Exhibit 10.5
DISTRIBUTION
AGREEMENT
DATED AS OF SEPTEMBER 9,
2005
BETWEEN
FOREST OIL
CORPORATION
AND
SML WELLHEAD
CORPORATION
TABLE OF CONTENTS
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ARTICLE I
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DEFINITIONS
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Section 1.1
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General
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1
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Section 1.2
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References to Time
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12
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ARTICLE II
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PRELIMINARY TRANSACTIONS
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Section 2.1
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Business Separation
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12
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Section 2.2
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Conveyancing and Assumption
Agreements
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13
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Section 2.3
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Certificate of Incorporation; By-laws
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13
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Section 2.4
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Issuance of Stock
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13
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Section 2.5
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Other Agreements
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13
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Section 2.6
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Transfers Not Effected Prior to the
Distribution; Transfers Deemed Effective as of the Distribution
Date
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13
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ARTICLE III
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THE DISTRIBUTION
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Section 3.1
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Record Date and Distribution Date
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15
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Section 3.2
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The Agent
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15
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Section 3.3
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Delivery of Share Certificates to the
Agent
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15
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Section 3.4
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The Distribution
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15
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ARTICLE IV
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CASH AMOUNT
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Section 4.1
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Estimated Cash Amount
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16
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Section 4.2
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Actual Cash Amount
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16
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Section 4.3
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Incremental Tax Amount
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16
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Section 4.4
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Dispute Resolution Procedure
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17
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Section 4.5
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Payment of Cash Amount
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17
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ARTICLE V
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SURVIVAL AND INDEMNIFICATION
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Section 5.1
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Survival of Agreements
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17
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Section 5.2
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Indemnification
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17
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Section 5.3
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Procedures for Indemnification for Third-Party
Claims
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18
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i
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Section 5.4
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Reductions for Insurance Proceeds and Other
Recoveries
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19
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Section 5.5
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Remedies Cumulative
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20
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Section 5.6
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Tax Treatment of Indemnity and Other
Payments
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20
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Section 5.7
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Survival of Indemnities
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20
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ARTICLE VI
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CERTAIN ADDITIONAL COVENANTS
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Section 6.1
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Notices to Third Parties
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20
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Section 6.2
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Licenses and Permits
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21
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Section 6.3
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Intercompany Agreements
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21
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Section 6.4
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Further Assurances
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21
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Section 6.5
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Guarantee Obligations and Liens
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21
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Section 6.6
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Insurance
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22
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Section 6.7
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Cooperation
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24
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ARTICLE VII
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ACCESS TO INFORMATION
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Section 7.1
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Provision of Corporate Records
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24
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Section 7.2
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Access to Information
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24
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Section 7.3
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Production of Witnesses
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26
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Section 7.4
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Retention of Records
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26
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Section 7.5
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Confidentiality
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26
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Section 7.6
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Cooperation with Respect to Government Reports
and Filings
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27
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Section 7.7
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Tax Sharing Agreement
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27
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ARTICLE VIII
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NO REPRESENTATIONS OR WARRANTIES
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Section 8.1
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No Representations or Warranties
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27
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ARTICLE IX
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MISCELLANEOUS
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Section 9.1
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Conditions to the Distribution
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27
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Section 9.2
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Complete Agreement
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29
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Section 9.3
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Expenses
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29
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Section 9.4
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Governing Law
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29
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Section 9.5
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Notices
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29
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Section 9.6
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Amendment and Modification
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30
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Section 9.7
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Successors and Assigns; No Third-Party
Beneficiaries
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31
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Section 9.8
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Counterparts
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31
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Section 9.9
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Interpretation
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31
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ii
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Section 9.10
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Severability
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31
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Section 9.11
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References; Construction
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31
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Section 9.12
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Termination
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31
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Section 9.13
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Consent to Jurisdiction and Service of
Process
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31
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Section 9.14
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Waivers
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32
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Section 9.15
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Specific Performance
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32
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Section 9.16
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Waiver of Jury Trial
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32
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Exhibit A
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-
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Certificate of Incorporation of
Spinco
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Exhibit B
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-
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Bylaws of Spinco
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Exhibit C
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-
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Certificate of Officers of Forest
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Exhibit D
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Certificate of Officers of Spinco
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Exhibit E
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Certificate of Officers of the
Company
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iii
DISTRIBUTION
AGREEMENT
THIS DISTRIBUTION AGREEMENT, dated
as of September 9, 2005, is between Forest Oil Corporation, a
New York corporation (“Forest”), and SML Wellhead
Corporation, a Delaware corporation and a wholly owned subsidiary
of Forest (“Spinco”).
WHEREAS, Forest, Spinco, Mariner
Energy, Inc., a Delaware corporation (the
“Company”), and MEI Sub, Inc., a Delaware
corporation and wholly owned subsidiary of the Company
(“Merger Sub”), have entered into an Agreement and Plan
of Merger, dated as of September 9, 2005 (the “Merger
Agreement”), pursuant to which, at the Effective Time (as
such term and other capitalized terms are defined in Article I
hereof), Merger Sub will merge with and into Spinco, with Spinco
being the surviving corporation, and Spinco becoming a wholly owned
subsidiary of the Company (the “Merger”);
WHEREAS, this Agreement and the
other Transaction Agreements set forth certain transactions that
are conditions to consummation of the Merger;
WHEREAS, prior to the Distribution
Date, and subject to the terms and conditions set forth herein,
Forest intends to transfer or cause to be transferred to Spinco all
of the Spinco Assets, which represent substantially all of
Forest’s Offshore Gulf of Mexico assets, and Spinco intends
to assume all of the Spinco Liabilities, as contemplated by this
Agreement (the “Contribution”);
WHEREAS, subject to the conditions
set forth in this Agreement, all of the issued and outstanding
shares of common stock of Spinco, par value $0.10 per share
(“Spinco Common Stock”), will be distributed on a pro
rata basis (the “Distribution”) to the holders as of
the Record Date of the outstanding common stock of Forest, par
value $0.10 per share (“Forest Common Stock”);
and
WHEREAS, the parties to this
Agreement intend that the Contribution and the Distribution qualify
under Sections 368(a) and 355 of the Internal Revenue
Code of 1986, as amended (the “Code”), respectively,
and that the Merger qualify as a reorganization under
Section 368(a) of the Code;
NOW, THEREFORE, in consideration of
the representations, warranties, covenants and agreements set forth
in this Agreement, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the
parties, intending to be legally bound hereby, agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.1
General . As used in this Agreement, the following
terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the
terms defined):
“Actual Cash Amount”
shall have the meaning specified in Section 4.2.
“Affiliate” shall mean,
with respect to any specified Person, any other Person that
directly or indirectly, controls, is controlled by or is under
common control with, such specified Person. For purposes of
this definition, “control” (including, with correlative
meanings, the terms “controlled by” and “under
common control with”), as used with respect to any Person,
shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by
contract or otherwise; provided, however, that for purposes of this
Agreement, from and after the Distribution Date, no member of
either Group shall be deemed an Affiliate of any member of the
other Group.
“Agent” shall mean the
distribution agent to be appointed by Forest to distribute the
shares of Spinco Common Stock pursuant to the
Distribution.
“Agreement” shall mean
this Distribution Agreement.
“Assets” shall mean the
Spinco Assets or the Forest Assets, as the case may be.
“Assumed Abandonment
Liabilities” shall mean Liabilities arising from legal
obligations to plug, abandon, remove, or otherwise retire
(a) to the extent constituting Spinco Assets, all real or
immovable property, including without limitation all
platforms, pipelines and improvements located or situated on,
related to, or used in connection with the Properties; (b) to
the extent constituting Spinco Assets, all equipment, personal or
movable property, fixtures and improvements located on or to the
extent reasonably necessary in connection with the operation of the
Properties, the Easements and all other Spinco Assets including
without limitation all wells (whether producing or shut-in and
whether for production, injection or disposal), flowlines,
gathering systems, processing plants, piping, tanks, buildings,
boat docks, treatment facilities, injection facilities, disposal
facilities, compression facilities, production units, tank
batteries; and (c) all other assets constituting a Spinco
Asset, in each case (with respect to each of clauses (a),
(b) and (c) above) to the extent such Liabilities are
either (i) described in the FAS 143 disclosure in respect of
the Spinco Assets provided by Forest to the Company prior to the
date hereof, (ii) arising after the Measurement Date, or
(iii) not within the Knowledge of Forest as of the date
hereof; provided, however, that the extent of an Assumed
Abandonment Liability shall not be limited by the specific dollar
amounts contained in the FAS 143 disclosure.
“Assumed Derivative
Liabilities” shall mean Liabilities under the derivatives
contracts set forth in Section 1.1(A) of the Disclosure
Schedule.
“Assumed Environmental
Liabilities” shall mean Liabilities, to the extent arising
from the conduct of the Spinco Business (whether prior to or after
the Measurement Date) (i) as the result of an Environmental
Condition or (ii) as a result of a claim by a Governmental
Authority for property damage, damage to natural resources,
remediation, or payment or reimbursement of response costs incurred
or expended by such Governmental Authority pursuant to
Environmental Law; provided, that Assumed Environmental Liabilities
shall not include any Liability (i) arising from the conduct
of the Spinco Business prior to the Measurement Date that was
required to have been set forth on Section 4.10 of the Spinco
Disclosure Schedule, but that was omitted from
2
such schedule, or (ii) in excess of $10.0
million in the aggregate, as actually incurred by Spinco, in
connection with the conditions described in clauses (ii) and
(iv) of Section 4.10 of the Spinco Disclosure
Schedule.
“Business” shall mean
the Spinco Business or the Forest Business, as the case may
be.
“Business Day” shall
mean any day other than a Saturday, Sunday or a day on which
banking institutions in the City of New York are authorized or
obligated by law or executive order to close.
“Cash Amount” shall mean
an amount calculated as follows:
(i)
Two hundred
million dollars ($200 million); provided, however, that if the
condition described in Section 4.2 of the Spinco Disclosure
Schedule has not been satisfied, such amount shall equal two
hundred seventy-five million dollars ($275 million);
less
(ii)
All revenue
recognized by Forest in accordance with GAAP applied on a
consistent basis (or as otherwise agreed by Forest, Spinco and the
Company), derived from the Spinco Assets during the Measurement
Period (including, without limitation, oil and gas revenue, settled
gains and losses from Assumed Derivative Liabilities, gas
processing revenue and gas marketing revenue, but excluding gains
on sales of property, plant and equipment related to the
Spinco Assets); less
(iii)
Cash
consideration of any sale during the Measurement Period of
property, plant and equipment related to the Spinco Assets
recognized by Forest in accordance with GAAP; plus
(iv)
The net assets
and liabilities described in Section 1.1(B) of the
Disclosure Schedule; plus or minus, as determined
below,
(v)
An amount equal
to net gas balancing assets or liabilities, as the case may be,
based on a gas price of $6.50 per mmbtu, of the Spinco Business as
of the Measurement Date (it being understood and agreed that if the
net amount is positive, such amount shall be added to the Cash
Amount, and if negative, shall be deducted from the Cash Amount);
plus or minus, as determined below,
(vi)
An amount equal
to the net settlement amount in respect of settlements of gas
imbalances effected during the Measurement Period (it being
understood and agreed that if the net amount is positive, such
amount shall be deducted from the Cash Amount, and if negative,
shall be added to the Cash Amount); plus
(vii)
All capital and
operating expenditures of Forest attributable to the Spinco Assets
during the Measurement Period calculated by Forest in accordance
with GAAP, other than expenditures (A) in connection with
repairs or remediation to any Properties damaged in Hurricane Ivan
or Hurricane Lilly, (B) in connection with any environmental
Liabilities that do not constitute Assumed Environmental
Liabilities or (C) amounts described in paragraph (x) below;
plus
3
(viii)
An amount equal
to hypothetical income taxes, which amount shall be calculated by
applying a rate of 35% to an amount calculated as
follows:
(a)
Item (ii) of the Cash Amount;
less
(b)
Item (vii) of the Cash
Amount; less
(c)
Item (x) of the Cash Amount;
less
(d)
Item (xi) of the Cash Amount;
plus
(e)
Capital expenditures in item
(vii) of the Cash Amount to the extent they represent tangible
assets; less
(f)
An amount representing estimated
cost depletion computed at a rate of $1.20 per mcfe produced during
the Measurement Period, subject to the adjustment as provided in
Section 4.3; plus
(ix)
An amount equal
to interest expense, which amount shall be calculated, for each
calendar month during the Measurement Period (or partial month, if
applicable with respect to the last month of the Measurement
Period), at a rate of 6.5% per annum on the aggregate amount of
indebtedness of the Spinco Business based on the average for such
month, which indebtedness shall be assumed to have equaled two
hundred million dollars ($200 million) on the Measurement Date and
to have been reduced on the last day of each calendar month after
the Measurement Date by net cash provided by operating activities,
and increased by net cash used in investing activities, in each
case in accordance with GAAP; plus
(x)
$1.6 million per
month (prorated for any partial month) for general and
administrative expenses, plus any Retention Benefits paid to Spinco
Employees during the Measurement Period pursuant to
Section 6.8(g) of the Merger Agreement; plus
(xi)
A cash amount for
costs and expenses incurred by Forest or Spinco in connection with
the Transaction Agreements and the transactions contemplated
thereby (including, without limitation, fees and expenses of legal
and financial advisors), such costs and expenses not to exceed
seven million dollars ($7 million); plus or minus, as
determined below,
(xii)
An amount equal
to the change in working capital accounts, other than cash
(accounts receivable plus inventories plus other current assets
less accounts payable and other current liabilities, but excluding
gas imbalances), excluding the effects of FAS 143 and FAS 133,
related to the Spinco Assets during the Measurement Period (it
being understood and agreed that working capital related to the
Spinco Assets at the Measurement Date shall be assumed to be zero
and that if the net amount is positive, such amount shall be added
to the Cash Amount, and if negative, shall be deducted from the
Cash Amount).
4
“Claims Administration”
shall mean the processing of claims made under the Policies,
including the reporting of claims to the insurance carrier,
management and defense of claims, and providing for appropriate
releases upon settlement of claims.
“Claims Made Policies”
shall have the meaning specified in Section 6.6(a).
“Code” shall have the
meaning specified in the Recitals hereof.
“Company” shall have the
meaning specified in the Recitals hereof.
“Company Common Stock”
shall have the meaning specified in the Merger
Agreement.
“Company Consent” shall
have the meaning specified in the Merger Agreement.
“Contribution” shall
have the meaning specified in the Recitals hereof.
“Disclosure Schedule”
shall mean the schedule prepared and delivered by Forest to
Spinco as of the date of this Agreement.
“Dispute Notification”
shall have the meaning specified in Section 4.4.
“Distribution” shall
have the meaning specified in the Recitals hereof.
“Distribution Date”
shall mean the date and time that the Distribution shall become
effective.
“Easement” shall mean
any easement, right of way, servitude, permit, license, franchise,
right of ingress or egress, property use agreement or other estate
or similar right or privilege.
“Effective Time” shall
have the meaning specified in the Merger Agreement.
“Employee Benefits
Agreement” shall mean the Employee Benefits Agreement of even
date herewith between Forest and Spinco.
“Environmental
Condition” shall mean soil or water contamination, other
types of environmental damage or contamination, or other
consequences of releases of Hazardous Materials in, on, under or
migrating from the Spinco Assets, in each case in violation of
Environmental Law.
“Environmental Law”
shall have the meaning specified in the Merger
Agreement.
“Estimated Cash Amount”
shall have the meaning specified in Section 4.1.
“Exchange Act” shall
mean the Securities Exchange Act of 1934, as amended, together with
the rules and regulations of the SEC promulgated
thereunder.
“Forest” shall have the
meaning specified in the preamble hereof.
5
“Forest Assets” shall
mean, collectively, all of the right, title and interest of Forest
and the Forest Subsidiaries in all their respective assets and
properties, tangible or intangible, other than the Spinco
Assets.
“Forest Business” shall
mean all of the businesses and operations conducted by Forest and
the Forest Subsidiaries (other than the Spinco Business) at any
time, whether prior to, on or after the Distribution
Date.
“Forest Common Stock”
shall have the meaning specified in the Recitals hereof.
“Forest Group” shall
mean Forest and the Forest Subsidiaries.
“Forest Indemnitees”
shall mean Forest, each Affiliate of Forest immediately after the
Distribution Date and each of their respective present and former
Representatives and each of the heirs, executors, successors and
assigns of any of the foregoing.
“Forest Liabilities”
shall mean, collectively, (i) all Liabilities of Forest and
all Liabilities of the Forest Subsidiaries, including the
Liabilities of Forest under the Transaction Agreements, and
(ii) all Liabilities set forth on Section 1.1(C) of
the Disclosure Schedule; provided that Forest Liabilities shall not
include the Spinco Liabilities.
“Forest Subsidiaries”
shall mean all direct and indirect Subsidiaries of Forest
immediately after the Distribution Date.
“GAAP” shall have the
meaning specified in the Merger Agreement.
“Governmental Authority”
shall have the meaning specified in the Merger
Agreement.
“Group” shall mean the
Forest Group or the Spinco Group, as the case may be.
“Hazardous Material”
shall have the meaning specified in the Merger
Agreement.
“Indemnifiable Losses”
shall mean all Losses, Liabilities, damages, claims, demands,
judgments or settlements of any nature or kind, including all
reasonable costs and expenses (legal, accounting or otherwise as
such costs are incurred) relating thereto, suffered by an
Indemnitee, including any reasonable costs or expenses of enforcing
any indemnity hereunder.
“Indemnifying Party”
shall mean a Person that is obligated under this Agreement to
provide indemnification.
“Indemnitee” shall mean
a Person that may seek indemnification under this
Agreement.
“Independent Accounting
Firm” shall mean Grant Thornton or BDO Seidman, LLP or, if
either of such firms is not independent and available, such other
independent accounting firm of national reputation mutually
acceptable to Forest and Spinco (or, if Forest and Spinco are
unable to agree upon such a firm, then either party shall select
one such firm and those two firms shall select a third firm, in
which event “Independent Accounting Firm” shall mean
such third firm).
6
“Information” shall mean
all records, books, contracts, instruments, computer data and other
data and information.
“Knowledge” of any
Person or person shall mean the knowledge after due inquiry of the
executive officers of such Person (including, with respect to
Forest’s or Spinco’s knowledge, the head of the Spinco
Business unit).
“Liability” or
“Liabilities” shall mean all debts, liabilities and
obligations whether absolute or contingent, matured or unmatured,
liquidated or unliquidated, accrued or unaccrued, known or unknown,
whenever arising, and whether or not the same would properly be
reflected on a balance sheet.
“Liens” shall have the
meaning specified in the Merger Agreement.
“Litigation Matters”
shall mean actual, threatened or future litigation, investigations,
claims or other legal matters that have been or may be asserted
against, or otherwise adversely affect, Forest and/or Spinco (or
members of either Group).
“Losses” shall have the
meaning specified in the Merger Agreement.
“Material Adverse
Effect” shall have the meaning specified in the Merger
Agreement.
“Measurement Date” shall
mean 12:01 a.m. Central time on July 1, 2005.
“Measurement Period”
shall mean the period from the Measurement Date through the
Distribution Date.
“Merger” shall have the
meaning specified in the preamble hereof.
“Merger Agreement” shall
have the meaning specified in the Recitals hereof.
“Occurrence Basis
Policies” shall have the meaning specified in
Section 6.6(a).
“Offshore Gulf of
Mexico” shall have the meaning specified in the Merger
Agreement.
“Permitted Liens” shall
have the meaning specified in the Merger Agreement.
“Person or person” shall
mean a natural person, corporation, company, partnership, limited
partnership, limited liability company, or any other entity,
including a Governmental Authority.
“Policies” shall mean
all insurance policies, insurance contracts and claim
administration contracts of any kind of Forest and its Subsidiaries
(including members of the Spinco Group) and their predecessors
which were or are in effect at any time at or prior to the
Distribution Date, including primary, excess and umbrella,
commercial general liability, fiduciary liability, product
liability, automobile, aircraft, property and casualty, business
interruption, directors and officers liability, employment
practices liability, workers’ compensation, crime, errors and
omissions, special accident, cargo, employee dishonesty and
operator’s extra expense insurance policies and
7
captive insurance company arrangements, together
with all rights, benefits and privileges thereunder.
“Privileged Information”
shall mean, with respect to either Group, Information regarding a
member of such Group, or any of its operations, Assets or
Liabilities (whether in documents or stored in any other form or
known to its employees or agents) that is or may be protected from
disclosure pursuant to the attorney-client privilege, the work
product doctrine or another applicable privilege, that a member of
the other Group may come into possession of or obtain access to
pursuant to this Agreement or otherwise.
“Reconciliation
Statement” shall have the meaning specified in
Section 4.2.
“Record Date” shall mean
the close of business on the date to be determined by the Board of
Directors of Forest as the record date for determining stockholders
of Forest entitled to receive the Distribution, which date shall be
a business day preceding the day of the Effective Time.
“Registration
Statements” shall mean the Registration Statement on
Form 10 (or, if such form is not appropriate, the appropriate
form pursuant to the Exchange Act) to be filed by Spinco with the
SEC to effect the registration of the Spinco Common Stock pursuant
to the Exchange Act in connection with the Distribution, the
Registration Statement on Form S-4 to be filed by the Company
with the SEC to effect the registration under the Securities Act of
the issuance of the shares of Company Common Stock into which
shares of Spinco Common Stock will be converted pursuant to the
Merger and the Registration Statement on Form S-1 to be filed
by the Company with the SEC to effect the registration under the
Securities Act of the resale of the shares of Company Common Stock
by certain selling stockholders.
“Representative” shall
mean, with respect to any Person, any of such Person’s
directors, officers, employees, agents, consultants, advisors,
accountants, attorneys and representatives.
“Requisite Approval”
shall have the meaning specified in the Merger
Agreement.
“Retention Benefits”
shall have the meaning specified in the Merger
Agreement.
“Review Period” shall
have the meaning specified in Section 4.2.
“SEC” shall mean the
U.S. Securities and Exchange Commission.
“Securities Act” shall
mean the Securities Act of 1933, as amended, together with the
rules and regulations of the SEC promulgated
thereunder.
“Spinco” shall have the
meaning specified in the preamble hereof.
“Spinco Assets” shall
mean, collectively, all of the right, title and interest of Forest
and the Forest Subsidiaries prior to the Contribution in and
to:
(a)
(i) all real property interests
of Forest and the Forest Subsidiaries in the Offshore Gulf of
Mexico, including without limitation the leasehold estates in and
to the oil, gas and mineral leases described on
Schedule 1.1(D)(a)(i) (and any extensions,
renewals,
8
ratifications or amendments to such interests
whether or not such extensions, renewals, ratifications or
amendments are described on
Schedule 1.1(D)(a)(i) (collectively, the
“Properties,” or singularly, a
“Property”)), (ii) the overriding royalty
interests and reversionary interests described on
Schedule 1.1(D)(a)(ii) and (iii) the other assets
described on Schedule 1.1(D)(a)(iii);
(b)
all real or immovable property and
rights incident to or used in conjunction with the Properties,
including (i) all rights with respect to the use and
occupation of the surface of and the subsurface depths under the
Properties; (ii) all rights with respect to any pooled,
communitized or unitized acreage by virtue of any Property being a
part thereof, including all production from such pool or unit
allocated to any such Property; (iii) all platforms, pipelines
and improvements located or situated on, related to, or used in
connection with the Properties; and (iv) all surplus,
materials stocks and inventory listed on
Schedule 1.1(D)(b)(iv);
(c)
all Easements to the extent related
to or used in connection with the Properties;
(d)
all oil, gas, condensate and other
hydrocarbons produced from or attributable to the Properties from
and after the Measurement Date or in storage on the Measurement
Date (the “Hydrocarbons”) and all equipment, personal
or movable property, fixtures, inventory and improvements located
on or to the extent reasonably necessary in connection with the
operation of the Properties and the Easements or with the
production, treatment, sale, or disposal of the Hydrocarbons,
byproducts or waste produced therefrom or attributable thereto,
including all wells (whether producing, shut in or abandoned, and
whether for production, injection or disposal), wellhead equipment,
pumps, pumping units, flowlines, gathering systems, interests in
processing plants, platforms, pipelines, vessels, computer software
and hardware, piping, tanks, buildings, boat docks, treatment
facilities, injection facilities, disposal facilities, compression
facilities, spare parts, tools, production units, heaters,
separators, dehydrators, tank batteries, abandoned property,
offices and office equipment and supplies at Forest’s
Metairie and Lafayette offices, and other materials, supplies,
equipment, facilities, appurtenances and machinery;
(e)
all contracts and instruments,
including but not limited to those listed on
Schedule 1.1(D)(e)(i), to the extent the same relate to the
Properties after the Measurement Date (collectively, the
“Contracts”);
(f)
any and all books and records
(including without limitation those referred to in
Section 7.1), files, muniments of title, reports, intellectual
property (including without limitation patents, trade secrets and
copyrights), state and MMS compliance information, logs core
samples, geological, geophysical (to the extent not subject to
third party consents or restriction on transfer) and engineering
data and information (including blueprints, maps, diagrams,
annotated logs, cross sections and all data room material) and
interpretive data, analysis and similar information, whether or not
of a proprietary nature (including without limitation seismic
processing methods) to the extent related to the
Properties;
(g)
the rights of Spinco and its
Subsidiaries under this Agreement and the other Transaction
Agreements;
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(h)
all noncash consideration of any
sale after the Measurement Date of property, plant and equipment
related to the assets described in paragraphs (a) through
(g) above;
(i)
any and all proceeds, benefits,
refunds, settlements, income or revenue accruing and attributable
to the Spinco Assets prior to the Measurement Date to the extent
they are in connection with any Assumed Abandonment Liability, any
Assumed Environmental Liability or any Assumed Derivative
Liability;
(j)
any and all proceeds from the
settlements of contract disputes with purchasers of Hydrocarbons or
byproducts from the Properties, insofar as said disputes are
attributable to periods after the Measurement Date;
(k)
any and all rights, titles, claims
and interests of Forest and its Subsidiaries to or under any policy
or agreement of insurance or indemnity, any bond, or to any
insurance proceeds or awards, to the extent attributable to
pre-Measurement Date events and to the extent they are in
connection with any Assumed Abandonment Liability or any Assumed
Environmental Liability;
(l)
any and all claims and causes of
action of Forest and its Subsidiaries arising from acts, omissions
or events, or damages to or destruction of property, occurring
prior to the Measurement Date to the extent they are in connection
with any Assumed Abandonment Liability or any Assumed Environmental
Liability; and
(m)
all accounts receivable, inventories
and other current assets (other than cash) attributable to the
assets described in paragraphs (a) through (l) above from and
after the Measurement Date.
Notwithstanding the foregoing, the Spinco Assets
shall not include, and there is excepted, reserved and excluded
from the Contribution contemplated hereby: (a) those
certain interests in and to the Properties described on
Schedule 1.1(D)(x) and the assets described in paragraphs
(b) through (i) above related to such Properties (the
“Excluded Properties”), (b) all furniture,
fixtures and equipment located in and all contracts relating to,
Forest’s office at 707 Seventeenth Street, Suite 3600,
Denver, Colorado 80202, (c) subject to Section 7.1, all
corporate, financial, legal and Tax records of Forest and the
Forest Subsidiaries which are related to the Forest Business,
(d) any and all business models, analyses, memoranda or
similar documents generated by Forest or its advisers during or in
the context of the consideration, negotiations or approvals of any
of the Transaction Agreements, (e) any and all proceeds,
benefits, refunds, settlements, income or revenue accruing and
attributable to the Spinco Assets prior to the Measurement Date
(other than in connection with any Assumed Abandonment Liability,
any Assumed Environmental Liability or any Assumed Derivative
Liability), (f) any and all claims of Forest and its
Subsidiaries for refunds of or loss carry forwards with respect to
Taxes attributable to the Spinco Assets for any period prior to the
Distribution Date, (g) any and all proceeds from the
settlements of contract disputes with purchasers of Hydrocarbons or
byproducts from the Properties, insofar as said disputes are
attributable to periods prior to the Measurement Date, (h) any
and all rights to use Forest’s name, marks trade dress or
insignia, or to use the name of any other Forest Subsidiary,
(i) any and all rights, titles, claims and interests of Forest
and the Forest Subsidiaries to or under any policy or agreement of
insurance or indemnity, any bond, or to any insurance proceeds
or
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awards, to the extent attributable to
pre-Measurement Date events and to the extent that Forest has
remediated or otherwise resolved without liability to Spinco any
associated Spinco Liability (other than in connection with any
Assumed Abandonment Liability or any Assumed Environmental
Liability), (j) any employment, consulting, office lease or
accounting service contracts listed on Schedule 1.1(D)(y), and
(k) any and all claims and causes of action of Forest and the
Forest Subsidiaries arising from acts, omissions or events, or
damages to or destruction of property, occurring prior to the
Measurement Date (other than in connection with any Assumed
Abandonment Liability or any Assumed Environmental
Liability).
“Spinco Business” shall
mean the business conducted by Forest and its Subsidiaries on the
Measurement Date related to the Spinco Assets.
“Spinco Common Stock”
shall have the meaning specified in the Recitals hereof.
“Spinco Disclosure
Schedule” shall have the meaning specified in the Merger
Agreement.
“Spinco Group” shall
mean Spinco and the Spinco Subsidiaries.
“Spinco Indemnitees”
shall mean Spinco, the Company, each Affiliate of Spinco and the
Company immediately after the Distribution Date and each of their
respective present and former Representatives and each of the
heirs, executors, successors and assigns of any of the
foregoing.
“Spinco Liabilities”
shall mean (i) all Liabilities of the Spinco Business to the
extent arising after the Measurement Date and attributable to the
conduct of the Spinco Business after the Measurement Date,
including without limitation the liabilities of Spinco under the
Transaction Agreements, (ii) the Assumed Environmental
Liabilities, (iii) the Assumed Abandonment Liabilities and
(iv) the Assumed Derivative Liabilities, but excluding (x)
Taxes (which shall be governed by the Tax Sharing Agreement) and
(y) the Liabilities set forth on Schedule 1.1(E).
“Spinco Subsidiaries”
shall mean all direct and indirect Subsidiaries of
Spinco.
“Subsidiary” shall have
the meaning specified in the Merger Agreement.
“Taxes” shall mean all
taxes, charges, fees, duties, levies, imposts, rates or other
assessments imposed by any federal, state, local or foreign Taxing
Authority, including, but not limited to, income, gross receipts,
excise, property, sales, use, license, capital stock, transfer,
franchise, payroll, withholding, social security, value added or
other taxes (including any interest, penalties or additions
attributable thereto); and “Tax” shall mean any of such
Taxes.
“Tax Sharing Agreement”
shall mean the Tax Sharing Agreement of even date herewith among
Forest, Spinco and the Company.
“Taxing Authority” shall
mean any Governmental Authority or any quasi-governmental or
private body having jurisdiction over the assessment,
determination, collection or imposition of any Tax (including the
United States Internal Revenue Service or any successor thereto,
including, but not limited to its agents, representatives and
attorneys).
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“Third-Party Claim”
shall mean any claim, suit, derivative suit, arbitration, inquiry,
proceeding or investigation by or before any court, any
governmental or other regulatory or administrative agency or
commission or any arbitration tribunal asserted by a Person who or
which is neither a party hereto nor an Affiliate of a party
hereto.
“Transaction Agreements”
shall mean this Agreement, the Employee Benefits Agreement, the
Merger Agreement, the Tax Sharing Agreement and the Transition
Services Agreement.
“Transition Services
Agreement” shall mean the Transition Services Agreement of
even date herewith between Forest and Spinco.
Section 1.2
References to Time
. All references in this
Agreement to times of the day shall be to New York City
time.
ARTICLE II
PRELIMINARY TRANSACTIONS
Section 2.1
Business
Separation.
(a)
On or prior to
the Distribution Date, Forest shall take or cause to be taken all
actions necessary to cause the transfer, assignment, delivery and
conveyance to Spinco of all of the Spinco Assets, free and clear of
all Liens other than Permitted Liens, and Spinco shall assume, and
thereafter timely pay, perform and discharge when due, all of the
Spinco Liabilities.
(b)
The separation of
the Forest Assets and the Spinco Assets, as contemplated by this
Agreement shall be effected in a manner that does not unreasonably
disrupt either the Forest Business or the Spinco Business.
Subject to Section 2.6, to the extent the separation of any of
the Assets cannot be achieved in a reasonably practicable manner,
Spinco and Forest will enter into appropriate arrangements
regarding the shared Asset, subject to Company Consent not to be
unreasonably withheld. Any costs related to the use of a
shared Asset that is not separated as of the Distribution Date
shall be allocated in a reasonable manner as agreed by Spinco and
Forest, subject to Company Consent not to be unreasonably
withheld.
(c)
On or prior to
the Distribution Date, Forest and Spinco will use their
commercially reasonable efforts to amend, in form and substance
reasonably satisfactory to the Company, all contractual
arrangements between or among Forest, Spinco, their respective
Affiliates and any other Person (other than the contractual
arrangements relating to the Distribution and the Merger) that
either (i) relate to the Forest Business but relate
predominantly to the Spinco Business or (ii) relate solely to
the Spinco Business, but, by their terms, contain provisions
relating to a member of the Forest Group, so that, after the
Distribution Date, such contractual arrangements (x) will
relate solely to the Spinco Business and (y) will eliminate
any provisions relating to a member of the Forest Group and, in
either event, will inure to the benefit of the Spinco Group on
substantially the same economic terms as such arrangements exist as
of the date hereof. On or prior to the Distribution Date,
Forest and Spinco will use their commercially reasonable efforts to
amend, in form and substance reasonably satisfactory to
the
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Company, all contractual
arrangements between or among Forest, Spinco, their respective
Affiliates and any other Person (other than the contractual
arrangements relating to the Distribution and the Merger) that
either (i) relate to the Spinco Business but relate
predominantly to the Forest Business or (ii) relate solely to
the Forest Business, but, by their terms, contain provisions
relating to a member of the Spinco Group, so that, after the
Distribution Date, such contractual arrangements (x) will
relate solely to the Forest Business and (y) will eliminate
any provisions relating to a member of the Spinco Group and, in
either event, will inure to the benefit of the Forest Group on
substantially the same economic terms as such arrangements exist as
of the date hereof. If, in any case, such amendment cannot be
obtained, or if an attempted amendment thereof would be ineffective
or would adversely affect the rights of Forest or Spinco
thereunder, Forest and Spinco will, subject to Section 2.6,
cooperate in negotiating a mutually agreeable arrangement, in form
and substance reasonably satisfactory to the Company, under which
Forest or Spinco, as applicable, will obtain the benefits and
assume the obligations thereunder.
(d)
Forest hereby
represents and warrants to Spinco and the Company that at the time
of the Distribution and at the Measurement Date, the Spinco Assets,
together with the Assets set forth on Schedule 1.1(D)(x),
constitute all of Forest’s, Spinco’s and their
respective Subsidiaries’ business and assets in the Offshore
Gulf of Mexico and property related thereto, and Forest, Spinco or
such Subsidiary owns the Spinco Assets free and clear of all Liens
other than Permitted Liens.
Section 2.2
Conveyancing and Assumption
Agreements . In
connection with the transfer of the Spinco Assets and the
assumption of the Spinco Liabilities contemplated by
Section 2.1, Forest and Spinco shall execute, or cause to be
executed by the appropriate entities, conveyancing and assumption
instruments in such forms (as special warranty deeds, where
applicable) as shall be reasonably acceptable to Forest, Spinco and
the Company.
Section 2.3
Certificate of Incorporation;
By-laws . The
Certificate of Incorporation and Bylaws of Spinco immediately prior
to the Distribution Date will be in the forms attached as
Exhibits A and B , respectively.
Section 2.4
Issuance of Stock
. Prior to the Distribution
Date, the parties hereto shall take all steps necessary so that the
number of shares of Spinco Common Stock outstanding and held by
Forest shall equal 50,637,010; provided, however, that if the
condition described in Section 4.2 of the Spinco Disclosure
Schedule has not been satisfied, such number of shares shall
equal 51,368,707.
Section 2.5
Other Agreements
. Each of Forest and Spinco
shall, prior to the Distribution Date, enter into, and cause the
appropriate members of the Group of which it is a member to enter
into, the other Transaction Agreements.
Section 2.6
Transfers Not Effected Prior to
the Distribution; Transfers Deemed Effective as of the Distribution
Date . To the
extent that any transfers contemplated by this Article II
shall not have been consummated on or prior to the Distribution
Date, the parties shall use their commercially reasonable efforts
to effect such transfers as promptly following the Distribution
Date as shall be practicable. Nothing herein shall be deemed
to require the transfer
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of any Assets or the assumption of any
Liabilities which by their ter
