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EXHIBIT 2.7
ASSET SALES AGREEMENT
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This
Asset Sales Agreement (the "Agreement"), dated the 24th day of
May,
2007, is by and between FOREST OIL CORPORATION, a New York
corporation
("Seller") on the one hand, and PACIFIC ENERGY RESOURCES LTD, a
Delaware
corporation, or any wholly-owned subsidiary thereof (including
Forest Alaska
Operating, LLC) ("Buyer") on the other hand.
In
consideration of the mutual promises herein stated and the benefits
to
be derived to each party under this Agreement and other good and
valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged,
Seller and Buyer hereby agree as follows:
1.
Sale and Purchase. Seller agrees to sell and convey to Buyer and
Buyer
agrees to purchase and receive, on and subject to the terms,
provisions and
conditions hereof, the Assets (as hereinafter defined).
2.
The Assets. For purposes of this Agreement, the Assets shall mean
all of
Seller's right, title and interest set forth in Exhibit "A",
attached hereto and
made a part hereof for all purposes, in and to:
(a) oil and gas leases, oil, gas and mineral leases, subleases
and
other leaseholds, royalties, overriding royalties, net profit
interests,
mineral fee interests, carried interests and other properties and
interests
(the
"Leases") and the lands covered thereby ("Land(s)") and any and
all
oil,
gas, water or injection wells thereon or applicable thereto
(the
"Wells"); (ii) any pools or units which include all or a part of
any Land
or
include any Well (the "Units") and including without limitation
all
right, title and interest in production from any such Unit, whether
such
Unit production comes
from wells located on or off of the Lands, and all
tenements, hereditaments and appurtenances belonging to, used or
useful in
connection with the Leases, Lands and Units; and (iii) interests
under or
derived from all contracts, agreements and instruments applicable
to or by
which such properties are bound Or created, to the extent
applicable to
such
properties, including, but not limited to, operating
agreements,
gathering agreements, marketing agreements (including commodity
swap,
collar and/or similar derivative agreements), transportation
agreements,
processing agreements, unitization, pooling and communitization
agreements,
declarations and orders, joint venture agreements, and farmin and
farmout
agreements ("Contracts"). For purposes of this Agreement, the
Leases,
Lands, Wells, Contracts are collectively referred to as the Oil and
Gas
Properties. Attached hereto as Exhibit "A-1" is a description of
the Oil
and
Gas Properties. The respective `net revenue interest" and
"working
interest" of the Seller or any of its Subsidiaries in the Oil and
Gas
Properties are also described on Exhibit "B"
(b) equipment, machinery, fixtures, improvements and other
tangible
personal property and improvements located now on, appurtenant to
or used
or
obtained in connection with such Oil and Gas Properties or with
the
production, treatment, sale or disposal of hydrocarbons produced
therefrom
or
attributable thereto; provided, however, that the office premises
of
Seller in Anchorage, including all personal property, fixtures
and
improvements now located in, appurtenant to or used or obtained
in
connection with such premises shall not constitute Assets;
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(c) easements, permits, licenses, servitudes, rights-of-way,
surface
leases and other surface rights appurtenant to, and used or held
for use to
the
extent applicable to such Oil and Gas Properties which are
described
and
shown in Exhibit "A- 2" (Rights-of-Way");
(d) To the extent transferable without third party consent, all
seismic data owned or licensed by Seller and all intellectual
property
related to such seismic data which is described and shown in
Exhibit "A-3"
("Seismic Data"); and
(e) All stock in the Cook Inlet Pipeline Company ("CIPL") owned
by
Seller (the "CIPL Shares"), including any rights to acquire
additional
stock in CIPL which is described on Exhibit "A-4"
For
purposes of this Agreement, all of the items described in Sections
2(a)
-
(e) hereinabove are collectively referred to as the "Assets".
3.
Consideration. The consideration for the Assets to be transferred
at
Closing shall be:
(a) the payment from Buyer to Seller at Closing in the amount of
ten
million US dollars (US$10,000,000) (the "Cash Consideration") plus,
subject
to
approval of issuance by the Toronto Stock Exchange ("TSX"),
5,500,000
shares of common stock (the "Stock Consideration", and together
with the
Cash
Consideration, the "Purchase Price"), which amount shall be
adjusted
as
provided in Section 5 below. In the event that the TSX denies
the
issuance of all or part of the Stock Consideration, then the
Cash
Consideration shall be increased for each share of stock that Buyer
is not
authorized to issue. The conversion rate per share shall be the
US$
equivalent of the weighted average closing price per share of the
Buyer's
common stock on the TSX over the five-trading day period
immediately
preceding the date on which the TSX issues its denial. The US$
conversion
shall be made at the noon buying rate as published by the US
Federal
Reserve Bank of New York on the date on which the TSX issues its
denial;
and
(b) Buyer has deposited with Seller a deposit of ten percent (10%)
of
the
Cash Consideration (the "Performance Deposit') applicable to
the
Purchase Price, which deposit is non-interest bearing and which
is
non-refundable except as hereinafter provided in Article 6;
(c) the assumption by Buyer of the obligations, liabilities and
costs
associated with the Assets from and after the Effective Date,
subject to
the
further provisions hereof (the "Assumed Liabilities"). Buyer is
not
assuming any liabilities of Seller other than the Assumed
Liabilities.
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4.
Effective Date. The "Effective Date" of the sale shall be as of
7:00
a.m., January 1, 2007.
5.
Allocation of Liability and Adjustments to Consideration.
(a) The transactions contemplated hereby shall be effective as of
the
Effective Date, and the ownership of the Assets shall be
transferred from
Seller to Buyer as of such date.
(b) The Purchase Price to be paid by Buyer to Seller for the
Assets
shall be adjusted as follows:
(i) subject to Seller's representations and warranties in
Section
10.1(t), upward by an amount equal to all costs and expenses
incurred
and paid by Seller attributable to the ongoing operation,
development
and maintenance of the Assets (including without limitation
lease
rentals, shut-in royalty payments, lease operating expenses,
workover
and other capital costs that are charged pursuant to the
applicable
operating agreements governing the Assets) for the period of time
on
and after the Effective Date to the date of Closing provided
however,
that with the exception of Lease rental payments and the like,
there
shall be no adjustment for any individual capital expenditure
that
exceeds $50,000 and is incurred between the date hereof and
Closing
unless Seller has notified Buyer of such expenditure and Buyer
has
consented thereto; and,
(ii) downward by an amount equal to all proceeds, if any,
received by Seller that are attributable to the Assets for the
period
of time on and after the Effective Date to the date of Closing,
including proceeds, or receipts from disposition of equipment,
done
with Buyer's consent or other revenues attributable to the
Assets.
(c) An estimate of the adjusted cash payment (the "Preliminary
Sum")
shall be determined by Seller and delivered to Buyer at least 3
business
days
prior to Closing, and shall be the basis for the payment to be made
by
Buyer to Seller at Closing as provided in Section 6 below, provided
that
Buyer agrees with Seller's estimates. For purposes of this
Agreement, the
calculation of the Preliminary Sum shall include the Performance
Deposit.
Following Closing, Seller shall prepare a final statement
("Settlement
Statement") setting forth all final adjustments to the cash portion
of the
consideration, and Seller shall deliver such statement, with such
other
information as may be necessary to substantiate the Settlement
Statement,
to
Buyer within 90 days after Closing. If the Settlement Statement
reflects
that
the final adjusted cash portion of the consideration is more than
the
Preliminary Sum, Buyer shall pay to Seller, within 15 days after
the
receipt of the Settlement Statement, the difference between the
final
adjusted cash amount and the Preliminary Sum; and if the final
adjusted
amount is less than the Preliminary Sum, Seller shall pay to Buyer,
within
15
days after the delivery of the final Settlement Statement, an
amount
equal to such difference.
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(d) Subject to the terms hereof and except to the extent same
have
already been taken into account as an adjustment to the Purchase
Price, all
monies, proceeds, receipts, credits and income attributable to
the
ownership and operation of the Assets (a) for all periods of time
from and
subsequent to the Effective Date, shall be the sole property
and
entitlement of Buyer, and to the extent received by Seller, Seller
shall
within ten (10) business days after such receipt, fully disclose,
account
for
and transmit same to Buyer and (b) for all periods of time prior to
the
Effective Date, shall be the sole property and entitlement of
Seller and,
to
the extent received by Buyer, Buyer shall fully disclose, account
for
and
transmit same to Seller within ten (10) business days after
such
receipt. Subject to the terms hereof and except to the extent same
have
already been taken into account as an adjustment to the Purchase
Price, all
costs, expenses, disbursements, obligations and liabilities
attributable to
the
Assets (i) for periods of time prior to the Effective Date,
regardless
of
when due or payable, shall be the sole obligation of Seller and
Seller
shall promptly pay, or if paid by Buyer, promptly reimburse Buyer
for and
hold
Buyer harmless from and against same and (ii) for periods of time
from
and
subsequent to the Effective Date, regardless of when due or
payable,
shall be the sole obligation of Buyer and Buyer shall promptly pay,
or if
paid
by Seller, promptly reimburse Seller for and hold Seller harmless
from
and against same.
6.
Closing or Termination.
(a) The closing of the transactions contemplated hereby (the
"Closing") shall occur at the office of Seller on the later of (i)
June 30,
2007, (ii) two (2) working days after satisfaction of all
conditions to
Closing, or (iii) five (5) working days after expiration (or
waiver, if
earlier) of any applicable preferential purchase rights or consent
to
assign period. Notwithstanding any provision herein to the
contrary, in no
event shall the Closing occur later than July 31, 2007. If the
transactions
contemplated by the Membership Interest Purchase Agreement between
Buyer
and
Forest Alaska Holding LLC have not closed prior to Closing, for
any
reason, then Buyer and Seller may each elect to terminate this
Agreement.
Unless otherwise waived in writing prior to the Closing, the
obligation of
Buyer to complete the Closing is subject to receipt by Buyer of (i)
the
proceeds of the debt financing contemplated by the commitment
letter to the
Buyer, dated the date hereof, a copy of which has been provided to
Seller,
or
alternative financing sufficient to fund the transactions
contemplated
herein and in the Membership Interest Purchase Agreement, and (ii)
the
required consent under the PERL Credit Agreement (collectively, the
"Debt
Conditions"). At the Closing, the following shall occur:
(i) Buyer shall deliver to the Seller the Preliminary Sum,
either
in cash or in the form of the Stock Consideration, or a
combination
thereof.
(ii) Seller shall execute and deliver such instruments of
assignment, bills of sale and other title transfer documents
with
respect to the Assets to Buyer on forms reasonably satisfactory
to
Seller and Buyer whereby Seller warrants the title to the Assets
by,
through and under Seller, but not otherwise, subject to the
remaining
provisions of this Agreement. Seller shall also deliver to Buyer
stock
certificates representing the CIPL Shares, duly endorsed for
transfer.
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(iii) If Stock Consideration is to be paid to Seller, Buyer and
Seller shall have executed a Share Acquisition and Registration
Rights
Agreement, consistent with industry standard terms and
conditions.
(iv) seller shall execute and deliver such other conveyances,
assignments, instruments of transfer or forms required by
governmental
agencies or such other instrument reasonably necessary to
accomplish
the purposes of this Agreement.
(b) If this Agreement does not close on the date specified above or
is
terminated other than (i) by mutual agreement of the Parties, (ii)
by
either party pursuant to Section 6(a), (iii) by Buyer as a result
of the
negligence, fault or willful failure of Seller to perform its
obligations
hereunder, or (iv) by Buyer as a result of a material breach of any
of
Seller's representations and warranties hereunder, Seller shall be
entitled
to
retain the Performance Deposit, together with any interest
earned
thereon and in such event, the Seller's retention of the
Performance
Deposit is Seller's sole remedy against the Buyer. In addition to
the
foregoing, if this Agreement does not close solely as a result of
the
failure of the Debt Conditions to be satisfied, then Seller shall
be
entitled to retain the
Performance Deposit, together with any interest
earned thereon, and in such event, the Seller's retention of
the
Performance Deposit is Seller's sole remedy against the Buyer.
However, if
this
Agreement does not close by July 31, 2007 or is terminated (i)
by
mutual agreement of the Parties, (ii) by either party pursuant to
Section
6(a)
(other than in the case where the Membership Interest Purchase
Agreement does not close because the condition in Section 8.1(f)
thereof is
not
satisfied), (iii) by Buyer as a result of the negligence, fault
or
willful failure of Seller to perform its obligations hereunder, or
(iv) by
Buyer as a result of a material breach of any of Seller's
representations
and
warranties hereunder, the Performance Deposit, together with
any
interest earned thereon, shall be delivered to Buyer.
7.
Restrictions. Exhibit B sets forth the allocation of total
consideration
(prior to adjustments) to be paid hereunder for each property
("Allocated
Values"). It is understood that certain title matters relating to
the Assets
must be cured at or prior to Closing. Such title matters consist of
the
necessity to obtain third party consents to the transfers
contemplated hereby
and waivers of applicable preferential purchase rights
(collectively
"Restrictions"), which consents and rights are listed on Schedule
7. Such third
party consents shall not include ordinary course regulatory
approvals and
consents to assign. If, on the date of Closing, any one or more of
the
properties is subject to Restrictions that have not been satisfied
or waived,
Seller shall continue to use its commercially reasonable efforts to
obtain a
waiver of, or otherwise satisfy, the Restriction(s) applicable to
such property,
and Closing shall be postponed until such Restrictions have been
waived or have
expired.
8.
Title.
(a) Review of Title Records. Seller has made and shall continue
to
make
available to Buyer, during reasonable business hours, records
in
Seller's possession relating to the title to the Assets. Buyer
shall be
entitled to review said title records. Buyer shall have the right
to
reasonably request copies of any and all such title records and
upon such
request, Seller shall
provide the requested copies to Buyer at Buyers
expense.
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(b) Alleged Title Defects. As soon as reasonably practicable (and
on
an
ongoing basis), but in no event later than three (3) business days
prior
to
Closing, Buyer shall notify Seller of any Assets which are subject
to
Alleged Title Defect(s). As used herein, Alleged Title Defect shall
mean a
deficiency in title with respect to an Interest such that Seller
owns less
than
the Net Revenue Interest shown on Exhibit B or such that Seller
owns
more
than the Working Interest shown on Exhibit B without a
corresponding
increase in the Net Revenue Interest. Buyer's notice asserting
Alleged
Title Defect(s) shall include a description and full explanation
(including
any
and all supporting documentation associated therewith) of each
Alleged
Title Defect being claimed and a value which Buyer in good faith
attributes
to
curing the same. Seller shall have the right to notify Buyer of
any
increases in Net Revenue Interest or decreases in Working Interest
in the
Assets and request a corresponding adjustment. Buyer and Seller
shall meet
from
time to time as necessary in an attempt to mutually agree on a
proposed resolution with respect to the Alleged Title Defect(s)
raised by
Buyer and increases in Net Revenue Interest or decreases in
Working
Interest raised by Seller. The value allocated to each Asset as set
forth
on
Exhibit "B" and the costs to cure such title defects shall be used
by
the
parties to determine the amount of any adjustment, if any, due to
the
existence of an Alleged Title Defect. It is recognized that good
faith
differences of opinion may exist between Buyer and Seller in
connection
with
the Alleged Title Defect(s) raised by Buyer and adjustments to the
Net
Revenue Interests or Working Interests raised by Seller, including
without
limitation, disputes as to: (a) whether or not the alleged
defect
constitutes an Alleged Title Defect within the meaning of this
Agreement,
(b)
whether or not the Alleged Title Defect raised by Buyer was
properly
and
timely asserted by Buyer pursuant to this Article, or (c) the
appropriate upward or downward adjustment, if any, on account of a
change
in
the Net Revenue Interest or Working Interest from those set forth
in
Exhibit "B". If any such differences of opinion are not resolved by
mutual
agreement of Buyer and Seller, either party shall have the
right,
exercisable prior to Closing, to submit all information relating to
the
Alleged Title Defect to a mutually agreeable attorney licensed in
the state
where the property at issue is located and who shall have at least
ten (10)
years oil and gas title experience for resolution of the difference
of
opinion. If such dispute is not resolved prior to Closing, Closing
shall
proceed on the basis of Seller's valuation, subject to an
obligation to
refund any amount, determined under the process outlined above, of
any
Title Defect that has been so determined.
(c) Waiver. All title objections not raised within the time
period
provided in paragraph (b) above shall be waived by Buyer for all
purposes.
9.
Indemnification. Buyer shall assume full responsibility for the
Assets
on and after the Effective Date and shall fully defend, compensate,
protect,
indemnify and hold Seller, its officers, directors, employees and
agents,
harmless from and against any and all losses, claims, demands,
damages, suits,
expenses, causes of action, and any sanctions of every kind and
character
(including reasonable attorneys' fees, court costs, and costs of
investigation)
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which may be made or asserted by Buyer, Buyer's assigns, Buyer's
employees,
agents, contractors, and subcontractors and employees thereof, or
(subject to
Seller's representations and warranties in Sections 10.1 Cc) and
(d)) by any
third parties (including governmental agencies) on account of
personal injury,
death or property damage (including claims for taxes, pollution,
environmental
damage, and regulatory compliance, any fines or penalties assessed
on account of
such damage, and causes of action alleging statutory liability)
caused by,
arising out of, or in any way incidental to operations conducted on
the Assets
on and after the Effective Date or in any way connected with the
conditions of
the equipment or facilities located on the Assets (including
maintenance, repair
and abandonmen
