FST » Topics » Item 1.01. Entry into a Material Definitive Agreement.

This excerpt taken from the FST 8-K filed Aug 10, 2009.

Item 1.01.           Entry into a Material Definitive Agreement.

 

On August 5, 2009, Forest Oil Corporation, a New York corporation (“Forest”) and Forest Oil Permian Corporation, a Delaware Corporation and wholly owned subsidiary of Forest (“Forest Permian” and together with Forest, the “Sellers”) entered into an Agreement for Purchase and Sale of Assets (the “Agreement”) with Linn Operating, Inc. (“Linn”) and Linn Energy Holdings, LLC (“Linn Energy” and together with Linn, the “Buyers”).  Pursuant to the Agreement, the Sellers agreed to sell to the Buyers approximately 34,296 gross acres (17,371 net acres) of oil and gas properties located in the States of Texas and New Mexico (the “Oil and Gas Assets”), and various other related interests, rights, receivables, wells, leasehold interests, records, fixtures, equipment, and other assets (together with the Oil and Gas Assets, the “Assets”).   The Assets exclude certain rights, claims, credits, records, data, and any hedging transactions associated with the Oil and Gas Assets. The effective date of the purchase and sale of the Assets is July 1, 2009 (the “Effective Date”).   The transaction is expected to close on September 30, 2009, subject to certain conditions, as described below.

 

The total consideration to be received by the Sellers for the Assets is $95,000,000 in cash, subject to customary adjustments to reflect the operation of the Oil and Gas Assets prior to the closing, title defects, and unresolved preferential rights and environmental defects (the “Purchase Price”).    Upon executing the Agreement, the Buyers paid the Sellers a cash deposit in the amount of $9,500,000 (the “Deposit”).

 

The Agreement contains customary representations and warranties and covenants by the Buyers and the Sellers.  Among other things, during the period between the execution of the Agreement and the closing of the transactions, the Sellers have agreed (i) to allow the Buyers access to the Oil and Gas Assets and the records pertaining to the Assets; (ii) to conduct its operations, including the operation of the Oil and Gas Assets, in the ordinary course; and (iii) to restrict certain activities and capital expenditures.  Forest and Buyer also have agreed to enter into a transition agreement at closing to allow for an orderly transition that will terminate on or before November 30, 2009.

 

Completion of the transactions contemplated by the Agreement is subject to customary closing conditions.

 

The Agreement provides the Buyers and the Sellers certain termination rights, including, among others: (1) the parties may terminate by mutual consent; (2) the Buyers or the Sellers may terminate if the closing shall not have occurred on or before November 30, 2009, unless due to a breach of the Agreement by the party seeking to terminate; (3) the Buyers or the Sellers may terminate if a governmental entity has issued an order or decree prohibiting the consummation of the transaction, and such order remains in effect at the time of the closing; (4) the Buyers or the Sellers may terminate if, on or before the closing, the sum of the aggregate uncured title defects and aggregate cost of resolving identified uncured environmental defects exceeds 20% of the Purchase Price; (5) the Sellers may terminate if at or prior to the closing all representations and warranties of the Buyers are not true in all material respects, or if the Buyers have not performed all of their obligations set forth in the Agreement in all material respects; or (6) the Buyers may terminate if at or prior to the closing all representations and warranties of the Sellers are not true

 

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in all material respects, or if the Sellers have not performed all of their obligations set forth in the Agreement in all material respects.  The Sellers may retain the Deposit if the Agreement is terminated by the Sellers for the reasons set forth in Item 5 above.

 

The foregoing description of the Agreement is qualified in its entirety by reference to the full text of the Agreement, a copy of which is attached as an exhibit to this Current Report on Form 8-K and incorporated herein by reference.

 

This excerpt taken from the FST 8-K filed May 21, 2009.

Item 1.01          Entry into a Material Definitive Agreement.

 

On May 20, 2009, Forest Oil Corporation (“Forest”) entered into an Underwriting Agreement (the “Underwriting Agreement”) with Deutsche Bank Securities Inc. and Credit Suisse Securities (USA) LLC, relating to the public offering of 12,500,000 shares of Forest’s common stock, $0.10 par value (the “Common Stock”), at a public offering price of $18.25, less underwriting discounts and commissions of $0.40 per share.  Pursuant to the Underwriting Agreement, Forest also granted the underwriters a 30-day option to purchase up to an additional 1,875,000 shares of Common Stock from Forest at the same price.  On May 20, 2009, the underwriters notified Forest of their exercise in full of their option to purchase additional shares of Common Stock.

 

Forest expects the closing of the transactions under the Underwriting Agreement to occur on May 26, 2009, subject to customary closing conditions.  Forest expects to receive net proceeds from the sale of the Common Stock sold pursuant to the Underwriting Agreement of approximately $256.3 million (after deducting underwriting discounts and commissions and estimated expenses).  Forest intends to use the net proceeds from the offering to repay a portion of the outstanding borrowings under its bank credit facilities.

 

The offering was made pursuant to Forest’s shelf registration statement on Form S-3 (File No. 333-159346), which became effective upon filing by Forest with the Securities and Exchange Commission on May 19, 2009.

 

The Underwriting Agreement contains customary representations, warranties, and agreements by Forest, and customary conditions to closing, indemnification obligations of Forest and the underwriters, including for liabilities under the Securities Act of 1933, other obligations of the parties, and termination provisions.  The foregoing description of the Underwriting Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Underwriting Agreement, which is filed as Exhibit 1.1 hereto and incorporated by reference herein.

 

The underwriters and their respective affiliates have provided in the past to Forest and its affiliates and may provide from time to time in the future certain commercial banking, financial advisory, investment banking, and other services for Forest and such affiliates in the ordinary course of their business, for which they have received and may continue to receive customary fees and commissions.  In addition, from time to time, certain of the underwriters and their respective affiliates may effect transactions for their own account or the account of customers, and hold on behalf of themselves or their customers, long or short positions in Forest’s debt or equity securities or loans, and may do so in the future.  Affiliates of the underwriters are lenders under Forest’s bank credit facilities.  In addition, the underwriters were initial purchasers of Forest’s 8 1/2% senior notes due 2014 that were issued in February 2009.

 

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This excerpt taken from the FST 8-K filed Sep 30, 2008.

Item 1.01               Entry into a Material Definitive Agreement

 

On September 30, 2008, Forest Oil Corporation, a New York corporation (“Forest”), announced that it had completed its acquisition of certain oil and gas properties located in the State of Texas and various other related interests, rights, receivables, wells, leasehold interests, records, fixtures, equipment and other assets (collectively, the “Assets”) from Cordillera Texas, L.P., a Texas limited partnership (“Seller”).   The economic effective date for the acquisition of the Assets is July 1, 2008.   Forest acquired the Assets pursuant to the terms and conditions set forth in an asset purchase and sale agreement (the “Purchase Agreement”) between Forest and Seller, dated as of August 15, 2008, as amended as of September 30, 2008.

 

The acquired properties are primarily gas properties and include approximately 118,000 gross acres (85,000 net acres). Based on its preliminary internal review of the properties, Forest attributes estimated proved reserves of 350 Bcfe (36% proved developed) and approximately 1,500 additional vertical and horizontal drilling locations to the properties.  The properties produced an average of approximately 34 MMcfe/d in the first six months of 2008 and are focused primarily in the Granite Wash, Atoka and Morrow intervals in the Greater Buffalo Wallow Area and in the Cotton Valley and Travis Peak intervals in East Texas.

 

Forest paid total consideration for the Assets of $529 million in cash (including a $45 million cash deposit paid to Seller upon execution of the Purchase Agreement) and 7.25 million shares of its common stock, par value $0.10 per share (“Common Stock”).   Forest funded the cash component of the consideration, which is subject to further post-closing adjustments, using cash on hand and advances under its credit facilities.  The shares of Common Stock issued to Seller have not been registered pursuant to the Securities Act of 1933, as amended (the “Securities Act”), or any applicable state securities laws and are deemed restricted securities under the federal securities laws.   Seller has distributed the shares of Common Stock issued by Forest  to certain of its designees, which include certain accredited investors who are members or beneficial owners of Seller’s parent company.   Pursuant to the terms of the Purchase Agreement, Forest has agreed to file an automatically effective Form S-3 shelf registration statement (the “S-3”) with the Securities and Exchange Commission registering the resale of the Common Stock by Seller and its designees on or before 9:30 a.m. New York, New York time on October 2, 2008, and to maintain the effectiveness of the S-3 for a period of up to one year.

 

In connection with the closing of the acquisition of the Assets, Forest and Seller also entered into a transition services agreement under which Seller will provide certain services to Forest as may be requested to allow for an orderly transition.   The transition services agreement is expected  to expire on  October 31, 2008.

 

A copy of the Purchase Agreement is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference, together with Amendment No. 1 to the Purchase Agreement which is filed as Exhibit 10.2 and incorporated herein by reference.   The foregoing description of the Purchase Agreement and Amendment No. 1 to the Purchase Agreement is qualified in its entirety by reference to the full text of the Purchase Agreement, as amended, incorporated herein.

 

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The shares of Common Stock issued to Seller have not been registered under the Securities Act and may not be offered or sold absent registration or an applicable exemption from registration.  The information contained in this Current Report on Form 8-K shall not constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of the Common Stock in any state where such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of such state.

 

This excerpt taken from the FST 8-K filed Aug 19, 2008.
Entry into a Material Definitive Agreement.

 

On August 18, 2008, Forest Oil Corporation, a New York corporation (“Forest”), announced that it had entered into an Asset Purchase and Sale Agreement (the “Purchase Agreement”) dated as of August 15, 2008, by and between Cordillera Texas, L.P., a Texas limited partnership (“Seller”), and Forest, as buyer, under which Forest has agreed to acquire from Seller certain oil and gas properties located in the State of  Texas (the “Oil and Gas Assets”), and various other related interests, rights, receivables, wells, leasehold interests, records, fixtures, equipment, and other assets (together with the Oil and Gas Assets, the “Assets”).   The Assets exclude certain rights, claims, credits, records, data, and any hedging transactions associated with the Oil and Gas Assets. The effective date of the purchase and sale of the Assets is July 1, 2008 (the “Effective Date”).   The transaction is expected to close on September 30, 2008, subject to certain conditions, as described below.

 

The total consideration for the Assets includes $707,500,000 in cash and 3,500,000 shares of Forest common stock, par value $0.10 per share, subject to adjustment (the “Purchase Price”).  The cash consideration is subject to customary adjustments to reflect the operation of the Oil and Gas Assets prior to the closing, title defects, and unresolved preferential rights and environmental defects.  The stock consideration is subject to adjustment in the event the per share closing price of Forest’s common stock during a prescribed 10-day period prior to closing is less than $45.00 per share or more than $65.00 per share.   If the average closing price of Forest’s common stock during this period is less than $45.00 per share, Forest will issue to Seller an aggregate number of shares equal to $157,500,000 divided by the average closing price; and if the price per share is more than $65.00 per share, Forest will issue an aggregate number of shares equal to $227,500,000 divided by the average closing price.  The shares of Forest common stock to be issued to Seller or its designees, which include certain accredited investors who are members or beneficial owners of the parent company of Seller, at the closing will have not been registered pursuant to the Securities Act of 1933 (the “Securities Act”) or any applicable state laws and will be deemed restricted securities under federal securities laws.   Forest has agreed to file an automatically effective registration statement with the Securities and Exchange Commission as soon as practicable (in any event within three business days) following the closing to register the resale of any shares of Forest common stock delivered to Seller at the closing and to keep such registration statement effective for up to one year after the closing.    Upon executing the Purchase Agreement, Forest paid Seller a cash deposit in the amount of $45,000,000 (the “Deposit”).

 

The Purchase Agreement contains customary representations and warranties and covenants by each of Forest and Seller.  Among other things, during the period between the execution of the Purchase Agreement and the closing of the transaction, Seller has agreed (i) to allow Forest access to the Oil and Gas Assets and the records pertaining to the Assets; (ii) to conduct its operations, including the operation of the Oil and Gas Assets, in the ordinary course; and (iii) to restrict certain activities and capital expenditures.  Forest and Seller also have agreed to enter into a transition agreement at closing to allow for an orderly transition that will terminate on or before December 31, 2008.

 

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Completion of the transactions contemplated by the Purchase Agreement is subject to customary closing conditions.

 

The Purchase Agreement provides each of  Forest and Seller certain termination rights, including, among others: (1) the parties may terminate by mutual consent; (2) Forest or Seller may terminate if the closing shall not have occurred on or before October 15, 2008, unless due to a breach of the Purchase Agreement by the party seeking to terminate, or due to the continued pendency of the Hart Scott Rodino Antitrust Improvements Act of 1976 waiting period, if applicable; (3) Forest or Seller may terminate if there is a statute, rule or regulation that makes consummation of the transactions illegal or a governmental entity has issued a permanent, final and nonappealable  order or decree prohibiting  the consummation of the transactions; (4) Forest or Seller may terminate if, on or before September 30, 2008, the sum of the aggregate uncured title defects and aggregate cost of resolving identified uncured environmental defects exceeds 10% of the Purchase Price; or (5) each of Forest and Seller may terminate if there is a breach of certain of the other party’s representations or warranties and such breach results in a material adverse effect, or material breach of the other party’s covenants and agreements, which are not capable of being cured or, if applicable, if capable of being cured, has not been cured by the 10th business day following written notice of such breach.   Seller may retain the Deposit in the event of (a) a termination of the Purchase Agreement due to item (2) above (if at the time, Forest is in material breach of the Purchase Agreement), or  (b) if Forest is in breach of certain of its representations and warranties or covenants, as described in item (5) above.  If the Purchase Agreement is terminated for any other reason, Seller shall return the Deposit to Forest.  If the Purchase Agreement is terminated by Forest (a) due to item (2) above (if at the time, Seller is in material breach of the Purchase Agreement), or (b) if Seller is in breach of certain of its representations and warranties or covenants, as described in item (5) above, Forest may pursue legal remedies.

 

Forest intends to initially fund the cash component of the Purchase Price using its existing credit facilities.

 

The foregoing description of the Purchase Agreement is qualified in its entirety by reference to the full text of the Purchase Agreement, which Buyer intends to file with the SEC as an exhibit to a Current Report on Form 8-K following the closing of the transactions.

 

The shares of Forest common stock to be issued to Seller or its designees will have not been registered under the Securities Act and may not be offered or sold absent registration or an applicable exemption from registration.  The information contained in this Current Report on Form 8-K shall not constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of those securities in any state where such offer, solicitation or sale would be unlawful prior to the registration of qualification under the securities laws of such state.

 

This excerpt taken from the FST 8-K filed May 13, 2008.

Item 1.01.              Entry into a Material Definitive Agreement.

 

On May 9, 2008, Forest entered into the First Amendment (the “First Amendment”) to its second amended and restated combined credit agreements dated as of June 6, 2007.  The First Amendment exercises an accordion option to increase the commitments under the combined credit agreements from $1,000,000,000 up to $1,800,000,000, establishes the global borrowing base at $1,800,000,000, and amends certain definitions and covenants.   The amended credit agreements consist of a $1,650,000,000 U.S. credit facility (the “U.S. Facility”) with a syndicate of banks led by JPMorgan Chase Bank, N.A., and a $150,000,000 Canadian credit facility (the “Canadian Facility”, and together with the U.S. Facility, the “Credit Facilities”) with a syndicate of banks led by JPMorgan Chase Bank, N.A., Toronto Branch.  The Credit Facilities will mature in June 2012.

 

Forest’s availability under the Credit Facilities is governed by a borrowing base (Global Borrowing Base) which is set at $1,800,000,000, with $1,650,000,000 allocated to the U.S. credit facility and $150,000,000 allocated to the Canadian credit facility.  The determination of the Global Borrowing Base is made by the lenders in their sole discretion taking into consideration the estimated value of Forest’s oil and gas properties in accordance with the lenders’ customary practices for oil and gas loans.  The Global Borrowing Base is redetermined semi-annually and the available borrowing amount could be increased or decreased as a result of such redeterminations.  In addition, Forest and the lenders each have discretion at any time, but not more often than once during any calendar year, to have the Global Borrowing Base redetermined. The Global Borrowing Base is also subject to automatic adjustment under certain circumstances. In the event Forest issues senior notes after May 9, 2008, the Global Borrowing Base will immediately be reduced by an amount equal to $0.30 of every $1.00 principal amount of newly issued senior notes (excluding any senior notes that Forest may issue to refinance senior notes outstanding on May 9, 2008).

 

The Credit Facilities include terms and covenants that place limitations on certain types of activities, including restrictions or requirements with respect to additional debt, liens, asset sales, hedging activities, investments, dividends, mergers and acquisitions, and also include financial covenants.

 

Under certain conditions, amounts outstanding under the Credit Facilities may be accelerated.  Bankruptcy and insolvency events with respect to Forest or certain of its subsidiaries will result in an automatic acceleration of the indebtedness under the Credit Facilities.  Subject to notice and cure periods in certain cases, other events of default under either of the Credit Facilities will result in acceleration of the indebtedness under the facilities at the option of the lenders.  Such other events of default include non-payment, breach of warranty, non-performance of obligations under the Credit Facilities (including financial covenants), default on other indebtedness, certain pension plan events, certain adverse judgments, change of control, a failure of the liens securing the Credit Facilities, and an event of default under the Canadian Facility.

 

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The Credit Facilities are collateralized by Forest’s assets.  Forest is required to mortgage, and grant a security interest in the greater of 75% of the present value of its consolidated proved oil and gas properties, or 1.875 multiplied by the allocated U.S. borrowing base.   Forest is also required to and has pledged to the lenders the stock of several of its subsidiaries to secure the Credit Facilities.  Under certain circumstances, Forest will be obligated to pledge additional assets as collateral.   If Forest’s corporate credit ratings by Moody’s and S&P meet pre-established levels, the collateral requirements would cease to apply and, at Forest’s request, the banks would release their liens and security interest on Forest’s properties.

 

From time to time, Forest and the syndication agents, documentation agents, global administrative agent and the other lenders party to the Credit Facilities engage in other transactions, including securities offerings where such parties or their affiliates may serve as an underwriter or initial purchaser of Forest’s securities and/or serve as counterparties to Forest’s derivative agreements.

 

A complete copy of the First Amendment is included in this Current Report on Form 8-K as Exhibit 10.1.

 

This excerpt taken from the FST 8-K filed Feb 25, 2008.
Entry into a Material Definitive Agreement.

 

             On February 21, 2008, the Compensation Committee (“Committee”) of the Board of Directors (the “Board”) of Forest Oil Corporation (“Forest”) approved Forest’s 2008 Annual Incentive Plan (the “2008 Plan”), including the performance criteria and specific measures and goals for Forest’s executive officers and all other participants.  Under the 2008 Plan, any incentive rewards will be tied to five performance criteria: Total Shareholder Return, Cash Cost (such as lease operating expense, transportation expense, and total general and administrative expense), Acquisitions, Production, and Rate of Return on Capital Investments.  Each of the performance criteria included in the 2008 Plan is tied to a percentage of the participant’s target bonus, which is expressed as a percentage of a participant’s base salary.  In addition to the target level, the 2008 Plan includes completion percentages for a range of performance levels, starting at a minimum threshold level, which is equal to 25% of the target level, up to an outstanding performance level, which is equal to 200% of the target level.

 

             The 2008 Plan is administered by the Committee and the President and Chief Executive Officer (for all participant awards other than his own award), although certain administrative aspects of the 2008 Plan may be delegated to the Vice President of Human Resources.  Participation in the 2008 Plan is determined by the President and Chief Executive Officer.   The Committee is responsible for determining the achievement of any of the completion levels.  No awards will be made under the 2008 Plan unless the minimum 25% completion threshold is achieved for the total plan.   Any modifications to the 2008 Plan must be approved by the Committee.  The 2008 Plan will be filed as an Exhibit to Forest’s Annual Report on Form 10-K for the year ended December 31, 2007.

 

This excerpt taken from the FST 8-K filed Oct 25, 2007.

Item 1.01.              Entry into a Material Definitive Agreement.

 

                On October 24, 2007, the Compensation Committee (the “Compensation Committee”) of the Board of Directors (the “Board”) of Forest Oil Corporation (“Forest”) approved changes to Forest’s 2007 Annual Incentive Plan (the “Plan”).  The changes to the Plan metrics take into account Forest’s acquisition of The Houston Exploration Company in June 2007 and the divestiture of Forest’s Alaska operations in August 2007.

 

                Under the Plan, any incentive rewards will be linked to several performance criteria, including total shareholder return, cash costs (such as lease operating expense, transportation expense, and total general and administrative expense), acquisition activities, production levels, and rate of return on capital investments.  Each of the performance criteria is tied to a percentage of the participant’s target bonus, which is expressed as a percentage of a participant’s base salary. In addition to the target level, the Plan includes completion percentages for a range of performance levels, starting at a threshold level (25% of the target level) up to an outstanding level (200% of the target level).   Determination of the completion percentages will be determined by the Compensation Committee and a minimum 25% completion threshold is required for the total plan.

 

                The Plan is administered by the Compensation Committee and the President and Chief Executive Officer (for all participant awards other than his own award), although certain administrative elements may be delegated to Forest’s Vice President of Human Resources and participation in the Plan is determined by the President and Chief Executive Officer.  All performance goals, performance standards, award determinations, and modifications to the Plan must be approved by the Compensation Committee, and the granting of any awards under the Plan is at the sole discretion of the Board.  The revised Plan is attached to this report as Exhibit 10.1.

 

 

This excerpt taken from the FST 8-K filed Jun 7, 2007.

Item 1.01.              Entry into a Material Definitive Agreement.

Second Amended and Restated Credit Facilities

On June 6, 2007, Forest entered into amended and restated credit facilities totaling $1,000,000,000.  The amended and restated facilities consist of a $850,000,000 U.S. credit facility (the “U.S. Facility”) through a syndicate of banks led by JPMorgan Chase Bank, N.A. and a $150,000,000 Canadian credit facility (the “Canadian Facility”, and together with the U.S. Facility, the “Credit Facilities”) through a syndicate of banks led by JPMorgan Chase Bank, N.A., Toronto Branch.  The Credit Facilities mature in June 2012. Subject to the agreement of Forest and the applicable lenders, the size of the Credit Facilities may be increased by $800,000,000 in the aggregate.

Forest’s availability under the Credit Facilities will be governed by a borrowing base (Global Borrowing Base) which currently is set at $1,400,000,000, with $1,250,000,000 allocated to the U.S. credit facility and $150,000,000 allocated to the Canadian credit facility.  The determination of the Global Borrowing Base is made by the lenders in their sole discretion taking into consideration the estimated value of Forest’s oil and gas properties in accordance with the lenders’ customary practices for oil and gas loans.  The Global Borrowing Base is redetermined semi-annually and the available borrowing amount could be increased or decreased as a result of such redeterminations.  In addition, Forest and the lenders each have discretion at any time, but not more often than once during any calendar year, to have the Global Borrowing Base redetermined.

The Credit Facilities include terms and covenants that place limitations on certain types of activities, including restrictions or requirements with respect to additional debt, liens, asset sales, hedging activities, investments, dividends, mergers and acquisitions, and include financial covenants.  Interest rates and collateral requirements under the Credit Facilities will vary based on Forest’s credit ratings and financial condition, as governed by certain financial tests.

Under certain conditions, amounts outstanding under the Credit Facilities may be accelerated.  Bankruptcy and insolvency events with respect to Forest or certain of its subsidiaries will result in an automatic acceleration of the indebtedness under the Credit Facilities.  Subject to notice and cure periods in certain cases, other events of default under either of the Credit Facilities will result in acceleration of the indebtedness under the facilities at the option of the lenders.  Such other events of default include non-payment, breach of warranty, non-performance of obligations under the Credit Facilities (including financial covenants), default on other indebtedness, certain pension plan events, certain adverse judgments, change of control, a failure of the liens securing the credit facilities and an event of default under the Canadian Facility.

The Credit Facilities are collateralized by Forest’s assets.  Forest is required to mortgage, and grant a security interest in, 75% of the present value of the proved oil and gas properties and related assets of Forest and its subsidiaries.  If Forest’s corporate credit ratings by Moody’s and S&P meet pre-established levels, the security requirements would cease to apply and at Forest’s request the banks would release their liens and security interest on Forest’s properties.

From time to time, Forest and the syndication agents, documentation agents, global adminstrative agent and the other lenders party to the Credit Facilities, engage in other transactions, including securities offerings where such parties or their affiliates, may serve as an underwriter or initial purchaser of Forest’s securities and, or serve as counterparties to Forest’s hedging arrangements.

Forest intends to file the U.S. Facility and the Canadian Facility as exhibits to its next quarterly report on Form 10-Q.

 

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Senior Notes Due 2019

On June 6, 2007, Forest announced that it had closed its previously announced private placement of $750 million of 7.25% senior notes due 2019 (the “Notes”).  The net proceeds of the Notes offering of approximately $740 million, after deducting initial purchaser discounts, were used to fund a portion of the cash merger consideration for Forest’s acquisition of Houston Exploration pursuant to the Merger Agreement.  Affiliates of certain purchasers of the Notes participated in the financing of the merger transactions, including the Credit Facilities, and one of the initial purchasers acted as Forest’s financial advisor in connection with the merger with Houston Exploration.

The Notes were issued under an indenture (the “Indenture”) dated as of June 6, 2007 among Forest, Forest Oil Permian Corporation, a wholly owned subsidiary of Forest (“Forest Permian”), as subsidiary guarantor, and U.S. Bank National Association, as trustee (the “Trustee”).  The Notes are unsecured obligations of Forest, rank equally in right of payment with Forest’s existing and future unsecured indebtedness,  rank senior in right of payment to all existing and future subordinated indebtedness, and are structurally subordinated in right of payment to Forest’s senior secured indebtedness, including its obligations under the Credit Facilities, to the extent of collateral securing such indebtedness, and all of the existing and future indebtedness and other liabilities of any Forest subsidiaries that do not guarantee the Notes.

On the date of issue, the Notes are jointly and severally guaranteed by Forest Permian on an unsecured basis.  In the future, any existing and future subsidiaries may deliver guarantees and any such guarantees may be released or terminated under certain circumstances.  Each subsidiary guarantee will have the same ranking with respect to the subsidiary’s indebtedness as the Notes will have with respect to Forest’s indebtedness. 

Interest on the Notes is payable on June 15 and December 15 of each year, beginning December 15, 2007.  The Notes will mature on June 15, 2019.

Forest may redeem up to 35% of the Notes at any time prior to June 15, 2010, on one or more occasions, with the proceeds from certain equity offerings at a redemption price equal to 107.25% of the principal amount, plus accrued but unpaid interest.   Forest may redeem the Notes at any time beginning on or after June 15, 2012 at the prices set forth below, expressed as percentages of the principal amount redeemed, plus accrued but unpaid interest:

2012

 

103.625

%

2013

 

102.417

%

2014

 

101.208

%

2015

 

and thereafter 100.000

%

 

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Forest may also redeem the Notes, in whole or in part, at a price equal to the principal amount plus a “make whole” premium, at any time prior to June 15, 2012, using a discount rate of the Treasury rate plus 0.50%, plus accrued but unpaid interest.  

If Forest experiences a change of control (as defined in the Indenture), subject to certain exceptions, Forest must give holders of the Notes the opportunity to sell to Forest their Notes, in whole or in part, at a purchase price equal to 101% of the principal amount, plus accrued but unpaid interest.

Forest and its restricted subsidiaries are subject to certain negative covenants under the Indenture governing the Notes.  The Indenture limits the ability of Forest and each of its restricted subsidiaries to, among other things: incur additional indebtedness, create certain liens, make certain types of “restricted payments”, make investments, sell assets, enter into agreements that restrict dividends or other payments from its subsidiaries to itself, consolidate, merge or transfer all or substantially all of its assets, engage in transactions with affiliates, and pay dividends or make other distributions on capital stock or subordinated indebtedness.

In connection with the Notes, Forest and Forest Permian agreed to file a registration statement with the Securities and Exchange Commission so that the holders of the Notes can exchange the Notes for registered notes that have substantially identical terms as the Notes and exchange Forest Permian’s guarantee for a registered guarantee having substantially the same terms as the original guarantee.

Forest intends to file the Indenture, the registration right agreement, and form of Note as exhibits to its next quarterly report on Form 10-Q.

This excerpt taken from the FST 8-K filed May 30, 2007.

Item 1.01.              Entry into a Material Definitive Agreement.

On May 29, 2007, Forest Oil Corporation (“Forest”) announced the execution of two agreements pertaining to the sale of its Alaska business unit.   The agreements, which were executed on May 28, 2007,  include (i) a membership interest purchase agreement (the “Membership Purchase Agreement”) dated as of May 24, 2007, among Forest Alaska Holding LLC, as seller (“Forest Holding”), Forest Alaska Operating LLC (“Forest Alaska Operating” and together with Forest Holding, “Forest Alaska”), Forest for certain limited purposes, and Pacific Energy Resources Ltd., as buyer (“PERL”), and (ii) an asset sales agreement (the “Asset Sales Agreement”) dated as of May 24, 2007, between Forest and PERL.

Membership Purchase Agreement.  Pursuant to the terms and conditions of the Membership Purchase Agreement, Forest Holding will sell to PERL all of the outstanding membership interests in Forest Alaska Operating and PERL will purchase such membership interests, for a total cash purchase price of $420 million, subject to adjustment (the base purchase price, as adjusted, the “Purchase Price”).    Under the terms of the Membership Purchase Agreement, PERL will pay Forest Holding a deposit equal to $4.2 million.  Forest expects the closing to occur on or about June 30, 2007, subject to satisfaction or waiver of the closing conditions.  At the closing, the Purchase Price will be adjusted downward to reflect the payment of the cash deposit, upward by working capital at December 31, 2006 (agreed by the parties to equal approximately $18 million), downward if certain title or environmental defects exist, downward by $380 million to pay off Forest Alaska Operating debt under existing credit agreements (including a put premium that arises due to the transaction), upward by the amount of any equity contributions that Forest Holding or Forest make to Forest Alaska Operating, and upward or downward due to the apportionment of real and personal property taxes.  Following the closing, the Purchase Price will be further adjusted to reflect gas imbalances, as warranted. The effective date for the transaction is January 1, 2007.  Forest will continue to operate the oil and gas properties held by Forest Alaska Operating after the closing until such time as PERL receives the required approvals to operate.

Asset Sales Agreement.  Pursuant to the terms and conditions of the Asset Sales Agreement, Forest will sell to PERL substantially all of its remaining assets located in Alaska including, without limitation, oil and gas leases, and the associated lands, wells, contracts, equipment, easements, permits, seismic data, and all of Forest’s stock in the Cook Inlet Pipeline Company (collectively, the “Assets”).  The purchase price for the Assets consists of $10 million in cash and 5.5 million shares of PERL common stock (the cash and shares together, the “Purchase Price”).  Under the terms of the Asset Sales Agreement, PERL will pay Forest a deposit equal to $1 million.  The Purchase Price is subject to adjustment.  In the event PERL is not able to issue the shares as a result of an inability to obtain necessary approvals from the Toronto Stock Exchange, PERL will be required to pay Forest an additional cash amount that will be determined based on the trading price of PERL. The effective date for the sale of the Assets is January 1, 2007, and the Purchase Price will be adjusted to reflect activities between the effective date and the closing date.  Forest expects the closing to occur on or about June 30, 2007, subject to the closing of the transactions contemplated by the Membership Purchase Agreement and satisfaction or waiver of the other closing conditions.

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If PERL is unable to close the Membership Purchase Agreement and the Asset Sales Agreement because PERL fails to obtain necessary acquisition financing, Forest’s sole remedy is the retention of the $5.2 million in deposits.

Each of the Membership Purchase Agreement and Asset Sales Agreement are attached to and incorporated in this Current Report on Form 8-K as exhibits 10.1 and 10.2, respectively.

This excerpt taken from the FST 8-K filed May 15, 2007.

Item 1.01.              Entry into a Material Definitive Agreement.

            On May 10, 2007, the Compensation Committee (the “Compensation Committee”) of the Board of Directors (the “Board”) of Forest Oil Corporation (“Forest”) ratified and approved Forest’s 2007 Annual Incentive Plan (“Plan”), including the 2007 performance measures for  Forest’s executive officers and all other participants in the Plan.  Under the Plan, any incentive rewards will be linked to several performance criteria, including total shareholder return, cash costs (such as lease operating expense, transportation expense, and total general and administrative expense), acquisition activities, production levels, and rate of return on capital investments.  Each of the performance criteria is tied to a percentage of the participant’s target bonus, which is expressed as a percentage of a participant’s base salary. In addition to the target level, the Plan includes completion percentages for a range of performance levels, starting at a threshold level (25% of the target level) up to an outstanding level (200% of the target level).   Determination of the completion percentages will be determined by the Compensation Committee and a minimum 25% completion threshold is required for the total plan.

            The Plan is administered by the Compensation Committee and the President and Chief Executive Officer (for all participant awards other than his own award), although certain administrative elements may be delegated to Forest’s Vice President of Human Resources and participation in the Plan is determined by the President and Chief Executive Officer.  All performance goals, performance standards, award determinations, and modifications to the Plan must be approved by the Compensation Committee, and the granting of any awards under the Plan is at the sole discretion of the Board. The Plan is attached to this report as Exhibit 10.1.

This excerpt taken from the FST 8-K filed Apr 27, 2007.

Item 1.01.              Entry into a Material Definitive Agreement.

On April 26, 2007, Forest Alaska Operating LLC and Forest Alaska Holding LLC (together, “Forest Alaska”) were notified by the administrative agent bank and collateral agent, Credit Suisse, that the required lenders under Forest Alaska’s $250 million First Lien Credit Agreement dated as of December 8, 2006 (the “First Lien Credit Agreement”) and $125 million Second Lien Credit Agreement dated as of December 8, 2006 (the “Second Lien Credit Agreement”, and the First Lien Credit Agreement together with the Second Lien Credit Agreement, the “Credit Agreements”) had approved the First Amendments to each of the Credit Agreements.   The amendments changed certain definitions included in the Credit Agreements and added a new provision to Article VII of the First Lien Credit Agreement.  We believe that the amendments to the Credit Agreements will prevent any default with respect to the four quarters ended March 31, 2007, as previously disclosed on the Current Report on Form 8-K that Forest filed on April 18, 2007.

Both Credit Agreements are secured by Forest Alaska’s oil and gas properties and are non-recourse to Forest.

The First Amendment to the First Lien Credit Agreement and the First Amendment to the Second Lien Credit Agreement are included in this Report as Exhibits 4.1 and 4.2, respectively.

From time to time, Forest, Forest Alaska, Credit Suisse and the other lenders party to the Credit Agreements engage in other transactions, including securities offerings where Credit Suisse and/ or a lender or an affiliate of these parties may serve as an underwriter or initial purchaser of the securities and hedging arrangements where Credit Suisse and, or such other lenders may be a counterparty to the hedging arrangement.

This excerpt taken from the FST 8-K filed Jan 9, 2007.

Item 1.01               Entry into a Material Definitive Agreement.

Merger Agreement

On January 7, 2007, Forest Oil Corporation, a New York corporation (the “Company”), entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, MJCO Corporation, a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”), and The Houston Exploration Company (“Houston Exploration”), under which the Company has agreed to acquire all of the issued and outstanding shares of common stock, par value $0.01 per share, of Houston Exploration (“THX Common Stock”).  Pursuant to the terms of the Merger Agreement, which was unanimously approved by the Boards of Directors of both the Company and Houston Exploration, Merger Sub will merge with and into Houston Exploration with Houston Exploration continuing as the surviving corporation (“Merger I”), and immediately thereafter, Houston Exploration will merge with and into the Company, with the Company continuing as the surviving corporation (“Merger II” and, together with Merger I, the “Merger”).

Under the terms of the Merger Agreement, the total consideration for the Merger is fixed.  In the Merger, each issued and outstanding share of THX Common Stock will be converted into the right to receive (i) 0.84 shares of common stock of the Company, par value $0.10 per share (“Company Common Stock”), and (ii) $26.25 per share in cash, without interest.  Stockholders of Houston Exploration will have the right to elect to receive Company Common Stock, cash or a combination of Company Common Stock and cash, subject to equalization so that each share of THX Common Stock receives consideration representing equal value and proration in the event either the Company Common Stock or cash component is oversubscribed.  These adjustments, however, will not increase or decrease the total shares of Company Common Stock to be issued by the Company, estimated to total 23.6 million shares, or the total amount of cash to be paid by the Company, approximately $740 million.   The Merger is structured to qualify as a reorganization for U.S. federal income tax purposes, such that each Houston Exploration stockholder generally should be subject to U.S. federal income tax only on the cash, if any, it receives in the Merger (or, if less, the gain it realizes upon the exchange of its shares in the Merger).

The Merger Agreement contains customary representations and warranties and covenants by each of the parties.  Among other things, during the period between the execution of the Merger Agreement and the consummation of the Merger, the parties agree (i) to conduct their respective businesses in the ordinary course and not to engage in certain types of activities and transactions, subject to certain exceptions, and (ii) not to solicit alternative transactions or enter into discussions concerning, or provide information in connection with, alternative transactions.

Completion of the Merger is conditioned upon: (1) approval by the shareholders of the Company of the issuance of additional shares of Company Common Stock and the adoption of the Merger Agreement by the stockholders of Houston Exploration, (2) applicable regulatory approvals, including the termination or expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (3) the effectiveness of a registration statement on Form S-4 relating to the Company Common Stock to be issued in the

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Merger and the approval of the listing of such shares on the New York Stock Exchange, (4) the absence of legal impediments prohibiting the transactions, and (5) other customary closing conditions.   In addition, the Company’s obligation to complete the Merger is subject to a limit on the number of shares of THX Common Stock for which demands for appraisal have not been withdrawn.

The Merger Agreement contains certain termination rights, including, among others, if the Merger is not completed by September 30, 2007, for both the Company and Houston Exploration.   In the event of a termination of the Merger Agreement under certain circumstances, the Company may be required to pay Houston Exploration a termination fee of $60 million, or Houston Exploration may be required to pay the Company a termination fee of $55 million.   Further, if the Company’s shareholders fail to approve the issuance of additional shares of Company Common Stock the Company must pay Houston Exploration $5 million to cover its expenses and Houston Exploration will be required to pay the Company $5 million to cover its expenses if the stockholders of Houston Exploration fail to adopt the Merger Agreement.

The foregoing descriptions of the Merger Agreement is qualified in its entirety by reference to the full text of the Merger Agreement, which is attached to this Current Report as Exhibit 2.1 and incorporated herein by reference.  The Merger Agreement is filed herewith to provide investors with information regarding its terms and is not intended to provide any other factual information about the Company or Houston Exploration. In particular, the assertions embodied in the representations and warranties contained in the Merger Agreement are as of specified dates and were made only for purposes of such Merger Agreement, are solely for the benefit of the parties to the Merger Agreement, and may be subject to limitations agreed between the parties, including being qualified by information contained in disclosure letters exchanged by the parties in connection with the execution of the Merger Agreement that may modify and create exceptions to the representations and warranties set forth in the Merger Agreement.  Moreover, certain representations and warranties in the Merger Agreement were used for the purpose of allocating risk between the Company and Houston Exploration, rather than establishing matters as facts.  Accordingly, you should not rely on the representations and warranties in the Merger Agreement as characterizations of the actual state of facts about the Company or Houston Exploration.

Voting Agreement

Concurrently with the execution of the Merger Agreement on January 7, 2007, the Company and Merger Sub entered into a voting agreement (“Voting Agreement”) with JANA Master Fund, Ltd. and JANA Piranha Master Fund, Ltd. (collectively, “JANA”).   As of such date, JANA beneficially owned approximately 14.7% of the total issued and outstanding shares of THX Common Stock.  During the term of the Voting Agreement, JANA has agreed to vote its shares of THX Common Stock in favor of the Merger and the adoption of the Merger Agreement and against any transaction that would impede or delay the Merger, and has granted the Company a proxy to vote its shares at any meeting of the stockholders of Houston Exploration convened to consider such matters.   The Voting Agreement will terminate on the first to occur of certain dates, including the effective time of the Merger, the date Houston Exploration withdraws or adversely modifies or amends its approval of or recommendation to adopt the Merger Agreement or recommends another acquisition proposal as contemplated by the terms of the Merger Agreement, the date of any material amendment to the Merger Agreement that is adverse to Houston Exploration or its stockholders or waiver of a material condition to its obligation to close the Merger, or September 30, 2007.

In addition, JANA separately agreed with the Company not to propose any extraordinary transactions with the Company or to seek to influence the management or control of the Company for a period of one year following the Merger.

The foregoing description of the Voting Agreement is qualified in its entirety be reference to the full text of the Voting Agreement, which is attached to this Current Report as Exhibit 2.2 and incorporated by reference.

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This excerpt taken from the FST 8-K filed Dec 12, 2006.

Item 1.01        Entry into a Material Definitive Agreement.

On December 8, 2006, two subsidiaries of Forest Oil Corporation (“Forest”), Forest Alaska Operating LLC (“Forest Alaska”) and Forest Alaska Holding LLC (“Forest Holding”), entered into term loan financing arrangements in the aggregate principal amount of $375,000,000.  The financing is comprised of two term loan facilities, including a $250,000,000 first lien credit agreement (“First Lien Agreement”) among Forest Alaska as borrower, Forest Holding, Credit Suisse, as administrative agent and collateral agent, JPMorgan Chase Bank, N.A. (“JPMorgan”), as syndication agent, and the lenders from time to time party thereto, and a $125,000,000 second lien credit agreement (“Second Lien Agreement”, the First Lien Agreement and the Second Lien Agreement collectively, the “Credit Agreements”) among Forest Alaska, as borrower, Forest Holding, Credit Suisse as administrative agent and collateral agent, JPMorgan, as syndication agent and the lenders from time to time party thereto.  Credit Suisse Securities (USA) LLC and J.P. Morgan Securities Inc., acted as co-lead arrangers and joint bookrunners for each Credit Agreement.  The loan proceeds were used to fund a $350,000,000 distribution to Forest and to provide Forest Alaska working capital for its operations and pay transaction fees and expenses.  Interest on the loans will be determined based on an adjusted LIBO rate or at a rate based off of the federal funds rate, at the election of Forest Alaska.  The loans under the First Lien Agreement will become due on December 8, 2010 and the loans under the Second Lien Agreements will become due on December 8, 2011.

As previously announced, effective as of October 31, 2006, Forest transferred the majority of the assets associated with its Alaska business unit to Forest Alaska.  In connection with the transfer of the Alaska assets to Forest Alaska, Forest Alaska entered into an intercompany services agreement with Forest.  Under the services agreement, Forest will provide Forest Alaska with services, personnel and equipment necessary for the conduct of its business and Forest will continue to operate certain oil and gas properties that were transferred to Forest Alaska.  Forest and Forest Holding also entered into federal and state tax allocation agreements that concern the payment of federal and state income taxes and other tax matters.  The obligations of Forest Alaska and Forest Holding under the First Lien Agreement and Second Lien Agreement and related loan documents are secured on a first priority and second priority basis, respectively, by substantially all of the assets and the equity interests in Forest Alaska together with the assets of Forest Holding.  The loans and obligations of Forest Alaska and Forest Holding under the Credit Agreements and related loan documents are non-recourse to Forest and any of its other assets.

The Credit Agreements include terms and covenants that place limitations on certain types of activities that may be conducted by Forest Alaska and Forest Holding.  The terms include restrictions or requirements with respect to additional debt, liens, investments, hedging activities, acquisitions, dividends, mergers, sales of assets, transactions with affiliates, and capital expenditures.  In addition, the Credit Agreements include financial covenants addressing limitations on PV10 to total debt and first lien debt, interest coverage and leverage ratios.

As required by the terms of the Credit Agreements, at the time of closing of the transactions on December 8, 2006, Forest Alaska had entered into commodity price hedging agreements with affiliates of Credit Suisse and JPMorgan covering over 75% of its anticipated crude oil and natural gas production for the next three years.  Going forward, Forest Alaska is required to at all times

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maintain hedges covering at least 60%, but not greater than 80%, of its anticipated crude oil and natural gas production over a rolling 12-month period and enter into and maintain, for at least three years, interest rate hedges that cap or fix the interest rates applicable to at least 50% of the outstanding loans under the Credit Agreements.

Repayments on the loans outstanding under the First Lien Agreement are due at the end of each calendar quarter, while the loans under the Second Lien Agreement are scheduled for repayment on the maturity date.  In addition, Forest Alaska is obligated to make mandatory prepayments annually using its excess cash flow and the proceeds associated with certain equity issuances, asset sales, and incurrence of additional indebtedness.  Under certain circumstances involving a change in control involving Forest Holding or Forest Alaska, the Credit Agreements also require Forest Alaska to repurchase outstanding loans put to it by the lenders and, depending on the date of any such repurchase, the repurchase price may include a premium.  Upon an event of default, a majority of the lenders under each of the Credit Agreements may request the Agent to declare the loans immediately payable.  Under certain circumstances involving insolvency, the loans will automatically become immediately due and payable.

Forest plans to file the First Lien Agreement and the Second Lien Agreement as exhibits to its annual report on Form 10-K.

From time to time, Forest, Credit Suisse, JPMorgan and the other lenders party to the Credit Agreements engage in other transactions, including securities offerings where Credit Suisse, JPMorgan and/or a lender or an affiliate of these parties may serve as an underwriter or initial purchaser of the securities and hedging arrangements where Credit Suisse, JPMorgan and/or such other lenders may be a counterparty to the hedging arrangement.

This excerpt taken from the FST 8-K filed Nov 3, 2006.

Item 1.01               Entry into a Material Definitive Agreement.

On November 3, 2006, Forest was informed by the administrative agent bank that the required lenders under Forest’s $600,000,000 credit facilities, consisting of a $500,000,000 U.S. credit facility through a syndicate of banks led by JPMorgan Chase and a $100,000,000 Canadian credit facility through a syndicate of banks led by JPMorgan Chase Bank, Toronto Branch, had approved the Third Amendment to the credit facilities. The credit facilities mature in September 2009.

The amendment permits Forest to transfer the majority of the assets associated with its Alaska business unit to a new subsidiary, Forest Alaska Operating LLC, and authorizes the release of certain liens filed against properties in Alaska that secure Forest’s credit facilities.  On November 1, 2006, Forest announced that the new subsidiary intends to attempt to obtain $375 million of term loan financing to fund a $350 million distribution to Forest and to provide working capital for the operations of the subsidiary, which will be secured by the assets transferred to the subsidiary, and will be nonrecourse to Forest.   The third amendment is effective as of October 31, 2006.  Forest plans to file the third amendment as an exhibit to its next quarterly report on Form 10-Q.

In connection with the third amendment and the transfer of the Alaska properties to the new subsidiary, no changes were made to the global borrowing base.  As announced on September 29, 2006, the global borrowing base under the credit facilities is set at $900,000,000.  Subject to the agreement of Forest and the applicable lenders, the size of the credit facilities may be increased by $200,000,000 in the aggregate.   Forest does not currently plan to ask the lenders to approve an increase in the size of the credit facilities and therefore borrowing will continue to be limited to the current commitments totaling $600,000,000.

From time to time, Forest and the lenders engage in other transactions.  These activities include securities offerings where a lender or an affiliate of the lender may serve as an underwriter or initial purchaser of the securities and hedging arrangements where a lender may be a counterparty to the arrangement.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

FOREST OIL CORPORATION

 

 

(Registrant)

 

 

 

 

 

 

 

 

 

 

 

Dated: November 3, 2006

By

/s/ Cyrus D. Marter IV

 

 

Cyrus D. Marter IV

 

 

Vice President —
General Counsel and Secretary

 



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