Forest Oil (FST)

(3) STOCK-BASED COMPENSATION

        The table below sets forth total stock-based compensation recorded during the three months ended March 31, 2009 and 2008 under the provisions of SFAS No. 123 (Revised), Share-Based Payment

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Table of Contents

FOREST OIL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(3) STOCK-BASED COMPENSATION (Continued)

("SFAS 123(R)"), and the remaining unamortized amounts and the weighted average amortization period remaining as of March 31, 2009.

⁽¹⁾

The Company also maintains an employee stock purchase plan (which is not included in the table) under which $.2 million and $.1 million of compensation cost was recognized for the three months ended March 31, 2009 and 2008, respectively, under the provisions of SFAS 123(R).

⁽²⁾

Based on the closing price of the Company's common stock on March 31, 2009.

Stock-Based Compensation

        The Company accounts for stock-based compensation under SFAS No. 123 (Revised), Share-Based Payment ("SFAS 123(R)"). Under this method, compensation cost is recorded for all unvested stock options, restricted stock, and phantom stock units beginning in the period of adoption, and prior period financial statements are not restated. Under the fair value recognition provisions of SFAS 123(R), stock-based compensation is measured at the grant date based on the value of the awards, and the value is recognized on a straight-line basis over the requisite service period (usually the vesting period).

Stock-Based Compensation

        The Company accounts for stock-based compensation under SFAS No. 123 (Revised), Share-Based Payment ("SFAS 123(R)"). Under this method, compensation cost is recorded for all unvested stock options, restricted stock, and phantom stock units beginning in the period of adoption, and prior period financial statements are not restated. Under the fair value recognition provisions of SFAS 123(R), stock-based compensation is measured at the grant date based on the value of the awards, and the value is recognized on a straight-line basis over the requisite service period (usually the vesting period).

Stock-Based Compensation

        The Company accounts for stock-based compensation under SFAS No. 123 (Revised), Share-Based Payment ("SFAS 123(R)"). Under this method, compensation cost is recorded for all unvested stock options, restricted stock, and phantom stock units beginning in the period of adoption, and prior period financial statements are not restated. Under the fair value recognition provisions of SFAS 123(R), stock-based compensation is measured at the grant date based on the value of the awards, and the value is recognized on a straight-line basis over the requisite service period (usually the vesting period).

Stock-Based Compensation

        The Company accounts for stock-based compensation under SFAS No. 123 (Revised), Share-Based
Payment ("SFAS 123(R)"). Under this method, compensation cost is recorded for all unvested stock options, restricted stock, and phantom stock units beginning in the
period of adoption, and prior period financial statements are not restated. Under the fair value recognition provisions of SFAS 123(R), stock-based compensation is measured at the grant date
based on the value of the awards, and the value is recognized on a straight-line basis over the requisite service period (usually the vesting period).

Stock-Based Compensation

        The Company accounts for stock-based compensation under SFAS No. 123 (Revised), Share-Based
Payment ("SFAS 123(R)"). Under this method, compensation cost is recorded for all unvested stock options, restricted stock, and phantom stock units beginning in the
period of adoption, and prior period financial statements are not restated. Under the fair value recognition provisions of SFAS 123(R), stock-based compensation is measured at the grant date
based on the value of the awards, and the value is recognized on a straight-line basis over the requisite service period (usually the vesting period).

(4) STOCK-BASED COMPENSATION

        The table below sets forth total stock-based compensation recorded during the three months ended March 31, 2008 and 2007 under the provisions of SFAS No. 123 (Revised), Share-Based Payment ("SFAS 123(R)") and the remaining unamortized amounts and the weighted average amortization period remaining as of March 31, 2008.

(1)

The Company also maintains an employee stock purchase plan (which is not included in the table above) under which $.1 million of compensation cost was recognized for each of the three month periods ended March 31, 2008 and 2007 under the provisions of SFAS 123(R).

(2)

Based on the closing price of the Company's common stock on March 31, 2008.

(7)    STOCK-BASED COMPENSATION:

        Prior to January 1, 2006, the Company accounted for stock-based compensation using the intrinsic value method prescribed in APB Opinion No. 25 and related interpretations. Under APB Opinion No. 25, no compensation expense was recognized for stock options issued to employees if the grant price equaled or was above the market price on the date of the option grant. Effective January 1, 2006, the Company adopted the provisions of SFAS 123(R) using the modified prospective method. Under this method, compensation cost is recorded for all unvested stock options, restricted stock, and phantom stock units beginning in the period of adoption and prior period financial statements are not restated. Under the fair value recognition provisions of SFAS 123(R), stock-based compensation is measured at the grant date based on the value of the awards and the value is recognized on a straight-line basis over the requisite service period (usually the vesting period).

        The table below sets forth total stock-based compensation recorded during 2007 and 2006 under the provisions of SFAS 123(R), the remaining unamortized amounts and the weighted average amortization period remaining as of December 31, 2007. Approximately $9.7 million of the

87

(7)    STOCK-BASED COMPENSATION: (Continued)

$22.0 million of total stock-based compensation for 2006 was attributable to a partial settlement of the Company's restricted stock awards and phantom stock unit awards in connection with the Spin-off.

⁽¹⁾

The Company also maintains an employee stock purchase plan (which is not included in the table above) under which $.4 million and $.3 million of compensation cost was recognized for the years ended December 31, 2007 and December 31, 2006, respectively, under the provisions of SFAS 123(R).

⁽²⁾

Based on the closing price of the Company's Common Stock on December 31, 2007.

        SFAS 123(R) required the Company to estimate forfeitures in calculating the cost related to stock-based compensation as opposed to recognizing forfeitures and the corresponding reduction in expense as the forfeitures occur. The cumulative adjustment recorded related to this change of approximately $.1 million was recorded as a reduction in general and administrative expense and capitalized oil and gas properties during 2006 and was not presented separately in the Consolidated Statement of Operations. The impact of adopting SFAS 123(R) as of January 1, 2006 resulted in a decrease to net earnings of approximately $1.9 million, or $.03 per basic and diluted share, for the year ending December 31, 2006.

(7)    STOCK-BASED COMPENSATION:

        Prior to January 1, 2006, the Company accounted for stock-based compensation using the intrinsic value method prescribed in APB Opinion No. 25 and
related interpretations. Under APB Opinion No. 25, no compensation expense was recognized for stock options issued to employees if the grant price equaled or was above the market price on the
date of the option grant. Effective January 1, 2006, the Company adopted the provisions of SFAS 123(R) using the modified prospective method. Under this method, compensation cost is
recorded for all unvested stock options, restricted stock, and phantom stock units beginning in the period of adoption and prior period financial statements are not restated. Under the fair value
recognition provisions of SFAS 123(R), stock-based compensation is measured at the grant date based on the value of the awards and the value is recognized on a straight-line basis
over the requisite service period (usually the vesting period).

        The
table below sets forth total stock-based compensation recorded during 2007 and 2006 under the provisions of SFAS 123(R), the remaining unamortized amounts and the weighted
average amortization period remaining as of December 31, 2007. Approximately $9.7 million of the

87

(7)    STOCK-BASED COMPENSATION: (Continued)

$22.0 million
of total stock-based compensation for 2006 was attributable to a partial settlement of the Company's restricted stock awards and phantom stock unit awards in connection with the
Spin-off.

⁽¹⁾

The
Company also maintains an employee stock purchase plan (which is not included in the table above) under which $.4 million and $.3 million of
compensation cost was recognized for the years ended December 31, 2007 and December 31, 2006, respectively, under the provisions of SFAS 123(R).

⁽²⁾

Based
on the closing price of the Company's Common Stock on December 31, 2007.

        SFAS 123(R) required the Company to estimate forfeitures in calculating the cost related to stock-based compensation as opposed to
recognizing forfeitures and the corresponding reduction in expense as the forfeitures occur. The cumulative adjustment recorded related to this change of approximately $.1 million was recorded
as a reduction in general and administrative expense and capitalized oil and gas properties during 2006 and was not presented separately in the Consolidated Statement of Operations. The impact of
adopting SFAS 123(R) as of January 1, 2006 resulted in a decrease to net earnings of approximately $1.9 million, or $.03 per basic and diluted share, for the year ending
December 31, 2006.

(4) STOCK-BASED COMPENSATION

        The table below sets forth total stock-based compensation recorded during the three and nine months ended September 30, 2007 and 2006 under the provisions of Statement of Financial Accounting Standards ("SFAS") No. 123 (Revised), Share-Based Payment ("SFAS 123(R)").

(1)

The Company also maintains an employee stock purchase plan (which is not included in the table) under which $.1 million and $.3 million of compensation cost was recognized for the three and nine month periods ended September 30, 2007, respectively, under the provisions of SFAS 123(R). Compensation costs for the employee stock purchase plan during the three and nine month periods ended September 30, 2006 were $.1 million and $.2 million, respectively.

(2)

Based on the closing price of the Company's common stock on September 30, 2007.

12

(4) STOCK-BASED COMPENSATION

      The table below sets forth total stock-based compensation recorded during the three and six months ended June 30, 2007 and 2006 under the provisions of Statement of Financial Accounting Standards ("SFAS") No. 123 (Revised), Share-Based Payment ("SFAS 123(R)").

(1)

The Company also maintains an employee stock purchase plan (which is not included in the table) under which $.1 million of compensation cost was recognized for each of the three and six months ended June 30, 2007 and 2006 under the provisions of SFAS 123(R).

(2)

Based on the closing price of the Company's common stock on June 30, 2007.

13