SEVERANCE AGREEMENT
AGREEMENT between FOREST OIL CORPORATION, a New York corporation (the
"Company"), and _________________ ("Executive"),
W I T N E S S E T H
WHEREAS, the Company desires to attract and retain certain key employee
personnel and, accordingly, the Board of Directors of the Company (the "Board")
has approved the Company entering into a severance agreement with Executive in
order to encourage his continued service to the Company; and
WHEREAS, Executive is prepared to commit such services in return for
specific arrangements with respect to severance compensation and other benefits;
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the Company and Executive agree as follows:
1. DEFINITIONS.
(a) "Annual Compensation" shall mean an amount equal to the
greater of:
(i) Executive's annual base salary at the annual rate in
effect at the date of his Involuntary Termination;
(ii) Executive's annual base salary at the annual rate in
effect sixty days prior to the date of his Involuntary Termination; or
(iii) Executive's annual base salary at the annual rate in
effect immediately prior to a Change of Control if Executive's employment shall
be subject to an Involuntary Termination within two years after such Change of
Control.
Notwithstanding the foregoing, if Executive's employment shall be subject to an
Involuntary Termination within two years after such Change of Control, then the
amount determined pursuant to the preceding sentence shall be increased by the
amount of the Annual Bonus. For purposes of the preceding sentence, the term
`Annual Bonus' shall mean the annual bonus most recently paid by the Company to
Executive prior to the date of his Involuntary Termination; provided, however,
that if Executive was employed by the Company for only a portion of the year
with respect to which such bonus was paid, then the `Annual Bonus' shall equal
an amount determined by annualizing the bonus received by Executive based on the
ratio of the number of days Executive was employed by the Company during such
year to 365 days; provided, further, that if Executive has not received an
annual bonus from the Company at any time prior to the date of his Involuntary
Termination, then the `Annual Bonus' shall equal the amount of Executive's
target annual bonus for the year in which such termination occurs.
(b) "Change in Duties" shall mean:
(i) The occurrence, prior to a Change of Control or after the
date which is two years after a Change of Control occurs, of any one or more of
the following:
(1) A significant change in the nature or scope of
Executive's authorities or duties from those previously applicable to him;
(2) A reduction in Executive's base salary from
that provided to him immediately prior to the effective date of this Agreement
(or the effective date of any extension of this Agreement pursuant to Paragraph
7(a)); or
(3) A diminution in employee benefits (including
but not limited to medical, dental, life insurance and long-term disability
plans) and perquisites applicable to Executive from those substantially similar
to the employee benefits and perquisites provided by the Company (including its
subsidiaries) to executives with comparable duties; or
(ii) The occurrence, within two years after the date upon
which a Change of Control occurs, of any one or more of the following:
(1) A significant change in the nature or scope of
Executive's authorities or duties from those applicable to him immediately prior
to the date on which a Change of Control occurs;
(2) A reduction in Executive's base salary from
that provided to him immediately prior to the date on which a Change of
Control occurs;
(3) A diminution in Executive's eligibility to
participate in bonus, stock option, incentive award and other compensation plans
which provide opportunities to receive compensation which are the greater of (A)
the opportunities provided by the Company (including its subsidiaries) for
executives with comparable duties or (B) the opportunities under any such plans
under which he was participating immediately prior to the date on which a Change
of Control occurs;
(4) A diminution in employee benefits (including
but not limited to medical, dental, life insurance and long-term disability
plans) and perquisites applicable to Executive from the greater of (A) the
employee benefits and perquisites provided by the Company (including its
subsidiaries) to executives with comparable duties or (B) the employee benefits
and perquisites to which he was entitled immediately prior to the date on which
a Change of Control occurs; or
(5) A change in the location of Executive's
principal place of employment by the Company (including its subsidiaries) by
more than 50 miles from the location where he was principally employed
immediately prior to the date on which a Change of Control occurs.
(c) "Change of Control" means the occurrence of any one or more
of the following events:
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(i) The Company shall not be the surviving entity in any
merger, consolidation or other reorganization (or survives only as a subsidiary
of an entity other than a previously wholly-owned subsidiary of the Company);
(ii) The Company sells, leases or exchanges all or
substantially all of its assets to any other person or entity (other than a
wholly-owned subsidiary of the Company);
(iii) The Company is to be dissolved and liquidated;
(iv) Any person or entity, including a "group" as contemplated
by Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, acquires
or gains ownership or control (including, without limitation, power to vote) of
more than 50% of the outstanding shares of the Company's voting stock (based
upon voting power); or
(v) As a result of or in connection with a contested election
of directors, the persons who were directors of the Company before such election
shall cease to constitute a majority of the Board.
Notwithstanding the foregoing, the term "Change of Control" shall not include
any reorganization, merger or consolidation involving solely the Company and one
or more previously wholly-owned subsidiaries of the Company.
(d) "Compensation Committee" shall mean the Compensation
Committee of the Board.
(e) "Disability" shall mean that, as a result of Executive's
incapacity due to physical or mental illness, he shall have been absent from the
full-time performance of his duties for six-consecutive months and he shall not
have returned to full-time performance of his duties within thirty days after
written notice of termination is given to Executive by the Company (provided,
however, that such notice may not be given prior to thirty days before the
expiration of such six-month period).
(f) "Involuntary Termination" shall mean any termination of
Executive's employment with the Company which:
(i) does not result from a resignation by Executive (other
than a resignation pursuant to clause (ii) of this subparagraph (f)); or
(ii) results from a resignation by Executive on or before the
date which is sixty days after the date upon which Executive receives notice of
a Change in Duties;
provided, however, the term "Involuntary Termination" shall not include a
Termination for Cause or any termination as a result of death, Disability, or
Retirement.
(g) "Monthly Severance Amount" shall mean an amount equal to
one-twelfth of Executive's Annual Compensation.
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(h) "Retirement" shall mean Executive's resignation on or after
the date he reaches age sixty-five.
(i) "Severance Amount" shall mean an amount equal to 2.5 times
Executive's Annual Compensation.
(j) "Severance Period" shall mean:
(i) in the case of an Involuntary Termination which occurs
prior to a Change of Control or after the date which is two years after a Change
of Control occurs, a period commencing on the date of such Involuntary
Termination and continuing for a number of months (not in excess of thirty
months) equal to the whole number of times that Executive's Annual Compensation
can be divided by $10,000; or
(ii) in the case of an Involuntary Termination which occurs
within two years after the date upon which a Change of Control occurs, a period
commencing on the date of such Involuntary Termination and continuing for thirty
months.
(k) "Termination for Cause" shall mean termination of Executive's
employment by the Company (or its subsidiaries) by reason of Executive's (i)
gross negligence in the performance of his duties, (ii) willful and continued
failure to perform his duties, (iii) willful engagement in conduct which is
materially injurious to the Company or its subsidiaries (monetarily or
otherwise) or (iv) conviction of a felony or a misdemeanor involving moral
turpitude.
2. SERVICES. Executive agrees that he will render services to the Company
(as well as any subsidiary thereof or successor thereto) during the period of
his employment to the best of his ability and in a prudent and businesslike
manner and that he will devote substantially the same time, efforts and
dedication to his duties as heretofore devoted.
3. TERMINATION OTHER THAN WITHIN TWO YEARS AFTER A CHANGE OF CONTROL.
Subject to the provisions of Paragraph 7(i) hereof, if Executive's employment by
the Company or any subsidiary thereof or successor thereto shall be subject to
an Involuntary Termination which occurs prior to a Change of Control or after
the date which is two years after a Change of Control occurs, then the Company
will, as additional compensation for services rendered to the Company (including
its subsidiaries), pay to Executive the following amounts (subject to any
applicable payroll or other taxes required to be withheld and any employee
benefit premiums) and take the following actions after the last day of
Executive's employment with the Company:
(a) Pay Executive the Monthly Severance Amount on the first day of
each month throughout the Severance Period; provided, however, that in the event
Executive obtains new employment during the Severance Period, each such monthly
payment shall be reduced by 50% beginning with the payment next due after the
date Executive obtains such new employment. Executive shall promptly report any
such new employment to the Company. For purposes of this Paragraph 3(a), the
term "employment" shall include (i) any employment as an employee or (ii) the
conduct of any trade or business (whether as a sole proprietor, independent
contractor or otherwise) by Executive in which he is expected to render personal
services for more than 40 hours in any given month during the Severance Period.
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(b) Cause Executive and those of his dependents (including his
spouse) who were covered under the Company's medical and dental benefit plans on
the day prior to Executive's Involuntary Termination to continue to be covered
under such plans throughout the Severance Period, without any cost to Executive;
provided, however, that (i) such coverage shall terminate if and to the extent
Executive becomes eligible to receive medical and dental coverage from a
subsequent employer (and any such eligibility shall be promptly reported to the
Company by Executive) and (ii) if Executive (and/or his spouse) would have been
entitled to retiree medical and/or dental coverage under the Company's plans had
he voluntarily retired on the date of such Involuntary Termination, then such
coverages shall be continued as provided under such plans.
4. TERMINATION WITHIN TWO YEARS AFTER A CHANGE OF CONTROL. If Executive's
employment by the Company or any subsidiary thereof or successor thereto shall
be subject to an Involuntary Termination which occurs within two years after the
date upon which a Change of Control occurs, then the Company will, as additional
compensation for services rendered to the Company (including its subsidiaries),
pay to Executive the following amounts (subject to any applicable payroll or
other taxes required to be withheld and any employee benefit premiums) and take
the following actions after the last day of Executive's employment with the
Company:
(a) Pay Executive a lump sum cash payment in an amount equal to the
Severance Amount on or before the fifth day after the last day of Executive's
employment with the Company.
(b) Cause Executive and those of his dependents (including his
spouse) who were covered under the Company's medical and dental benefit plans on
the day prior to Executive's Involuntary Termination to continue to be covered
under such plans throughout the Severance Period, without any cost to Executive;
provided, however, that (i) such coverage shall terminate if and to the extent
Executive becomes eligible to receive medical and dental coverage from a
subsequent employer (and any such eligibility shall be promptly reported to the
Company by Executive) and (ii) if Executive (and/or his spouse) would have been
entitled to retiree medical and/or dental coverage under the Company's plans had
he voluntarily retired on the date of such Involuntary Termination, then such
coverages shall be continued as provided under such plans.
(c) Cause any and all outstanding options to purchase common stock
of the Company held by Executive to become immediately exercisable in full and
cause Executive's accrued benefits under any and all nonqualified deferred
compensation plans sponsored by the Company to become immediately
nonforfeitable.
(d) Cause any and all outstanding options to purchase common stock
of the Company held by Executive to remain exercisable for twelve months after
the last day of Executive's employment with the Company (but in no event shall
any such option be exercisable for (i) a longer period than the original term of
such option or (ii) a shorter period than that already provided for under the
terms of such option).
5. INTEREST ON LATE PAYMENTS. If any payment provided for in Paragraph
3(a) or Paragraph 4(a) hereof is not made when due, the Company shall pay to
Executive interest on the
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amount payable from the date that such payment should have been made under
such paragraph until such payment is made, which interest shall be calculated
at 10% plus the prime or base rate of interest announced by The Chase
Manhattan Bank, N.A. (or any successor thereto) at its principal office in
New York, and shall change when and as any such change in such prime or base
rate shall be announced by such bank.
6. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Notwithstanding anything to the contrary in this Agreement, in
the event that any payment or distribution by the Company to or for the benefit
of Executive, whether paid or payable or distributed or distributable pursuant
to the terms of this Agreement or otherwise (a "Payment"), would be subject to
the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended, or any interest or penalties with respect to such excise tax (such
excise tax, together with any such interest or penalties, are hereinafter
collectively referred to as the "Excise Tax"), the Company shall pay to
Executive an additional payment (a "Gross-up Payment") in an amount such that
after payment by Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including any Excise Tax imposed on any
Gross-up Payment, Executive retains an amount of the Gross-up Payment equal to
the Excise Tax imposed upon the Payments. The Company and Executive shall make
an initial determination as to whether a Gross-up Payment is required and the
amount of any such Gross-up Payment. Executive shall notify the Company
immediately in writing of any claim by the Internal Revenue Service which, if
successful, would require the Company to make a Gross-up Payment (or a Gross-up
Payment in excess of that, if any, initially determined by the Company and
Executive) within five days of the receipt of such claim. The Company shall
notify Executive in writing at least five days prior to the due date of any
response required with respect to such claim if it plans to contest the claim.
If the Company decides to contest such claim, Executive shall cooperate fully
with the Company in such action; provided, however, the Company shall bear and
pay directly or indirectly all costs and expenses (including additional interest
and penalties) incurred in connection with such action and shall indemnify and
hold Executive harmless, on an after-tax basis, for any Excise Tax or income
tax, including interest and penalties with respect thereto, imposed as a result
of the Company's action. If, as a result of the Company's action with respect to
a claim, Executive receives a refund of any amount paid by the Company with
respect to such claim, Executive shall promptly pay such refund to the Company.
If the Company fails to timely notify Executive whether it will contest such
claim or the Company determines not to contest such claim, then the Company
shall immediately pay to Executive the portion of such claim, if any, which it
has not previously paid to Executive.
(b) On or before the date upon which a Change of Control occurs (the
"Change of Control Date"), the Compensation Committee shall make a determination
under the Company's annual incentive plan as to whether bonuses under such plan
for the year during which the Change of Control Date occurs are due based on
partial year results through the Change of Control Date, and, if the
Compensation Committee determines that such bonuses are due, then the
Compensation Committee shall also determine the amount of such bonus that shall
be paid to Executive. On or before the Change of Control Date, the Company shall
pay to Executive the amount of Executive's bonus that has been determined by the
Compensation Committee in accordance with the preceding sentence.
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7. GENERAL.
(a) TERM. The effective date of this Agreement is __________, 200__.
Within thirty (30) days after December 14, 2002, and within thirty (30) days
after each successive thirty (30)-month period of time thereafter that this
Agreement is in effect, the Company shall have the right to review this
Agreement, and in its sole discretion either continue and extend this Agreement,
terminate this Agreement, and/or offer Executive a different agreement. The
Compensation Committee (excluding any member of the Compensation Committee who
is covered by this Agreement or by a similar agreement with the Company) will
vote on whether to so extend, terminate, and/or offer Executive a different
agreement and will notify Executive of such action within said thirty-day time
period mentioned above. This Agreement shall remain in effect until so
terminated and/or modified by the Company. Failure of the Compensation Committee
to take any action within said thirty days shall be considered as an extension
of this Agreement for an additional thirty-month period of time. Notwithstanding
anything to the contrary contained in this "sunset provision," it is agreed that
if a Change of Control occurs while this Agreement is in effect, then this
Agreement shall not be subject to termination or modification under this "sunset
provision," and shall remain in force for a period of thirty months after such
Change of Control, and if within said thirty months the contingency factors
occur which would entitle Executive to the benefits as provided herein, this
Agreement shall remain in effect in accordance with its terms. If, within such
thirty months after a Change of Control, the contingency factors that would
entitle Executive to said benefits do not occur, thereupon this thirty-month
"sunset provision" shall again be applicable with the thirty-day time period for
Compensation Committee action to thereafter commence at the expiration of said
thirty months after such Change of Control and on each thirty-month anniversary
date thereafter.
(b) INDEMNIFICATION. If Executive shall obtain any money judgment or
otherwise prevail with respect to any litigation brought by Executive or the
Company to enforce or interpret any provision contained herein, the Company, to
the fullest extent permitted by applicable law, hereby indemnifies Executive for
his reasonable attorneys' fees and disbursements incurred in such litigation and
hereby agrees (i) to pay in full all such fees and disbursements and (ii) to pay
prejudgment interest on any money judgment obtained by Executive from the
earliest date that payment to him should have been made under this Agreement
until such judgment shall have been paid in full, which interest shall be
calculated at 10% plus the prime or base rate of interest announced by The Chase
Manhattan Bank, N.A. (or any successor thereto) at its principal office in New
York, and shall change when and as any such change in such prime or base rate
shall be announced by such bank.
(c) PAYMENT OBLIGATIONS ABSOLUTE. The Company's obligation to pay
(or cause one of its subsidiaries to pay) Executive the amounts and to make the
arrangements provided herein shall be absolute and unconditional and shall not
be affected by any circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which the Company (including
its subsidiaries) may have against him or anyone else. All amounts payable by
the Company (including its subsidiaries hereunder) shall be paid without notice
or demand. Executive shall not be obligated to seek other employment in
mitigation of the amounts payable or arrangements made under any provision of
this Agreement, and, except as provided in Paragraphs 3(a), 3(b) and 4(b)
hereof, the obtaining of any such other employment
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shall in no event effect any reduction of the Company's obligations to make
(or cause to be made) the payments and arrangements required to be made under
this Agreement.
(d) SUCCESSORS. This Agreement shall be binding upon and inure to
the benefit of the Company and any successor of the Company, by merger or
otherwise. This Agreement shall also be binding upon and inure to the benefit of
Executive and his estate. If Executive shall die prior to full payment of
amounts due pursuant to this Agreement, such amounts shall be payable pursuant
to the terms of this Agreement to his estate.
(e) SEVERABILITY. Any provision in this Agreement which is
prohibited or unenforceable in any jurisdiction by reason of applicable law
shall, as to such jurisdiction, be ineffective only to the extent of such
prohibition or unenforceability without invalidating or affecting the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
(f) NON-ALIENATION. Executive shall not have any right to pledge,
hypothecate, anticipate or assign this Agreement or the rights hereunder, except
by will or the laws of descent and distribution.
(g) NOTICES. Any notices or other communications provided for in
this Agreement shall be sufficient if in writing. In the case of Executive, such
notices or communications shall be effectively delivered if hand delivered to
Executive at his principal place of employment or if sent by registered or
certified mail to Executive at the last address he 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.
(h) CONTROLLING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Colorado.
(i) RELEASE. As a condition to the receipt of any benefit under
Paragraph 3 hereof, Executive shall first execute a release, in the form
established by the Company, releasing the Company, its shareholders, partners,
officers, directors, employees and agents from any and all claims and from any
and all causes of action of any kind or character, including but not limited to
all claims or causes of action arising out of Executive's employment with the
Company or the termination of such employment.
(j) FULL SETTLEMENT. If Executive is entitled to and receives the
benefits provided hereunder, performance of the obligations of the Company
hereunder will constitute full settlement of all claims that Executive might
otherwise assert against the Company on account of his termination of
employment.
(k) UNFUNDED OBLIGATION. The obligation to pay amounts under this
Agreement is an unfunded obligation of the Company (including its subsidiaries),
and no such obligation shall create a trust or be deemed to be secured by any
pledge or encumbrance on any property of the Company (including its
subsidiaries).
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(l) NOT A CONTRACT OF EMPLOYMENT. This Agreement shall not be deemed
to constitute a contract of employment, nor shall any provision hereof affect
(a) the right of the Company (or its subsidiaries) to discharge Executive at
will or (b) the terms and conditions of any other agreement between the Company
and Executive except as provided herein.
(m) NUMBER AND GENDER. Wherever appropriate herein, words used in
the singular shall include the plural and the plural shall include the singular.
The masculine gender where appearing herein shall be deemed to include the
feminine gender.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the effective date in Paragraph 7(a).
"EXECUTIVE"
---------------------------------
[NAME]
"COMPANY"
FOREST OIL CORPORATION
By:______________________________
Name_____________________________
Title____________________________
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