nothing in the award of the Restricted Stock pursuant to this Agreement, shall confer upon the Employee the right to continued employment by the Company or affect in any way the right of the Company to terminate such employment at any time. Unless otherwise provided in a written employment agreement or by applicable law, the Employee’s employment by the Company shall be on an at-will basis, and the employment relationship may be terminated at any time by either the Employee or the Company for any reason whatsoever, with or without cause. Any question as to whether and when there has been a termination of such employment, and the cause of such termination, shall be determined by the Committee, and its determination shall be final.

 

7.                                      Notices. Any notices or other communications provided for in this Agreement shall be sufficient if in writing.  In the case of the Employee, such notices or communications shall be effectively delivered if hand delivered to the Employee at his principal place of employment or if sent by registered or certified mail to the Employee at the last address the Employee has filed with the Company. In the case of the Company, such notices or communications shall be effectively delivered if sent by registered or certified mail to the Company at its principal executive offices.

 

8.                                      Parachute Payment.  If, in connection with a Corporate Change, the lapse of Forfeiture Restrictions on one or more shares of Restricted Stock pursuant to this Agreement comprises part of any “parachute payment” as defined in Code Section 280G(a)(2), the number of shares of Restricted Stock to which such accelerated lapse of Forfeiture Restrictions would otherwise apply may be reduced in accordance with Section 5 of the Severance Agreement.

 

9.                                      Other Laws.  The Company shall not be obligated to issue any common stock pursuant to this Agreement at any time when the shares covered by this Agreement have not been registered under the Securities Act of 1933, as amended, and such other state and federal laws, rules, and regulations as the Company or the Committee deems applicable and, in the opinion of legal counsel for the Company, there is no exemption from the registration requirements of such laws, rules, and regulations available for the issuance and sale of such shares.  No fractional shares of common stock shall be delivered, nor shall any cash in lieu of fractional shares be paid.

 

10.                               Entire Agreement; Amendment. This Agreement replaces and merges all previous agreements and discussions relating to the same or similar subject matters between the Employee and the Company and constitutes the entire agreement between the Employee and the Company with respect to the subject matter of this Agreement.  This Agreement may not be modified in any respect by any verbal statement, representation or agreement made by any employee, officer, or representative of the Company or by any written agreement unless signed by an officer of the Company who is expressly authorized by the Company to execute such document.  Except as provided below, any modification of this Agreement shall be effective only if it is in writing and signed by both the Employee and an authorized officer of the Company.

 

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11.                               Inducement Award.  This award of Restricted Stock is granted in accordance with exemption for employment inducement awards set forth under Section 303A.08 of the New York Stock Exchange Listed Company Manual, and has not been approved by the Company’s shareholders.

 

12.                               Interpretation of Committee.  The Employee agrees that any dispute or disagreement which may arise in connection with this Agreement shall be resolved by the Committee. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Agreement in the manner and to the extent the Committee shall deem expedient to carry the Agreement into effect.  Any interpretation made by the Committee of the terms of this Agreement and any determination made by the Committee under this Agreement may be made in the sole discretion of the Committee and shall be final, binding and conclusive.

 

13.                               Binding Effect. This Agreement shall be binding upon and inure to the benefit of any successors to the Company and all persons lawfully claiming under the Employee.

 

14.                               Controlling Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

 

[Signature page follows]

 

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IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by an officer thereunto duly authorized, and the Employee has executed this Agreement, all as of the date first above written.

 

	
 
    	
FOREST OIL CORPORATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
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EMPLOYEE
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
[EMPLOYEE   NAME]
    
	
 
    	
 
    	
SS#:
    	
 
    	
 
    

 

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