10-K

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TABLE OF CONTENTS

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-K

(Mark One)
ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2008
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to            

Commission File Number: 1-13515

FOREST OIL CORPORATION
(Exact Name of Registrant as Specified in Its Charter)

State of incorporation: New York	I.R.S. Employer Identification No. 25-0484900
707 17th Street - Suite 3600 - Denver, Colorado	80202
(Address of Principal Executive Offices)	(Zip Code)
Registrant's telephone number, including area code: 303-812-1400
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class	Name of Each Exchange on which Registered
Common Stock, Par Value $.10 Per Share	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

         Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No o

         Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý

         Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

         Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

         Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of "large accelerated filer", "accelerated filer", and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ý Accelerated filer o Non-accelerated filer o
(Do not check if a smaller
reporting company) Smaller reporting company o

         Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes o No ý

         The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2008, the last business day of the registrant's most recently completed second fiscal quarter, was $6,631,228,312 (based on the closing price of such stock on the New York Stock Exchange Composite Tape).

         There were 97,034,743 shares of the registrant's common stock, par value $.10 per share, outstanding as of February 20, 2009.

         Documents incorporated by reference: Portions of the registrant's notice of annual meeting of shareholders and proxy statement to be filed pursuant to Regulation 14A within 120 days after the registrant's fiscal year end of December 31, 2008 are incorporated by reference into Part III of this Form 10-K.

TABLE OF CONTENTS

		Page No.
	PART I
Item 1.	Business		1
Item 1A.	Risk Factors		17
Item 1B.	Unresolved Staff Comments		29
Item 2.	Properties		29
Item 3.	Legal Proceedings		29
Item 4.	Submission of Matters to a Vote of Security Holders		29
Item 4A.	Executive Officers of Forest		30
	PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		32
Item 6.	Selected Financial Data		35
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations		36
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk		57
Item 8.	Financial Statements and Supplementary Data		60
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		121
Item 9A.	Controls and Procedures		121
Item 9B.	Other Information		121
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance		123
Item 11.	Executive Compensation		123
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		123
Item 13.	Certain Relationships and Related Transactions, and Director Independence		123
Item 14.	Principal Accounting Fees and Services		124
	PART IV
Item 15.	Exhibits and Financial Statement Schedules		124
	Signatures		131

i

PART I

Item 1.    Business.

General

        Forest Oil Corporation ("Forest") is an independent oil and gas company engaged in the acquisition, exploration, development, and production of natural gas and liquids primarily in North America. Forest was incorporated in New York in 1924, as the successor to a company formed in 1916, and has been a publicly held company since 1969. Throughout this Form 10-K we use the terms "Forest," "Company," "we," "our," and "us" to refer to Forest Oil Corporation and its subsidiaries.

        We currently conduct our operations in three geographical segments and five business units. The geographical segments are: the United States, Canada, and International. The business units are: Western, Eastern, Southern, Canada, and International. We conduct exploration and development activities in each of our geographical segments; however, substantially all of our estimated proved reserves and all of our producing properties are located in North America. Forest's total estimated proved reserves as of December 31, 2008 were approximately 2,668 Bcfe. At December 31, 2008, approximately 87% of our estimated proved oil and gas reserves were in the United States, approximately 11% were in Canada, and approximately 2% were in Italy. See Note 15 to the Consolidated Financial Statements for additional segment information.

        In the following discussion, we make statements that may be deemed "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. See "Forward-Looking Statements," below, for more details. We also use a number of terms used in the oil and gas industry. See the heading "Glossary of Oil and Gas Terms," below, for the definition of certain terms.

Strategy

        Over the last several years, we have implemented a strategy directed at transforming Forest from a predominantly Gulf of Mexico oil and gas producer with international frontier exploration emphasis to a North American onshore development company with numerous lower risk opportunities for production and reserve growth. As part of this transformation, we have made several key acquisitions of properties in our core operational areas while divesting certain non-core assets, including our offshore Gulf of Mexico properties in 2006 and our Alaska properties in 2007. Since the beginning of 2004, we have acquired oil and gas assets that included approximately 1,682 Bcfe of estimated proved reserves. In general, our acquisition program has focused on acquisitions of properties that have substantial development drilling opportunities and undeveloped acreage. Our drilling and recompletion activities have added 1,282 Bcfe of estimated proved reserves over the last five years, and our inventory of future drilling locations is at an all time high as of December 31, 2008. Since 2004, we have also

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divested non-core oil and gas properties with estimated proved reserves of 705 Bcfe. The following table sets forth changes in our estimated proved reserves over the last five years.

	Estimated Proved Reserves
	(Bcfe)
Beginning balance, January 1, 2004		1,296
Purchases of proved reserves		1,682
Extensions and discoveries		1,282
Sales of proved reserves		(705	)
Production		(804	)
Revisions of previous estimates		(83	)
Ending balance, December 31, 2008		2,668

        Due to the recent downturn in the global economy as well as the dramatic decrease in oil and natural gas prices, we have chosen to significantly reduce our capital expenditures and drilling activity in 2009. Our goal in 2009 will be to keep our exploration and development capital expenditures within our cash flow from operations, while maintaining our estimated proved reserve base and production, protecting against lease expirations and non-consent penalties, and continuing to focus on cost control. We plan to devote over one-third of our capital spending in 2009 to horizontal drilling in the Ark-La-Tex and Greater Buffalo Wallow core areas (see discussion of our core areas in "Business Unit Activities" below). We expect this horizontal drilling to generate rates of return acceptable to us in the current price and cost environment. We also plan to rely almost exclusively on our drilling subsidiary, Lantern Drilling Company ("Lantern"), to drill our wells rather than employing third-party drilling rigs whenever possible.

        We have a divestiture program with an announced intention to sell $450 million to $750 million of oil and gas assets outside our core areas. Due to the current economic conditions, this program has been delayed. We hope to complete these divestitures by the end of 2010, assuming market conditions and property valuations improve, but cannot predict whether we will be able to complete any asset divestitures. If divestitures are completed, we intend to use the proceeds to reduce debt.

        By keeping our 2009 capital spending within our cash flow from operations, we hope to maintain financial flexibility and sufficient liquidity to maintain our assets and operations until margins on oil and gas production improve. In order to preserve significant borrowing capacity and flexibility under our bank credit facilities, we recently issued $600 million in senior notes due 2014 and used the net proceeds to pay down borrowings on the facilities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Bank Credit Facilities," for a discussion of our bank credit facilities.

Acquisition and Divestiture Activities

        We pursue acquisitions that meet our criteria for investment returns and that are consistent with our low-risk development focus, and pursue divestitures of non-core assets to upgrade our portfolio and further increase our operational efficiencies. Acquisitions in and around our existing core areas enable us to leverage our cost control prowess, technical expertise, and existing land and infrastructure positions.

        In September 2008, we acquired producing oil and natural gas properties located in our Greater Buffalo Wallow and Ark-La-Tex core areas from Cordillera Texas, L.P. We paid to the seller approximately $570 million in cash, subject to customary post-closing adjustments to reflect an economic effective date of July 1, 2008, and issued 7.25 million shares of Forest's common stock,

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valued at approximately $360 million (based on a September 30, 2008 closing price), for the acquired assets. As of the closing date of the acquisition, the assets included approximately 350 Bcfe of estimated proved reserves and 118,000 gross acres (85,000 net acres).

        In May 2008, we acquired producing oil and natural gas properties located primarily in our core Ark-La-Tex region in East Texas and North Louisiana. We paid approximately $284 million for the assets, as adjusted to reflect an economic effective date of April 1, 2008. As of the closing date of the acquisition, the assets included approximately 110 Bcfe of estimated proved reserves and 69,000 gross acres (47,000 net acres).

        In June 2007, we acquired The Houston Exploration Company ("Houston Exploration") in a cash and stock transaction totaling approximately $1.5 billion and the assumption of Houston Exploration's debt. Houston Exploration was an independent natural gas and oil producer engaged in the exploration, development, exploitation, and acquisition of natural gas and oil reserves in North America. At the time of the acquisition, we estimated the Houston Exploration proved reserves to be 653 Bcfe. Pursuant to the terms and conditions of the agreement and plan of merger, Forest paid total merger consideration of $750 million in cash and issued approximately 24 million common shares, valued at $30.28 per share.

        In August 2007, we sold all of our assets located in Alaska (the "Alaska Assets") to Pacific Energy Resources Ltd. ("PERL"). Forest estimated the proved reserves associated with the Alaska Assets at closing to be 173 Bcfe. The total consideration received for the Alaska Assets included $400 million in cash, 10 million shares of PERL common stock, and a zero coupon senior subordinated note from PERL due 2014 in the principal amount at stated maturity of $60.8 million.

        In March 2006, we acquired oil and natural gas properties located primarily in the Cotton Valley trend in East Texas for approximately $255 million in cash, as adjusted to reflect an economic effective date of February 1, 2006. As of the closing date of the acquisition, the assets included approximately 110 Bcfe of estimated proved reserves and approximately 26,000 net acres.

        Also in March 2006, we completed the spin-off of our offshore Gulf of Mexico operations by means of a special dividend, which consisted of a pro rata spin-off (the "Spin-off") of all outstanding shares of Forest Energy Resources, Inc. (hereinafter known as Mariner Energy Resources, Inc. or "MERI"), a total of approximately 50.6 million shares of common stock, to holders of record of Forest common stock as of the close of business on February 21, 2006. Immediately following the Spin-off, MERI was merged with a subsidiary of Mariner Energy, Inc. ("Mariner") (the "Mariner Merger"). Mariner's common stock commenced trading on the New York Stock Exchange ("NYSE") on March 3, 2006. We estimated the proved reserves associated with the Spin-off to be 313 Bcfe.

Business Unit Activities

Western

        The Western business unit's operations are located primarily in the Texas Panhandle and West Texas. Western's core area of focus is in the Greater Buffalo Wallow area located primarily in Hemphill, Roberts, and Wheeler Counties in the Texas Panhandle. Wells drilled in the Greater Buffalo Wallow area primarily target the Granite Wash, Atoka, and Morrow formations at depths between approximately 10,000 feet and 18,000 feet.

Eastern

        The Eastern business unit's operations are located primarily in East Texas, Arkansas, and Louisiana. The business unit's core area of focus is the Ark-La-Tex region including the Cotton Valley/Haynesville trends in East Texas and North Louisiana and the Arkoma Basin in western Arkansas. Since focusing operations in East Texas in 2006, we primarily have targeted tight-gas sands in

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the Cotton Valley trend at depths ranging from 9,500 feet to 11,000 feet through both vertical and horizontal wells. Based on our success in 2008, we expect to expand the business unit's horizontal drilling activity beyond tight-gas sands. In February 2009, we announced the initial production rates from our first horizontal Haynesville Shale well and are planning to complete 12 to 15 horizontal tests in 2009 in the Haynesville Shale. Of the approximately 161,000 net acres we have leased in the Cotton Valley trend, approximately 127,000 net acres also include rights to the Haynesville formation. The Eastern business unit's operations in the Arkoma Basin provide for low-risk, low-cost repeatable drilling opportunities targeting the Bashum and Borum sands at depths ranging between 6,000 feet to 7,000 feet. We also initiated a horizontal drilling program in the Arkoma Basin in 2008 and, given its success, plan to drill between three and five horizontal wells there in 2009.

Southern

        The Southern business unit's operations are located in South Texas and the upper Texas Gulf Coast. The business unit's core areas of focus include the Charco and Rincon fields acquired from Houston Exploration in 2007 as well as the Katy and McAllen Ranch fields, which are legacy Forest properties. The primary producing zones targeted in South Texas include the Wilcox and Vicksburg trends at depths ranging between 7,000 feet and 13,000 feet.

Canada

        The Canada business unit's operations are located primarily in Alberta and its core area of focus is in the Deep Basin in central Alberta. Wells drilled in the Deep Basin target multi-zone Cretaceous reservoirs at depths of approximately 10,000 feet. The business unit has also accumulated nearly 340,000 gross acres in the Utica Shale play in the St. Lawrence Lowlands in Quebec. We drilled and completed three horizontal wells in the Utica Shale in 2008 and plan additional evaluation and testing in 2009. Our Quebec licenses have ten-year terms with various expiration dates, ranging from 2012 to 2019.

International

        The International business unit's operations are located in Italy and South Africa. The International business unit sold all of its interests in Gabon during 2008 for approximately $24 million. In 2007, the International business unit drilled and completed two wells in Italy, which established estimated proved reserves of approximately 56 Bcfe as of December 31, 2008. We are in the process of procuring required permits in Italy to allow us to commence production after 2009.

Reserves

        The following table shows our estimated quantities of proved reserves as of December 31, 2008 and 2007. Substantially all of our estimated proved reserves are currently located in North America.

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See Note 17 to the Consolidated Financial Statements for additional information regarding estimated proved reserves.

		December 31,
		2008		2007
Proved developed:
	Natural gas (MMcf)		1,260,078		1,092,075
	Liquids (MBbls)		69,841		66,597
	Total (MMcfe)		1,679,124		1,491,657
Proved undeveloped:
	Natural gas (MMcf)		753,328		460,301
	Liquids (MBbls)		39,279		27,879
	Total (MMcfe)		989,002		627,575
Total proved:
	Natural gas (MMcf)		2,013,406		1,552,376
	Liquids (MBbls)		109,120		94,476
	Total (MMcfe)		2,668,126		2,119,232

        Uncertainties are inherent in estimating quantities of proved reserves, including many factors beyond our control. Reserve engineering is a subjective process of estimating subsurface accumulations of oil and gas that cannot be measured in an exact manner, and the accuracy of any reserve estimate is a function of the quality of available data and its interpretation. As a result, estimates by different engineers often vary, sometimes significantly. In addition, physical factors such as the results of drilling, testing, and production subsequent to the date of an estimate, as well as economic factors such as changes in product prices or development and production expenses, may require revision of such estimates. Accordingly, oil and gas quantities ultimately recovered will vary from reserve estimates. See Part I, Item 1A—"Risk Factors," for a description of some of the risks and uncertainties associated with our business and reserves.

        Forest annually files estimates of its oil and gas reserves with the U.S. Department of Energy ("DOE"). During 2008, we filed estimates of our oil and gas reserves as of December 31, 2007 with the DOE, which were consistent with the reserve data reported for the year ended December 31, 2007 in Note 17 to the Consolidated Financial Statements.

Independent Audit of Reserves

        For financial reporting purposes, including this Form 10-K, Forest uses reserve estimates prepared by its internal staff of engineers. We engage independent reserve engineers to audit a substantial portion of our reserves. Our reserve audit procedures require the independent reserve engineers to prepare their own independent estimates of proved reserves for fields comprising at least 80% of the aggregate net present value of our year-end proved reserves, discounted at 10% per annum, for each country in which we own fields for which proved reserves have been recorded. The fields selected for audit comprise at least the top 80% of Forest's fields based on the discounted present value of such fields and a minimum of 80% of the value added during the year through discoveries, extensions, and acquisitions. Forest may also include fields that fall outside of the top 80% that represent material volumes of proved reserves, have experienced material revisions to prior estimates of proved reserve volumes or value, or have experienced changes as a result of new operational activity. The procedures prohibit exclusions of any fields, or any part of a field, that comprises part of the top 80%. The independent reserve engineers then compare their estimates to those prepared by Forest. The independent reserve audits prepared for Forest are not financial audits and are not performed in accordance with the established generally accepted financial audit procedures. Instead, a reserve audit

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is conducted based on reserve definition and cost and price parameters specified by the Securities and Exchange Commission ("SEC").

        For the years ended December 31, 2008, 2007, and 2006, we engaged DeGolyer and MacNaughton, an independent petroleum engineering firm, to perform reserve audit services. For the year ended December 31, 2008, DeGolyer and MacNaughton independently audited estimates relating to properties constituting approximately 88% of our reserves, as of December 31, 2008, based on reserve values. When compared on a field-by-field basis, some of Forest's estimates of net proved reserves were greater and some were less than the estimates prepared by DeGolyer and MacNaughton. However, there was no material difference, in the aggregate, between Forest's internal estimates of total net proved reserves and the estimates prepared by DeGolyer and MacNaughton for the fields subject to the audit.

Drilling Activities

        During 2008, we drilled a total of 714 gross wells, of which 85 were classified as exploration and 629 were classified as development. Our 2008 drilling program achieved a 97% success rate. The following table summarizes the number of wells drilled during 2008, 2007, and 2006, excluding any wells drilled under farmout agreements, royalty interest ownership, or any other wells in which we do not have a working interest. As of December 31, 2008, we had 47 gross (33 net) wells in progress in the United States and 9 gross (7 net) wells in progress in Canada.

		Year Ended December 31,
		2008				2007				2006
		Gross		Net		Gross		Net		Gross		Net
Development wells, completed as:
	Gas wells		570		322		392		210		210		52
	Oil wells		44		40		34		29		13		11
	Non-productive(1)		15		11		17		14		1		1
	Total		629		373		443		253		224		64
Exploratory wells, completed as:
	Gas wells		76		56		41		28		135		68
	Oil wells		6		6		6		2		15		9
	Non-productive(1)		3		2		5		3		8		5
	Total		85		64		52		33		158		82

⁽¹⁾

A non-productive well is a well found to be incapable of producing either oil or natural gas in sufficient quantities to justify completion as an oil or natural gas well; also known as a dry well (or dry hole).

Productive Wells

        Productive wells consist of producing wells, and wells capable of production, including shut-in wells. A well bore with multiple completions is counted as only one well. As of December 31, 2008, Forest owned interests in 493 gross wells containing multiple completions. The following table

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summarizes our productive wells as of December 31, 2008, all of which are located in the United States, Canada, and Italy:

	United States								Canada								Italy								Total
	Operated Wells				Non-operated Wells				Operated Wells				Non-operated Wells				Operated Wells				Non-operated Wells				Operated and Non-operated Wells
	Gross		Net		Gross		Net		Gross		Net		Gross		Net		Gross		Net		Gross		Net		Gross		Net
Gas		2,923		2,571		709		182		398		313		270		78		2		2		—		—		4,302		3,146
Oil		2,010		1,849		369		95		259		234		97		21		—		—		—		—		2,735		2,199
Total		4,933		4,420		1,078		277		657		547		367		99		2		2		—		—		7,037		5,345

Acreage

        The following table summarizes developed and undeveloped acreage in which we owned a working interest or held an exploration license as of December 31, 2008 and 2007. A majority of our developed acreage in the United States and Canada is subject to mortgage liens securing our bank credit facilities. Acreage related to royalty, overriding royalty, and other similar interests is excluded from this summary, as well as acreage related to any options held by us to acquire additional leasehold interests.

		December 31,
		2008								2007
		Developed Acreage				Undeveloped Acreage(1)				Developed Acreage				Undeveloped Acreage
Location		Gross		Net		Gross		Net		Gross		Net		Gross		Net
United States:
	Western		384,511		230,680		416,240		272,101		353,754		217,814		1,128,547		789,494
	Eastern		274,326		189,089		195,558		119,126		172,633		113,557		282,298		139,101
	Southern		175,091		127,572		54,943		40,090		192,752		135,852		73,843		34,208
			833,928		547,341		666,741		431,317		719,139		467,223		1,484,688		962,803
Canada			297,238		161,687		822,662		344,504		286,016		157,737		852,704		375,398
International:
	South Africa		—		—		2,771,695		1,474,542		—		—		2,771,695		1,474,542
	Italy		2,500		2,250		288,543		287,911		2,500		2,250		288,543		287,911
	Gabon(2)		—		—		—		—		—		—		2,409,276		1,204,638
			2,500		2,250		3,060,238		1,762,453		2,500		2,250		5,469,514		2,967,091
Total			1,133,666		711,278		4,549,641		2,538,274		1,007,655		627,210		7,806,906		4,305,292

⁽¹⁾

The decrease in undeveloped acreage from 2007 to 2008 is a result of selling non-core oil and gas properties located primarily in the Western business unit.

⁽²⁾

The Gabon assets were sold in August 2008.

        At December 31, 2008, approximately 12%, 12%, and 19% of our net undeveloped acreage in the United States and Canada was held under leases that will expire in 2009, 2010, and 2011, respectively, if not extended by exploration or production activities. The South African national government implemented new legislation in 2004 that revised the regulations and process pursuant to which it grants petroleum exploration and production licenses. Under the new regulations, we have applied to the government to convert one existing prospecting sublease into an exploration right and have applied for a production right covering the geographic area of our other existing prospecting sublease. The government has not taken final action on these applications. Because the regulations implementing the new legislation are not final and the potential work obligations that could be imposed pursuant to any new rights, when and if they are granted,

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are still uncertain, we cannot predict whether these rights will meet our economic or operational requirements. If the rights do not meet our internal requirements, we may choose to relinquish these leases. See "Our international operations may be adversely affected by currency fluctuations and economic and political developments" in Part I, Item 1A—"Risk Factors", for further details.

Production, Average Sales Prices, and Production Costs

        The following table reflects production, average sales price, and production cost information for the years ended December 31, 2008, 2007, and 2006.

		United States							Canada						Total Company
		2008		2007		2006			2008		2007		2006		2008		2007		2006
Natural Gas:
	Sales price received (per Mcf)	$	7.54		5.95		6.21			6.98		5.29		5.07		7.45		5.79		5.83
	Effects of energy swaps and collars (per Mcf)(1)		—		—		(.37	)		—		—		—		—		—		(.25	)
	Average sales price (per Mcf)(1)	$	7.54		5.95		5.84			6.98		5.29		5.07		7.45		5.79		5.58
	Natural gas sales volumes (MMcf)		118,120		82,963		48,674			23,313		25,079		24,350		141,433		108,042		73,024
Liquids:
	Oil and Condensate:
	Sales price received (per Bbl)	$	96.85		67.91		62.18			86.68		58.05		50.89		95.07		66.44		60.79
	Effects of energy swaps and collars (per Bbl)(1)		—		—		(4.94	)		—		—		—		—		—		(4.34	)
	Average sales price (per Bbl)(1)	$	96.85		67.91		57.24			86.68		58.05		50.89		95.07		66.44		56.45
	Natural gas liquids:
	Average sales price (per Bbl)	$	44.54		39.32		32.02			60.71		43.54		41.40		45.94		39.75		33.85
	Total liquids:
	Average sales price (per Bbl)(1)	$	73.06		58.02		51.22			79.61		54.40		47.55		73.96		57.54		50.70
	Liquids sales volumes (MBbls)		6,929		6,885		6,887			1,102		1,060		1,139		8,031		7,945		8,026
Average sales price (per Mcfe)(1)		$	8.75		7.18		7.08			8.37		6.05		5.69		8.69		6.96		6.72
Total sales volumes (MMcfe)			159,694		124,273		89,996			29,925		31,439		31,184		189,619		155,712		121,180
Production costs (per Mcfe):
	Lease operating expenses	$	.83		1.09		1.41			1.21		1.00		.91		.89		1.08		1.28
	Production and property taxes		.49		.42		.40			.12		.11		.10		.43		.35		.32
	Transportation and processing costs		.06		.08		.13			.32		.33		.32		.10		.13		.18
Total production costs (per Mcfe)		$	1.38		1.59		1.94			1.65		1.44		1.32		1.42		1.56		1.78

⁽¹⁾

Includes the effects of hedging under cash flow hedge accounting in 2006. See Part II, Item 7—"Management's Discussion and Analysis of Financial Condition and Results of Operations," concerning our hedging activities and the effects of energy swaps and collars not accounted for under cash flow hedge accounting.

Marketing and Delivery Commitments

        Our natural gas production is typically sold on a month-to-month basis in the spot market, priced in reference to published indices. Our oil production is typically sold under short-term contracts at prices based upon refinery postings and is typically sold at the wellhead. Our natural gas liquids production is typically sold under term agreements at prices based on postings at large fractionation facilities. We believe that the loss of one or more of our current oil, natural gas, or natural gas liquids purchasers would not have a material adverse effect on our ability to sell our production, because any individual purchaser could be readily replaced by another purchaser, absent a broad market disruption. We had no material delivery commitments as of February 25, 2009.

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Competition

        Forest encounters competition in all aspects of its business, including acquisition of properties and oil and gas leases, marketing oil and gas, obtaining services and labor, and securing drilling rigs and other equipment necessary for drilling and completing wells. Our ability to increase reserves in the future will depend on our ability to generate successful prospects on our existing properties, execute on major development drilling programs, acquire new producing properties, and acquire additional leases and prospects for future development and exploration. Factors that affect our ability to acquire properties include, among others, availability of desirable acquisition targets, staff and resources to identify and evaluate properties, available funds, and internal standards for minimum projected return on investment. A large number of the companies that we compete with have substantially larger staffs and greater financial and operational resources than we have. Because of the nature of our oil and gas assets and management's experience in exploiting our reserves and acquiring properties, management believes that we effectively compete in our markets. See Part I, Item 1A—"Risk Factors—Competition within our industry is intense and may adversely affect our operations" below.

Regulation

        Our oil and gas operations are subject to various United States federal, state, and local laws and regulations and foreign laws and regulations.

United States

        Various aspects of our oil and natural gas operations are subject to regulation by state and federal agencies. All of the jurisdictions in which we own or operate producing crude oil and natural gas properties have adopted laws regulating the exploration for and production of crude oil and natural gas, including laws requiring permits for the drilling of wells, imposing bonding requirements in order to drill or operate wells, and providing authority for regulation relating to the location of wells, the method of drilling and casing wells, the surface use and restoration of properties upon which wells are drilled, and the plugging and abandonment of wells. Our operations are also subject to various conservation laws and regulations. These include the regulation of the size of drilling and spacing units or proration units, the number of wells which may be drilled in an area, and the unitization or pooling of crude oil and natural gas properties. In addition, state conservation laws sometimes establish maximum rates of production from crude oil and natural gas wells, generally prohibit the venting or flaring of natural gas, and impose certain requirements regarding the ratability or fair apportionment of production from fields and individual wells.

        Certain of our operations are conducted on federal land pursuant to oil and gas leases administered by the Bureau of Land Management ("BLM"). These leases contain relatively standardized terms and require compliance with detailed BLM regulations and orders (which are subject to change by the BLM). In addition to permits required from other agencies, lessees must obtain a permit from the BLM prior to the commencement of drilling and comply with regulations governing, among other things, engineering and construction specifications for production facilities, safety procedures, the valuation of production, and the removal of facilities. Under certain circumstances, the BLM or the Minerals Management Service, as applicable, may require our operations on federal leases to be suspended or terminated. Any such suspension or termination could materially and adversely affect our financial condition and operations.

        In August 2005, Congress enacted the Energy Policy Act of 2005 ("EPAct 2005"). Among other matters, EPAct 2005 amends the Natural Gas Act ("NGA") to make it unlawful for "any entity," including otherwise non-jurisdictional producers such as Forest, to use any deceptive or manipulative device or contrivance in connection with the purchase or sale of natural gas or the purchase or sale of transportation services subject to regulation by the Federal Energy Regulatory Commission ("FERC"),

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in contravention of rules prescribed by the FERC. EPAct 2005 also gives the FERC authority to impose civil penalties for violations of the NGA up to $1,000,000 per day per violation. The new anti-manipulation rule does not apply to activities that relate only to intrastate or other non-jurisdictional sales or gathering, but does apply to activities of otherwise non-jurisdictional entities to the extent the activities are conducted "in connection with" gas sales, purchases or transportation subject to FERC jurisdiction. It therefore reflects a significant expansion of the FERC's enforcement authority. We do not anticipate we will be affected any differently than other producers of natural gas.

        In December 2007, the FERC issued rules requiring that any market participant, including a producer such as Forest, that engages in physical sales for resale or purchases for resale of natural gas that equal or exceed 2.2 million MMBtus during a calendar year must annually report such sales or purchases to the FERC, beginning on May 1, 2009. These rules are intended to increase the transparency of the wholesale natural gas markets and to assist the FERC in monitoring such markets and in detecting market manipulation. On September 18, 2008 the FERC issued its order on rehearing, which largely approved the existing rules, except the FERC exempted from the reporting requirement certain types of purchases and sales, including purchases and sales of unprocessed gas and bundled sales of gas made pursuant to state regulated retail tariffs. Also, the FERC clarified that other end use purchases and sales are not exempt from the reporting requirements. The monitoring and reporting required by the new rules will likely increase our administrative costs. Forest does not anticipate it will be affected any differently than other producers of natural gas.

        Additional proposals and proceedings that might affect the oil and gas industry are regularly considered by Congress, the states, the FERC, and the courts. We cannot predict when or whether any such proposals may become effective. No material portion of Forest's business is subject to renegotiation of profits or termination of contracts or subcontracts at the election of the federal government.

Canada

        The oil and natural gas industry in Canada is subject to extensive controls and regulations imposed by various levels of government. Federal authorities do not regulate the price of oil and gas in export trade. Legislation exists, however, that regulates the quantities of oil and natural gas which may be removed from the provinces and exported from Canada in certain circumstances. Regulatory requirements also exist related to licensing for drilling of wells, the method and ability to produce wells, surface usage, transportation of production from wells, and conservation matters. We do not expect that any of these controls and regulations will affect Forest in a manner significantly different from other oil and natural gas companies of similar size with operations in Canada.

        The provinces in which we operate have legislation and regulation which govern land tenure, royalties, production rates and taxes, environmental protection, and other matters under their respective jurisdictions. The royalty regime in the provinces in which we operate is a significant factor in the profitability of our production. Crown royalties are determined by government regulation and are typically calculated as a percentage of the value of production. The value of the production and the rate of royalties payable depend on prescribed reference prices, well productivity, geographical location, and the type or quality of the product produced. Any royalties payable on production from privately owned lands are determined by negotiations between Forest and the landowners.

        The majority of our Canadian operations are located in the Province of Alberta. The Alberta Government implemented a new oil and gas royalty framework effective January 2009. The new framework establishes new royalties for conventional oil, natural gas and bitumen that are linked to price and production levels and apply to both new and existing conventional oil and gas activities and oil sands projects. Under the new framework, the formula for conventional oil and natural gas royalties uses a sliding rate formula, dependant on the market price and production volumes, and well depths in

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the case of gas wells. Royalty rates for conventional oil range from 0% to 50%. Natural gas royalty rates range from 5% to 50%. In comparison, under the prior royalty regime, royalty rates ranged from 10% to 35% for conventional oil and from 5% to 35% for natural gas.

        In November 2008, the Alberta Government announced that companies drilling new natural gas and conventional oil wells at depths between 1,000 meters and 3,500 meters (or 3,281 feet and 11,483 feet), which are drilled between November 19, 2008 and December 31, 2013, will have a one-time option of selecting new transitional royalty rates or the new royalty framework rates. The transition option provides lower royalties in the initial years of a well's life. For example, under the transition option, royalty rates for natural gas wells will range from 5% to 30%. However, if we elect to apply the transitional royalty rates, the well will not qualify for either of the two new royalty programs for deeper wells that also went into effect in January 2009 (see the "DOEP" and "NGDDP" discussion below). The election must be made before the well is drilled. Re-entry wells that are given a new drill date are also eligible for the transition option. All wells using the transitional royalty rates must shift to the new royalty framework rates on January 1, 2014.

        Our drilling programs in Alberta have included, and in the future may include, deeper wells. On January 1, 2009, two new royalty programs impacting deep drilling activities went into effect, including the Deep Oil Exploration Program ("DOEP") and the Natural Gas Deep Drilling Program ("NGDDP"). These programs provide upfront royalty adjustments to new wells. To qualify for such royalty adjustments under the DOEP, exploration wells must have a vertical depth greater than 2,000 meters (6,562 feet) with a Crown interest and must be drilled after January 1, 2009. Oil wells in this category qualify for a royalty exemption on either the first $1,000,000 of royalty or the first 12 months of production and the oil well royalty rate minimum will be 0% until the entire credit has been applied. The NGDDP applies to wells producing at a true vertical depth greater than 2,500 meters (8,202 feet). The NGDDP will have an escalating royalty credit in line with progressively deeper wells from $625 per meter ($191 per foot) to a maximum of $3,750 per meter ($1,143 per foot) and there are additional benefits for the deepest wells, and the gas well royalty rate will be 5% until the entire credit has been applied. Both the DOEP and the NGDDP are five year programs. Any wells drilled after December 31, 2013, or any wells that choose the transition option, will not qualify under either program. No royalty adjustments will be granted under either the DOEP or the NGDDP after December 31, 2018. The majority of our drilling activities and wells in Alberta will be subject to the new royalty framework or, at our election, the transitional rules. As a result, wells that we drill in the future may be subject to the new higher royalty rates, which may be partially offset by credits for deep wells, while our existing production base will be subject to lower royalty rates. Overall, we do not currently believe the new regime will have a significant impact on our financial results and operations.

Environmental Regulation

        As an operator of oil and natural gas properties in the United States and Canada, we are subject to stringent federal, state, provincial, and local laws and regulations relating to environmental protection as well as controlling the manner in which various substances, including wastes generated in connection with oil and gas exploration, production, and transportation operations, are released into the environment. Compliance with these laws and regulations can affect the location or size of wells and facilities, prohibit or limit the extent to which exploration and development may be allowed, and require proper closure of wells and restoration of properties when production ceases. Failure to comply with these laws and regulations may result in the assessment of administrative, civil, or criminal penalties, imposition of remedial obligations, incurrence of capital or increased operating costs to comply with governmental standards, and even injunctions that limit or prohibit exploration and production activities or that constrain the disposal of substances generated by oilfield operations.

        We currently operate or lease, and have in the past operated or leased, a number of properties that for many years have been used for the exploration and production of oil and gas. Although we

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have utilized operating and disposal practices that were standard in the industry at the time, hydrocarbons or other wastes may have been disposed of or released on or under the properties operated or leased by us or on or under other locations where such wastes have been taken for disposal. In addition, many of these properties have been operated by third parties whose treatment and disposal or release of hydrocarbons or other wastes was not under our control. These properties and the wastes disposed thereon may be subject to laws and regulations imposing joint and several, strict liability without regard to fault or the legality of the original conduct that could require us to remove previously disposed wastes or remediate property contamination, or to perform well pluggings or pit closure or other actions of a remedial nature to prevent future contamination. We believe that it is reasonably likely that the trend in environmental legislation and regulation will continue toward stricter standards. See Part I, Item 1A—"Risk Factors—Our oil and gas operations are subject to various environmental and other governmental laws and regulations that materially affect our operations" below, for a discussion of greenhouse gas emission regulatory developments.

        While we believe that we are in substantial compliance with applicable environmental laws and regulations in effect at the present time and that continued compliance with existing requirements will not have a material adverse impact on us, we cannot give any assurance that we will not be adversely affected in the future. We have established internal guidelines to be followed in order to comply with environmental laws and regulations in the United States, Canada, and other relevant international jurisdictions. We employ an environmental, health, and safety department whose responsibilities include providing assurance that our operations are carried out in accordance with applicable environmental guidelines and safety precautions. Although we maintain pollution insurance against the costs of cleanup operations, public liability, and physical damage, there is no assurance that such insurance will be adequate to cover all such costs or that such insurance will continue to be available in the future.

Employees

        As of December 31, 2008, we had 814 employees. None of our employees is currently represented by a union for collective bargaining purposes.

Geographical Data

        Forest operates in one industry segment. For information relating to our geographical operating segments, see Note 15 to the Consolidated Financial Statements of this Form 10-K.

Offices

        Our corporate office is located in leased space at 707 17^th Street, Denver, Colorado 80202. We maintain offices in Houston, Texas and Calgary, Alberta, Canada, and also lease or own field offices in the areas in which we conduct operations.

Title to Properties

        Title to our oil and gas properties is subject to royalty, overriding royalty, carried, net profits, working, and similar interests customary in the oil and gas industry. Under the terms of our bank credit facilities, we have granted the lenders a lien on the substantial majority of our properties. In addition, our properties may also be subject to liens incident to operating agreements, as well as other customary encumbrances, easements, and restrictions, and for current taxes not yet due. Forest's general practice is to conduct a title examination on material property acquisitions. Prior to the commencement of drilling operations, a title examination and, if necessary, curative work is performed. The methods of title examination that we have adopted are reasonable in the opinion of management and are designed to insure that production from our properties, if obtained, will be salable for the account of Forest.

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Glossary of Oil and Gas Terms

        The terms defined in this section are used throughout this Form 10-K. The definitions of proved developed reserves, proved reserves, and proved undeveloped reserves have been abbreviated from the applicable definitions contained in Rule 4-10(a)(2-4) of Regulation S-X. The entire definitions of those terms can be viewed on the SEC's website at http://www.sec.gov.

        Bbl.    One stock tank barrel, or 42 U.S. gallons liquid volume, of crude oil or liquid hydrocarbons.

        Bcf.    Billion cubic feet of natural gas.

        Bcfe.    Billion cubic feet equivalent, determined using the ratio of six Mcf of natural gas to one bbl of crude oil, condensate, or natural gas liquids.

        Bbtu.    One billion British Thermal Units.

        Btu.    A British Thermal Unit, or the amount of heat necessary to raise the temperature of one pound of water one degree Fahrenheit.

        Condensate.    Liquid hydrocarbons associated with the production of a primarily natural gas reserve.

        Developed acreage.    The number of acres which are allocated or held by producing wells or wells capable of production.

        Development well.    A well drilled within the proved area of an oil or gas reservoir to the depth of a stratigraphic horizon known to be productive.

        Dry hole; dry well.    A well found to be incapable of producing either oil or gas in sufficient quantities to justify completion as an oil or gas well.

        Equivalent volumes.    Equivalent volumes are computed with oil and natural gas liquid quantities converted to Mcf on an energy equivalent ratio of one barrel to six Mcf.

        Exploitation.    Ordinarily considered to be a form of development within a known reservoir.

        Exploratory well.    A well drilled to find and produce oil or gas reserves not classified as proved, to find a new reservoir in a field previously found to be productive of oil or gas in another reservoir, or to extend a known reservoir.

        Farmout.    An assignment of an interest in a drilling location and related acreage conditional upon the drilling of a well on that location or the undertaking of other work obligations.

        Field.    An area consisting of either a single reservoir or multiple reservoirs, all grouped on or related to the same individual geological structural feature and/or stratigraphic condition.

        Full cost pool.    The full cost pool consists of all costs associated with property acquisition, exploration, and development activities for a company using the full cost method of accounting. Additionally, any internal costs that can be directly identified with acquisition, exploration, and development activities are included. Any costs related to production, general and administrative expense, or similar activities are not included.

        Gross acres or gross wells.    The total acres or wells, as the case may be, in which a working interest is owned.

        Lease operating expenses.    The expenses of lifting oil or gas from a producing formation to the surface, constituting part of the current operating expenses of a working interest, and also including

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labor, superintendence, supplies, repairs, short-lived assets, maintenance, allocated overhead costs, and other expenses incidental to production, but not including lease acquisition or drilling or completion expenses.

        Liquids.    Describes oil, condensate, and natural gas liquids.

        MBbls.    Thousand barrels of crude oil or other liquid hydrocarbons.

        Mcf.    Thousand cubic feet of natural gas.

        Mcfe.    Thousand cubic feet equivalent determined using the ratio of six Mcf of natural gas to one bbl of crude oil, condensate, or natural gas liquids.

        MMBtu.    One million British Thermal Units, a common energy measurement.

        MMcf.    Million cubic feet of natural gas.

        MMcfe.    Million cubic feet equivalent determined using the ratio of six Mcf of natural gas to one bbl of crude oil, condensate, or natural gas liquids.

        NGL.    Natural gas liquids.

        Net acres or net wells.    The sum of the fractional working interest owned in gross acres or gross wells expressed in whole numbers.

        NYMEX.    New York Mercantile Exchange.

        Productive wells.    Producing wells and wells that are capable of production, including injection wells, salt water disposal wells, service wells, and wells that are shut-in.

        Proved developed reserves.    Estimated proved reserves that can be expected to be recovered through existing wells with existing equipment and operating methods.

        Proved reserves.    Estimated quantities of crude oil, natural gas, and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known oil and gas reservoirs under existing economic and operating conditions.

        Proved undeveloped reserves.    Estimated proved reserves that are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recovery to occur.

        Reservoir.    A porous and permeable underground formation containing a natural accumulation of producible oil and/or gas that is confined by impermeable rock or water barriers and is individual and separate from other reservoirs.

        Standardized measure or present value of estimated future net revenues.    An estimate of the present value of the estimated future net revenues from proved oil and gas reserves at a date indicated after deducting estimated production and ad valorem taxes, future capital costs, and operating expenses, but before deducting any estimates of U.S. federal income taxes. The estimated future net revenues are discounted at an annual rate of 10%, in accordance with the SEC's practice, to determine their "present value." The present value is shown to indicate the effect of time on the value of the revenue stream and should not be construed as being the fair market value of the properties. Estimates of future net revenues are made using oil and natural gas prices and operating costs at the estimation date and held constant for the life of the reserves.

        Tcfe.    Trillion cubic feet equivalent, determined using the ratio of six Mcf of natural gas to one bbl of crude oil, condensate, or natural gas liquids.

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        Undeveloped Acreage.    Acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil or natural gas, regardless of whether such acreage contains estimated proved reserves.

        Working interest.    An operating interest which gives the owner the right to drill, produce, and conduct operating activities on the property, and to receive a share of production.

Available Information

        Forest's website address is http://www.forestoil.com. Available on our website, free of charge, are Forest's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, reports on Forms 3, 4, and 5 filed on behalf of directors and officers, as well as amendments to these reports. These materials are available as soon as reasonably practicable after such materials are electronically filed with or furnished to the SEC.

        Also posted on Forest's website, and available in print upon written request of any shareholder addressed to the Secretary of Forest, at 707 17^th Street, Suite 3600, Denver, Colorado 80202, are Forest's Corporate Governance Guidelines, the charters for each of the committees of our Board of Directors (including the charters of the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee), and codes of ethics for our directors and employees entitled "Code of Business Conduct and Ethics" and "Proper Business Practices Policy," respectively.

        In June 2008, we submitted to the NYSE the certification of the Chief Executive Officer of Forest required by Section 303A.12 of the NYSE Listed Company Manual, relating to Forest's compliance with the NYSE's corporate governance listing standards with no qualifications. Also, we have included the certifications of the Principal Executive Officer and Principal Financial Officer of Forest required by Section 302 of the Sarbanes-Oxley Act of 2002 and related rules, relating to the quality of Forest's public disclosure, in this Form 10-K as Exhibits 31.1 and 31.2.

Forward-Looking Statements

        The information in this Form 10-K includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements other than statements of historical facts or present facts, that address activities, events, outcomes, and other matters that Forest plans, expects, intends, assumes, believes, budgets, predicts, forecasts, projects, estimates, or anticipates (and other similar expressions) will, should, or may occur in the future. Generally, the words "expects," "anticipates," "targets," "goals," "projects," "intends," "plans," "believes," "seeks," "estimates," variations of such words, and similar expressions identify forward-looking statements. These forward-looking statements are based on our current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events.

        These forward-looking statements appear in a number of places and include statements with respect to, among other things:

•

estimates of our oil and natural gas reserves;

•

estimates of our future oil and natural gas production, including estimates of any increases or decreases in our production;

•

estimates of future capital expenditures;

•

our future financial condition and results of operations;

•

our future revenues, cash flows, and expenses;

•

our access to capital and our anticipated liquidity;

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•

our future business strategy and other plans and objectives for future operations;

•

our outlook on oil and gas prices;

•

the amount, nature, and timing of the completion of any planned asset-monetization transactions;

•

the amount, nature, and timing of future capital expenditures, including future development costs;

•

our outlook on the current financial crisis and our ability to access the capital markets to fund capital and other expenditures;

•

our assessment of our counterparty risks and the ability of our counterparties to perform their future obligations;

•

our estimates as to the amount, nature, and timing of any synergies and other benefits expected to result from acquisitions; and

•

the impact of federal, state, and local political, regulatory, and environmental developments in the United States and certain foreign locations where we conduct business operations.

        We believe the expectations and forecasts reflected in our forward-looking statements are reasonable, but we can give no assurance that they will prove to be correct. We caution you that these forward-looking statements can be affected by inaccurate assumptions and are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to the exploration for and development, production, and sale of oil and gas. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under the heading "Risk Factors" included in this Form 10-K. These risks include, but are not limited to, the following:

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the volatility of oil and natural gas prices;

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the availability of capital on economic terms to fund our significant capital expenditures and acquisitions;

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our level of our indebtedness;

•

our ability to replace and sustain production;

•

the impact of the current financial crisis on our business operations, financial condition, and ability to raise capital;

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the ability of financial counterparties to perform or fulfill their obligations under existing agreements;

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a lack of available drilling and production equipment, and related services and labor;

•

unsuccessful exploration and development drilling activities;

•

regulatory and environmental risks associated with drilling and production activities;

•

declines in the value of our oil and natural gas properties resulting in a decrease in our borrowing base under our bank credit facilities and ceiling test write-downs;

•

the adverse effects of changes in applicable tax, environmental and other regulatory legislation;

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a deterioration in the demand for our products;

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the risks and uncertainties inherent in estimating proved oil and natural gas reserves and in projecting future rates of production and the timing of expenditures;

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•

the risks of conducting exploratory drilling operations in new or emerging plays;

•

intense competition with companies with more capital and larger staffs; and

•

the risks of conducting operations outside of the United States and impact of fluctuations in currency exchange rates and political developments on the financial results of our operations.

        Should one or more of the risks or uncertainties described above or elsewhere in this Form 10-K occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements.

        We caution you not to place undue reliance on these forward-looking statements, which speak only as of the date of this report, and we undertake no obligation to update this information to reflect events or circumstances after the filing of this report with the SEC, except as required by law. All forward-looking statements, expressed or implied, included in this Form 10-K and attributable to Forest are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we may make or persons acting on our behalf may issue.

Item 1A.    Risk Factors.

        We are subject to certain risks and hazards due to the nature of the business activities we conduct, including the risks discussed below. The risks discussed below, any of which could materially and adversely affect our business, financial condition, cash flows, and results of operations, are not the only risks we face. We may experience additional risks and uncertainties not currently known to us; or, as a result of developments occurring in the future, conditions that we currently deem to be immaterial may also materially and adversely affect our business, financial condition, cash flows, and results of operations.

Oil and natural gas prices are volatile. Recent declines in commodity prices have adversely affected, and in the future will adversely affect, our financial condition and results of operations, cash flows, access to the capital markets, and ability to grow.

        Our financial condition, operating results, and future rate of growth depend upon the prices that we receive for our oil and natural gas. Prices also affect our cash flow available for capital expenditures and our ability to access funds under our bank credit facilities and through the capital markets. The amount available for borrowing under our bank credit facilities is subject to a global borrowing base, which is determined by our lenders taking into account our estimated proved reserves and is subject to periodic redeterminations based on pricing models determined by the lenders at such time. The recent decline in oil and natural gas prices has adversely impacted the value of our estimated proved reserves and, in turn, the market values used by our lenders to determine our global borrowing base. If commodity prices continue to decline in 2009, it will have similar adverse effects on our reserves and global borrowing base. Further, because we have elected to use the full-cost accounting method, we must perform each quarter a "ceiling test" that is impacted by declining prices. Significant price declines could cause us to take one or more ceiling test write-downs, which would be reflected as non-cash charges against current earnings. For example, as a result of the dramatic declines in oil and natural gas prices in the second half of 2008, we recorded a non-cash ceiling test impairment of approximately $2.4 billion ($1.5 billion after-tax) for the three months and year ended December 31, 2008. The impairment resulted in a charge to net earnings and the recording of a net loss in 2008. See "—Lower oil and gas prices and other factors have resulted, and in the future may result, in ceiling test write-downs and other impairments of our asset carrying values."

        In addition, significant or extended price declines may also adversely affect the amount of oil and natural gas that we can produce economically. A reduction in production could result in a shortfall in

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our expected cash flows and require us to reduce our capital spending or borrow funds to cover any such shortfall. Any of these factors could negatively impact our ability to replace our production and our future rate of growth.

        The markets for oil and natural gas have been volatile historically and are likely to remain volatile in the future. Oil spot prices reached historical highs in July 2008, peaking at more than $145 per barrel, and natural gas spot prices reached near historical highs in July 2008, peaking at more than $13 per MMBtu. These prices have declined significantly since that time and may continue to fluctuate widely in the future. The prices we receive for our oil and natural gas depend upon factors beyond our control, including among others:

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domestic and global supplies, consumer demand for oil and natural gas, and market expectations regarding supply and demand;

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domestic and worldwide economic conditions;

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the impact of the U.S. dollar exchange rate on oil and natural gas prices;

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the proximity, capacity, cost, and availability of oil and natural gas pipelines, processing, gathering, and other transportation facilities;

•

weather conditions;

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political instability and armed conflicts in oil-producing and gas-producing regions;

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actions by the Organization of Petroleum Exporting Countries directed at maintaining prices and production levels;

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the price and availability of imports of oil and natural gas;

•

the impact of energy conservation efforts and the price and availability of alternative fuels; and

•

domestic and foreign governmental regulations and taxes.

        These factors make it very difficult to predict future commodity price movements with any certainty. We sell the majority of our oil and natural gas production at current prices rather than through fixed-price contracts. However, we do enter into derivative instruments to reduce our exposure to fluctuations in oil and natural gas prices. See "—Our use of hedging transactions could result in financial losses or reduce our income." Further, oil prices and natural gas prices do not necessarily fluctuate in direct relation to each other. Approximately 75% of our estimated proved reserves at December 31, 2008 were natural gas, and, as a result, our financial results will be more sensitive to fluctuations in natural gas prices.

We require substantial capital expenditures to conduct our operations, engage in acquisition activities, and replace our production, and we may be unable to obtain needed financing on satisfactory terms necessary to execute our operating strategy.

        We require substantial capital expenditures to conduct our exploration, development, and production operations, engage in acquisition activities, and replace our production. Historically, we have funded our capital expenditures through a combination of our cash flows from operations, our bank credit facilities, and debt and equity issuances. We also engage in asset sale transactions to fund capital expenditures when market conditions permit us to complete transactions on terms we find acceptable. In 2008, 2007, and 2006, we spent approximately $2.8 billion, $3.0 billion, and $943 million on capital expenditures, respectively, including approximately $1.4 billion, $2.2 billion, and $316 million on property acquisitions, respectively. Our exploration and development capital expenditures budget for 2009 is approximately $500 million to $600 million, which reflects our intention to finance our capital expenditures using cash flow from operations. Our lower level of planned capital expenditures in 2009,

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compared with 2008, reflects our expectations of lower future commodity prices and declining service costs in 2009. In addition, we may seek advances under our bank credit facilities to fund some of our 2009 capital and operating expenses depending on the timing of our cash flows and capital requirements. For any large acquisitions or other exceptional expenditures, we expect we would need to access the public or private capital markets or complete additional asset sales. If our revenues and cash flows decrease in the future as a result of a continuation of the decline in commodity prices, however, and we are unable to obtain additional debt or equity financing in the private or public capital markets or access alternative sources of funds in 2009, we may be required to reduce the level of our capital expenditures and may lack the capital necessary to replace our reserves or maintain our production at current levels.

        Our future revenues, cash flows, and spending levels are subject to a number of factors, including commodity prices, the level of production from existing wells, and our success in developing and producing new wells. Further, our ability to access funds under our bank credit facilities is based on a global borrowing base, which is subject to periodic redeterminations based on our estimated proved reserves and prices that will be determined by our lenders using the prices prevailing at such time. If the prices for oil and natural gas decline, or if we have a downward revision in estimates of our proved reserves, the global borrowing base may be reduced. See Part II, Item 7—"Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Bank Credit Facilities" below, for more details.

        Our ability to access the private and public debt and equity markets and complete future asset monetization transactions is also dependent upon oil and natural gas prices, in addition to a number of other factors, some of which are outside our control. These factors include, among others:

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the value and performance of our debt and equity securities;

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the credit ratings assigned to our debt by independent rating agencies;

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domestic and global economic conditions; and

•

conditions in the domestic and global financial markets.

The continuing financial crisis may impact our business and financial condition. We may not be able to obtain funding in the capital markets on terms we find acceptable, or obtain funding under our current bank credit facilities because of the deterioration of the capital and credit markets and our global borrowing base.

        The current credit crisis and related turmoil in the global financial systems have had an impact on our business and our financial condition, and we may face challenges if economic and financial market conditions do not improve. Historically, we have used our cash flow from operations and borrowings under our bank credit facilities to fund our capital expenditures and have relied on the capital markets and asset monetization transactions to provide us with additional capital for large or exceptional transactions or to refinance debt obligations. A continuation of the economic crisis could further reduce the demand for oil and natural gas and continue to put downward pressure on the prices for oil and natural gas, which have declined significantly since oil prices reached historic highs and natural gas prices reached near historic highs in July 2008. These price declines have negatively impacted our revenues and cash flows.

        We currently have existing bank credit facilities with lender commitments totaling $1.8 billion and a global borrowing base set at $1.62 billion. The global borrowing base is determined by the lenders periodically and is based on the estimated value of our oil and gas properties using pricing models determined by the lenders at such time. Also, under the terms of our bank credit facilities, our global borrowing base will be immediately reduced by an amount equal to $0.30 for every $1.00 principal amount of senior notes issued in the future (excluding any senior notes that Forest may issue to refinance senior notes outstanding on May 9, 2008). For example, our borrowing base was recently

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lowered by $180 million to $1.62 billion as a result of a $600 million senior notes issuance on February 17, 2009. In the future, we may not be able to access adequate funding under our bank credit facilities as a result of (i) a decrease in our global borrowing base due to the outcome of a subsequent borrowing base redetermination, or (ii) an unwillingness or inability on the part of our lending counterparties to meet their funding obligations. The recent declines in commodity prices, or a continuing decline in these prices, could result in a determination to lower the global borrowing base in the future and, in such case, we could be required to repay any indebtedness in excess of the global borrowing base. The turmoil in the financial markets has adversely impacted the stability and solvency of a number of large global financial institutions.

        Although we were recently able to issue $600 million in senior notes, the current credit crisis has made it more difficult to obtain funding in the public and private capital markets. In particular, the cost of raising money in the debt and equity capital markets has increased substantially while the availability of funds from those markets generally has diminished significantly. Also, as a result of concerns about the general stability of financial markets and the solvency of specific counterparties, the cost of obtaining money from the credit markets has increased as many lenders and institutional investors have increased interest rates, imposed tighter lending standards, refused to refinance existing debt at maturity on terms similar to existing debt or at all, and reduced or, in some cases, ceased to provide any new funding.

        The credit crisis also has impacted the level of activity in the oil and gas property sales market. The lack of available credit and access to capital has limited and will likely continue to limit the parties interested in any proposed asset transactions and will likely reduce the values we could realize in those transactions. We were unable to complete all of our planned asset divestitures in the second half of 2008 due to the distressed market conditions, and we believe that it will be difficult to complete any asset monetization transactions in 2009 on economically attractive terms. While we hope to complete our planned asset divestitures by the end of 2010, there is no assurance that we will be able to complete these planned divestitures.

        The distressed economic conditions also may adversely affect the collectibility of our trade receivables. For example, our accounts receivable, which totaled $157 million at December 31, 2008, are primarily from purchasers of our oil and natural gas production and other exploration and production companies which own working interests in the properties that we operate. This industry concentration could adversely impact our overall credit risk, because our customers and working interest owners may be similarly affected by changes in economic and financial market conditions, commodity prices, and other conditions. Further, the credit crisis and turmoil in the financial markets could cause our commodity derivative instruments to be ineffective in the event a counterparty were unable to perform its obligations or seek bankruptcy protection.

        Due to these factors, we cannot be certain that funding, if needed, will be available to the extent required, or on acceptable terms. If we are unable to access funding when needed on acceptable terms, we may not be able to fully implement our business plans, complete new property acquisitions to replace our reserves, take advantage of business opportunities, respond to competitive pressures, or refinance our debt obligations as they come due, any of which could have a material adverse effect on our operations and financial results.

We have substantial indebtedness and may incur more debt in the future. Our leverage may materially affect our operations and financial condition.

        As of December 31, 2008, the principal amount of our outstanding consolidated debt was approximately $2.7 billion, which amount included approximately $1.3 billion outstanding under our

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combined U.S. and Canadian credit facilities. Our level of indebtedness has several important effects on our business and operations; among other things, it may:

•

require us to use a significant portion of our cash flow to pay principal and interest on the debt, which will reduce the amount available to fund working capital, capital expenditures, and other general corporate purposes;

•

adversely affect the credit ratings assigned by third party rating agencies, which have in the past and may in the future downgrade their ratings of our debt and other obligations due to changes in our debt level or our financial condition;

•

limit our access to the capital markets;

•

increase our borrowing costs, and impact the terms, conditions, and restrictions contained in our debt agreements, including the addition of more restrictive covenants;

•

limit our flexibility in planning for and reacting to changes in our business as covenants and restrictions contained in our existing and possible future debt arrangements may require that we meet certain financial tests and place restrictions on the incurrence of additional indebtedness;

•

place us at a disadvantage compared to similar companies in our industry that have less debt; and

•

make us more vulnerable to economic downturns and adverse developments in our business.

        We may incur more debt in the future. In February 2009, for example, we issued $600 million of 8¹/2% senior notes due 2014. The net proceeds from this offering were used to repay a portion of the outstanding borrowings under our U.S. credit facility.

        Our credit and debt agreements contain various restrictive covenants. A failure on our part to comply with the financial and other restrictive covenants contained in our bank credit facilities and the indentures pertaining to our outstanding senior notes could result in a default under these agreements. Any default under our bank credit facilities or indentures could adversely affect our business and our financial condition and results of operations, and would impact our ability to obtain financing in the future. In addition, the global borrowing base included in our bank credit facilities is subject to periodic redetermination by our lenders. A lowering of our global borrowing base could require us to repay indebtedness in excess of the borrowing base.

        A higher level of debt will increase the risk that we may default on our financial obligations. Our ability to meet our debt obligations and other expenses will depend on our future performance. Our future performance will be affected by oil and natural gas prices, financial, business, domestic and global economic conditions, governmental regulations and environmental regulations, and other factors, many of which we are unable to control. If our cash flow is not sufficient to service our debt, we may be required to refinance the debt, sell assets, or sell shares of our stock on terms that we do not find attractive, if it can be done at all.

Our use of hedging transactions could result in financial losses or reduce our income.

        To reduce our exposure to fluctuations in oil and natural gas prices, we have entered into and expect in the future to enter into derivative instruments (or hedging agreements) for a portion of our oil and natural gas production. Our commodity hedging agreements are limited in duration, usually for periods of two years or less; however, in conjunction with acquisitions, we sometimes enter into or acquire hedges for longer periods. As of February 25, 2009, we had hedged, via commodity swaps and

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collar instruments, approximately 83 Bcfe of our 2009 production and 40 Bcfe of our 2010 production. Our hedging transactions expose us to certain risks and financial losses, including, among others:

•

the risk that we may be limited in receiving the full benefit of increases in oil and natural gas prices as a result of these transactions;

•

the risk that we may hedge too much or too little production depending on how oil and natural gas prices fluctuate in the future;

•

the risk that there is a change to the expected differential between the underlying price and the actual price received; and

•

the risk that a counterparty to a hedging arrangement may default on its obligations to Forest.

        Our hedging transactions will impact our earnings in various ways. Due to the volatility of oil and natural gas prices, we may be required to recognize mark-to-market gains and losses on derivative instruments as the estimated fair value of our commodity derivative instruments is subject to significant fluctuations from period to period. The amount of any actual gains or losses recognized will likely differ from our period to period estimates and will be a function of the actual price of the commodities on the settlement date of the derivative instrument. For example, for the first two quarterly periods in 2008, we reported unrealized losses on our commodity derivative instruments of $137 million and $329 million, respectively. In contrast, for the third and fourth quarters of 2008, we reported unrealized gains on our commodity derivative instruments of $498 million and $185 million, respectively. We expect that commodity prices will continue to fluctuate in the future and, as a result, our periodic financial results will continue to be subject to fluctuations related to our derivative instruments.

        Currently, all of our outstanding commodity derivative instruments are with certain lenders or affiliates of the lenders under our bank credit facilities. As of February 25, 2009, our primary derivative counterparties included the following lenders and their affiliates: BMO Capital Markets Financing, Inc. ("BMO"), BNP Paribas, Barclays Bank PLC ("Barclays"), Credit Suisse, Deutsche Bank AG New York Branch ("Deutsche Bank"), Fortis Capital Corp. ("Fortis"), The Bank of Nova Scotia, Toronto Dominion (Texas) LLC and The Toronto-Dominion Bank (collectively, "Toronto Dominion"), and Wells Fargo Bank, N.A. ("Wells Fargo"). As of February 25, 2009, our derivative transactions with BMO, Credit Suisse, Fortis, The Bank of Nova Scotia, BNP Paribas and Toronto Dominion accounted for approximately 73 Bcfe, or 88% of our 2009 hedged production, and 32 Bcfe, or 82% of our 2010 hedged production. Our obligations under our existing derivative agreements with our lenders are secured by the security documents executed by the parties under our bank credit facilities.

Lower oil and gas prices and other factors have resulted, and in the future may result, in ceiling test write-downs and other impairments of our asset carrying values.

        We use the full cost method of accounting to report our oil and gas operations. Under this method, we capitalize the cost to acquire, explore for, and develop oil and gas properties. Under full cost accounting rules, the net capitalized costs of proved oil and gas properties may not exceed a "ceiling limit," which is based upon the present value of estimated future net cash flows from proved reserves, discounted at 10%. If net capitalized costs of proved oil and gas properties exceed the ceiling limit, we must charge the amount of the excess to earnings. This is called a "ceiling test write-down." Under the accounting rules, we are required to perform a ceiling test each quarter. A ceiling test write-down would not impact cash flow from operating activities, but it would reduce our shareholders' equity. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies, Estimates, Judgments, and Assumptions—Full Cost Method of Accounting" below, for further details.

        Investments in unproved properties, including capitalized interest costs, are also assessed periodically to ascertain whether impairment has occurred. Unproved properties whose costs are

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individually significant are assessed individually by considering the primary lease terms of the properties, the holding period of the properties, and geographic and geologic data obtained relating to the properties. The amount of impairment assessed, if any, is added to the costs to be amortized, or is reported as a period expense, as appropriate. If an impairment of unproved properties results in a reclassification to proved oil and gas properties, the amount by which the ceiling limit exceeds the capitalized costs of proved oil and gas properties would be reduced.

        We also assess the carrying amount of goodwill in the second quarter of each year and at other periods when events occur that may indicate an impairment exists. These events include, for example, a significant decline in oil and gas prices or a decline in our market capitalization.

        The risk that we will be required to write-down the carrying value of our oil and gas properties, our unproved properties, or goodwill increases when oil and gas prices are low or volatile. In addition, write-downs may occur if we experience substantial downward adjustments to our estimated proved reserves or our unproved property values, or if estimated future development costs increase. For example, oil and natural gas prices declined significantly during the second half of 2008. At December 31, 2008, the spot prices for oil and natural gas were $44.60 per barrel and $5.71 per MMBtu, respectively. Based on these prices, we recorded a non-cash ceiling test impairment of approximately $2.4 billion ($1.5 billion after-tax) for the three months and year ended December 31, 2008. The impairment is reflected as a charge to net earnings. Additional write-downs of the full cost pools in the United States and Canada may be required in 2009 if oil and natural gas prices stay at their current levels or decline further, unproved property values decrease, estimated proved reserve volumes are revised downward or costs incurred in exploration, development, or acquisition activities in the respective full cost pools exceed the discounted future net cash flows from the additional reserves, if any, attributable to each of the cost pools. Based on current prices, as of February 25, 2009, we believe it is likely we will record an additional ceiling test impairment in the first quarter of 2009.

Our proved reserves are estimates and depend on many assumptions. Any material inaccuracies in these assumptions could cause the quantity and value of our oil and gas reserves, and our revenue, profitability, and cash flow, to be materially different from our estimates.

        The proved oil and gas reserve information and the related future net revenues information contained in this report represent only estimates, which are prepared by our internal staff of engineers. Estimating quantities of proved oil and natural gas reserves is a subjective, complex process and depends on a number of variable factors and assumptions. To prepare estimates of economically recoverable oil and natural gas reserves and future net cash flows:

•

we analyze historical production from the area and compare it to production rates from other producing areas;

•

we analyze available technical data, including geological, geophysical, production, and engineering data, and the extent, quality, and reliability of this data can vary; and

•

we must make various economic assumptions, including assumptions about oil and natural gas prices, drilling, operating, and production costs, severance and excise taxes, capital expenditures, workover and remedial costs, and the availability of funds.

        As a result, these estimates are inherently imprecise. Ultimately, actual production, revenues, taxes, expenses, and expenditures relating to our reserves will vary from our estimates. Any significant inaccuracies in our assumptions or changes in operating conditions could cause the estimated quantities and net present value of the reserves contained in this Form 10-K to be different from our estimates. In addition, we may adjust our estimates of proved reserves to reflect production history, actual results, prevailing commodity prices, and other factors, many of which are beyond our control.

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        Further, you should not assume that any present value of future net cash flows from our producing reserves contained in this Form 10-K represents the market value of our estimated oil and natural gas reserves. We base the estimated discounted future net cash flows from our proved reserves on oil and natural gas prices and costs as of the date of the estimate. Actual future prices and costs may be materially higher or lower. Actual future net revenues will be affected by factors such as the amount and timing of actual development expenditures, the rate and timing of production, and changes in governmental regulations and, or taxes. At December 31, 2008, approximately 37% of our estimated proved reserves (by volume) were undeveloped. Recovery of undeveloped reserves generally requires significant capital expenditures and successful drilling operations. Our reserve estimates include the assumption that we will make significant capital expenditures to develop these undeveloped reserves and the actual costs, development schedule, and results associated with these properties may not be as estimated. In addition, the 10% discount factor that we use to calculate the net present value of future net revenues and cash flows may not necessarily be the most appropriate discount factor based on our cost of capital in effect from time to time and the risks associated with our business and the oil and gas industry in general.

Our failure to replace our reserves could result in a material decline in our reserves and production, which could adversely affect our financial condition.

        In general, our proved reserves decline when oil and natural gas is produced, unless we are able to conduct successful exploitation, exploration, and development activities, or acquire additional properties containing proved reserves, or both. Our future performance, therefore, is highly dependent upon our ability to find, develop, and acquire additional oil and natural gas reserves that are economically recoverable. Exploring for, developing, or acquiring reserves is capital intensive and uncertain. We may not be able to economically find, develop, or acquire additional reserves, or may not be able to make the necessary capital investments if our cash flows from operations decline or external sources of capital become limited or unavailable. We cannot assure you that our future exploitation, exploration, development, and acquisition activities will result in additional proved reserves or that we will be able to drill productive wells at acceptable costs. Further, the current economic crisis has adversely impacted our ability to obtain financing to fund acquisitions and has lowered the level of activity and depressed values in the oil and natural gas property sales market. See "—The continuing financial crisis may impact our business and financial condition. We may not be able to obtain funding in the capital markets on terms we find acceptable, or obtain funding under our current bank credit facilities because of the deterioration of the capital and credit markets and our global borrowing base," for a discussion of the impact of financial market conditions on our access to financing.

Drilling is a high-risk activity and may not result in commercially productive reserves.

        We do not always encounter commercially productive reservoirs through our drilling operations. The seismic data and other technologies that we use when drilling wells do not allow us to conclusively determine prior to drilling a well whether oil or natural gas is present or can be produced economically. As a result, we may drill new wells or participate in new wells that are dry wells or are productive but not commercially productive and, as a result, we may not recover all or any portion of our investment in the wells we drill or in which we participate.

        The costs and expenses of drilling, completing, and operating wells are often uncertain. The presence of unanticipated pressures or irregularities in formations, miscalculations, or accidents may cause our drilling costs to be significantly higher than expected or cause our drilling activities to be unsuccessful or result in the total loss of our investment. Also, our drilling operations may be shortened, delayed, or canceled as a result of a variety of factors, many of which are beyond our control, including, among others:

•

unexpected drilling conditions;

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•

geological irregularities or pressure in formations;

•

mechanical difficulties and equipment failures or accidents;

•

increases in the costs of, or shortages or delays in the availability of, drilling rigs and related equipment;

•

shortages in labor;

•

adverse weather conditions;

•

compliance with environmental and other governmental requirements;

•

fires, explosions, blow-outs, or surface cratering; and

•

restricted access to land necessary for drilling or laying pipelines.

        We conduct our drilling activities through a wholly owned drilling subsidiary that provides services to us and third parties. The activities conducted by the drilling subsidiary are subject to many risks, including well blow-outs, cratering and explosions, pipe failures, fires, uncontrollable flows of oil, natural gas, brine, or well fluids, other environmental hazards, and risks outside of our control, including the factors described above, and the risks associated with conducting drilling activities. Among other things, these risks include the risk of natural gas leaks, oil spills, pipeline ruptures, and discharges of toxic gases, any of which could result in substantial losses, personal injuries or loss of life, severe damage to or destruction of property, natural resources, and equipment, extensive pollution or other environmental damage, clean-up responsibilities, regulatory investigations, and administrative, civil, and criminal penalties, and injunctions resulting in the suspension of our operations. If any of these risks occur, we could sustain substantial losses.

Competition within our industry is intense and may adversely affect our operations.

        We operate in a highly competitive environment. We compete with major and independent oil and gas companies in acquiring desirable oil and gas properties and in obtaining the equipment and labor required to develop and operate such properties. We also compete with major and independent oil and gas companies in the marketing and sale of oil and natural gas. Many of these competitors are larger, including some of the fully integrated companies, have financial, staff, and other resources substantially greater than ours and, or are less leveraged than we are. As a result, these companies may have more access to capital and may be able to pay more for development prospects and producing properties, or evaluate and bid for a greater number of properties and prospects than our financial and staffing resources permit. Also, from time to time, we have to compete with financial investors in the property acquisition market, including private equity sponsors with more funds and access to additional liquidity. Factors that affect our ability to acquire properties include availability of desirable acquisition targets, staff and resources to identify and evaluate properties, available funds, and internal standards for minimum projected return on investment. Oil prices increased to historic levels and natural gas prices increased to near historic levels in 2008, before declining significantly. As commodity prices increased, so did the cost of equipment, service, and labor in the industry as well as the cost of properties available for acquisition. While commodity prices have dropped significantly, the costs of obtaining necessary equipment, services, and labor have not declined in a corresponding fashion, which impacts our cash flows and places us at a disadvantage with companies with greater cash flows and liquidity. In addition, oil and gas producers are increasingly facing competition from providers of non-fossil energy, and government policy may favor those competitors in the future. Many of these competitors have financial and other resources substantially greater than ours. We can give no assurance that we will be able to compete effectively in the future and that our financial condition and results of operations will not suffer as a result.

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Our growth depends partly on our ability to acquire oil and gas properties on a profitable basis.

        Acquisition of producing oil and gas properties has historically been a key element of maintaining and growing our reserves and production. Competition for these assets has been and will continue to be intense, and we have curtailed our acquisition efforts at the present time. The success of any acquisition will depend on a number of factors, including, among others:

•

the acquisition price;

•

future oil and gas prices;

•

our ability to reasonably estimate or assess the recoverable volumes of reserves;

•

rates of future production and future net revenues attainable from reserves;

•

future operating and capital costs;

•

our ability to promptly integrate the new operations with Forest's operations;

•

results of future exploitation, exploration, and development activities on the acquired properties; and

•

future abandonment and possible future environmental liabilities.

        There are numerous uncertainties inherent in estimating quantities of proved oil and gas reserves, future production rates, and associated costs and potential liabilities with respect to prospective acquisition targets. Actual results from an acquisition may vary substantially from those assumed in the purchase analysis, and acquired properties may not produce as expected; or there may be conditions that subject us to increased costs and liabilities, including environmental liabilities. See "—The continuing financial crisis may impact our business and financial condition. We may not be able to obtain funding in the capital markets on terms we find acceptable, or obtain funding under our current bank credit facilities because of the deterioration of the capital and credit markets and our global borrowing base," for a discussion of the impact of the financial market conditions on our access to financing.

Our international operations may be adversely affected by currency fluctuations and economic and political developments.

        We currently have oil and gas properties and operations in Canada, Italy, and South Africa. As a result, we are exposed to the risks of international operations, including political and economic developments, royalty and tax increases, changes in laws or policies affecting our exploration and development activities, and currency exchange risks, as well as changes in the policies of the United States affecting trade, taxation, and investment in other countries.

        We have significant operations in Canada. In 2008, the revenues and expenses of such operations represented approximately 15% of our consolidated oil and gas revenues and 18% of our consolidated production costs. The revenues and expenses of these operations are denominated in Canadian dollars. As a result, the profitability of our Canadian operations is subject to the risk of fluctuation in the exchange rates between the U.S. dollar and Canadian dollar. In addition, our Canadian operations may be adversely affected by recent regulatory developments.

        The majority of our Canadian operations are located in Alberta, Canada, and in October 2007, the Alberta Government announced a new oil and gas royalty framework. The new framework went into effect on January 1, 2009. Under the new Alberta framework, royalties for conventional oil, natural gas, and bitumen are linked to price and production levels that apply to both new and existing conventional oil and gas activities and oil sands projects. The new framework applies a sliding rate formula to determine conventional oil and natural gas royalties, which are dependent on market prices and production volumes. Royalty rates for conventional oil will range from 0% to 50%. New natural gas

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royalty rates will range from 5% to 50%. In comparison, under the prior royalty regime, royalty rates ranged from 10% to 35% for conventional oil and from 5% to 35% for natural gas.

        We currently conduct drilling and related exploration and development activities in Italy and are conducting related types of activities in South Africa. These activities may be adversely affected by political, economic, and regulatory developments, changes in the local royalty and tax regimes, and currency fluctuations.

Part of our strategy includes drilling in new or emerging plays. As a result, our drilling in these areas is subject to greater risk and uncertainty.

        We have an internal group that is responsible for identifying and exploiting exploratory drilling in new or emerging plays. These activities are more uncertain than drilling in areas that are developed and have established production. Because emerging plays and new formations have limited or no production history, we are less able to use past drilling results to help predict future results. The lack of historical information may result in not being able to fully execute our expected drilling programs in these areas, or the return on investment in these areas may turn out not be as attractive as anticipated. We cannot assure you that our future drilling activities in Quebec or other emerging plays will be successful or, if successful, will achieve the resource potential levels that we currently anticipate based on the drilling activities that have been completed or will achieve the anticipated economic returns based on our current cost models.

Our oil and gas operations are subject to various environmental and other governmental laws and regulations that materially affect our operations.

        Our oil and gas operations are subject to various U.S. federal, state, and local laws and regulations, Canadian federal, provincial, and local laws and regulations, and local and federal laws and regulations in Italy and South Africa. These laws and regulations may be changed in response to economic or political conditions. Matters subject to governmental regulation include the discharge or other release into the environment of wastes and other substances in connection with drilling and production activities, bonds or other financial responsibility requirements to cover drilling contingencies and well plugging and abandonment costs, reports concerning our operations, the spacing of wells, unitization and pooling of properties, and taxation. Failure to comply with these laws and regulations may result in the assessment of administrative, civil, and criminal penalties, the imposition of remedial obligations, and the issuance of injunctions that could delay, limit, or prohibit certain of our operations. At various times, regulatory agencies have imposed price controls and limitations on oil and gas production. In order to conserve supplies of oil and gas, these agencies may restrict the rates of flow of oil and gas wells below actual production capacity. Further, a significant spill from one of our facilities could have a material adverse effect on our results of operations, competitive position, or financial condition. The laws in the United States, Canada, Italy, and South Africa regulate, among other things, the production, handling, storage, transportation, and disposal of oil and gas, by-products from oil and gas, and other substances and materials produced or used in connection with oil and gas operations. We cannot predict the ultimate cost of compliance with these requirements or their effect on our operations. We may not be able to recover some or any of these costs from insurance.

        Canada and Italy are signatories to the United Nations Framework Convention on Climate Change and have ratified the Kyoto Protocol established thereunder to set legally binding targets to reduce nation-wide emissions of carbon dioxide, methane, nitrous oxide and other greenhouse gases ("GHG"). In response to the Kyoto Protocol, the Canadian federal government introduced the Regulatory Framework for Air Emissions (the "Regulatory Framework") for regulating GHG emissions by establishing mandatory emissions reduction requirements on a sector basis. Sector-specific regulations are expected to come into force in 2010, but the Regulatory Framework is expected to allow emissions trading, which would enable regulated sources of GHG emissions to purchase emissions allowances or

27

emission reduction credits from other sources. Similar GHG emission reduction requirements apply to our operations in Italy. Additionally, GHG regulation can take place at the provincial and municipal level. For example, Alberta introduced the Climate Change and Emissions Management Act, which provides a framework for managing GHG emissions by reducing specified gas emissions, relative to gross domestic product, to an amount that is equal to or less than 50% of 1990 levels by December 31, 2020 and which imposes duties to report. The accompanying regulation, the Specified Gas Emitters Regulation, effective July 1, 2007, requires mandatory emissions reductions through the use of emissions intensity targets. The Canadian federal government proposes to enter into equivalency agreements with provinces that establish a regulatory regime to ensure consistency with the federal plan. The success of any such plan appears to be doubtful in the current political climate, leaving multiple overlapping levels of regulation. The direct and indirect costs of these regulations may adversely affect our operations and financial results.

        In addition, the U.S. Congress is considering legislation to reduce emissions of GHGs, and more than one-third of the states, either individually or through multi-state initiatives, already have begun implementing legal measures to reduce emissions of GHGs. Also, the U.S. Supreme Court's holding in its 2007 decision, Massachusetts, et al. v. EPA, that carbon dioxide may be regulated as an "air pollutant" under the federal Clean Air Act could result in future regulation of GHG emissions from stationary sources, even if Congress does not adopt new legislation specifically addressing emissions of GHGs. In July 2008, the United States Environmental Protection Agency released an "Advance Notice of Proposed Rulemaking" regarding possible future regulation of GHG emissions under the Clean Air Act. Although the notice did not propose any specific, new regulatory requirements for GHGs, it indicates that federal regulation of GHG emissions could occur in the near future. While it is not possible at this time to predict how legislation or new regulations that may be adopted in the United States to address GHG emissions would impact our business, any such future laws and regulations could result in increased compliance costs or additional operating restrictions, and could have an adverse effect on demand for the oil and natural gas that we produce.

The marketability of our production is dependent upon transportation and processing facilities over which we may have no control.

        The marketability of our production depends in part upon the availability, proximity, and capacity of pipelines, natural gas gathering systems, and processing facilities. Any significant change in market factors affecting these infrastructure facilities, as well as delays in the construction of new infrastructure facilities, could harm our business. We deliver the majority of our oil and natural gas through gathering facilities that we do not own or operate. As a result, we are subject to the risk that these facilities may be temporarily unavailable due to mechanical reasons or market conditions, or may not be available to us in the future. If we experience interruptions or loss of pipeline or access to gathering systems that impact a substantial amount of our production, it could temporarily have an adverse impact on our cash flow.

We may not be insured against all of the operating risks to which our businesses are exposed.

        The exploration, development, and production of oil and natural gas and the activities performed by our drilling subsidiary and gas gathering subsidiary involve risks. These operating risks include the risk of fire, explosions, blow-outs, pipe failure, damaged drilling and oil field equipment, abnormally pressured formations, and environmental hazards. Environmental hazards include oil spills, gas leaks, pipeline ruptures, or discharges of toxic gases. If any of these industry operating risks occur, we could have substantial losses. Substantial losses may be caused by injury or loss of life, severe damage to or destruction of property, natural resources, and equipment, pollution or other environmental damage, clean-up responsibilities, regulatory investigation and penalties, and suspension of operations. In accordance with industry practice, we maintain insurance against some, but not all, of the risks

28

described above. Generally, pollution related environmental risks are not fully insurable. We do not insure against business interruption. We cannot assure that our insurance will be fully adequate to cover other losses or liabilities. Also, we cannot predict the continued availability of insurance at premium levels that justify its purchase.

Our Restated Certificate of Incorporation and Bylaws have provisions that discourage corporate takeovers.

        Certain provisions of our Restated Certificate of Incorporation and Bylaws and provisions of the New York Business Corporation Law may have the effect of delaying or preventing a change in control. Our directors are elected to staggered terms. Also, our Restated Certificate of Incorporation authorizes our board of directors to issue preferred stock without shareholder approval and to set the rights, preferences, and other designations, including voting rights of those shares as the board may determine. Additional provisions include restrictions on business combinations, the availability of authorized but unissued common stock, and notice requirements for shareholder proposals and director nominations. Also, our board of directors has adopted a shareholder rights plan. If activated, this plan would cause extreme dilution to any person or group that attempts to acquire a significant interest in Forest without advance approval of our board of directors. The provisions contained in our Bylaws and Restated Certificate of Incorporation, alone or in combination with each other and with the shareholder rights plan, may discourage transactions involving actual or potential changes of control.

Item 1B.    Unresolved Staff Comments.

        As of December 31, 2008, we did not have any SEC staff comments that have been unresolved for more than 180 days.

Item 2.    Properties.

        Information on Properties is contained in Item 1 of this Form 10-K.

Item 3.    Legal Proceedings.

        We are a party to various lawsuits, claims, and proceedings in the ordinary course of business. These proceedings are subject to uncertainties inherent in any litigation, and the outcome of these matters is inherently difficult to predict with any certainty. We believe that the amount of any potential loss associated with these proceedings would not be material to our consolidated financial position; however, in the event of an unfavorable outcome, the potential loss could have an adverse effect on our results of operations and cash flow in the reporting periods in which any such actions are resolved.

Item 4.    Submission of Matters to a Vote of Security Holders.

        No matter was submitted to a vote of our shareholders during the fourth quarter of the fiscal year ended December 31, 2008.

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Item 4A.    Executive Officers of Forest.

        The following persons were serving as executive officers of Forest as of February 25, 2009.

Name	Age		Years with Forest		Office(1)
H. Craig Clark		52		8	President and Chief Executive Officer, and a member of the Board of Directors since July 2003. Mr. Clark joined Forest in September 2001 and served as President and Chief Operating Officer through July 2003. Mr. Clark was employed by Apache Corporation, an oil and gas exploration and production company, from 1989 to 2001, where he served in various management positions including Executive Vice President—U.S. Operations and Chairman and Chief Executive Officer of Pro Energy, an affiliate of Apache.
David H. Keyte		52		21	Executive Vice President and Chief Financial Officer since November 1997. Mr. Keyte served as our Vice President and Chief Financial Officer from December 1995 to November 1997 and our Vice President and Chief Accounting Officer from December 1993 until December 1995.
J.C. Ridens		53		5	Executive Vice President and Chief Operating Officer since November 2007. Since joining Forest in April 2004, Mr. Ridens has served as Senior Vice President for the Gulf Region, the Southern Region and most recently the Western Region. From 2001 to 2004, Mr. Ridens was employed by Cordillera Energy Partners, LLC, as Vice President of Operations and Exploitation. From 1996 to 2001, he served in various capacities at Apache Corporation.
Cecil N. Colwell		58		20	Senior Vice President, Worldwide Drilling since May 2004. Between 2000 and May 2004, Mr. Colwell served as our Vice President, Drilling, and from 1988 to 2000 he served as our Drilling Manager, Gulf Coast.
Leonard C. Gurule		52		6	Senior Vice President since September 2003. From 1987 to 2000, he served in various capacities at Atlantic Richfield Co. Before joining Forest, Mr. Gurule served on the boards of several local community and non-profit organizations and managed his own portfolio.
Cyrus D. Marter IV		45		7	Senior Vice President, General Counsel and Secretary since November 2007. Mr. Marter served as Vice President, General Counsel and Secretary from January 2005 to November 2007, as Associate General Counsel from October 2004 to January 2005, and as Senior Counsel from June 2002 until October 2004. Prior to joining Forest, Mr. Marter was a partner of the law firm of Susman Godfrey L.L.P. in Houston, Texas.
Glen J. Mizenko		46		8	Senior Vice President, Business Development and Engineering since May 2007. Mr. Mizenko joined Forest in January 2001 as Manager Corporate Development and New Ventures. In October 2003, he was promoted to the position of Director, Business Development. In May 2005, he was promoted to Vice President, Business Development. Prior to joining Forest, Mr. Mizenko held various positions in reservoir engineering, reserves reporting, development planning, and operations management with Shell Oil, Benton Oil & Gas, and British Borneo Oil and Gas PLC.
Mark E. Bush		49		11	Vice President, Eastern Region since April 2007. Mr. Bush joined Forest in June 1997 as Production Engineer in the Gulf of Mexico Region and was subsequently promoted to Offshore Production Engineering Manager and Production Engineering Manager, both in the Gulf Coast Region and its successor, the Eastern Region. Prior to joining Forest Oil, he worked for Oryx Energy Company (formerly Sun E&P) in various production engineering assignments in the Gulf of Mexico and South Texas.
Stephen T. Harpham		47		7	Vice President, Western Region since November 2007. Mr. Harpham joined Forest in January 2002 and served as a Reservoir Engineer and subsequently Reservoir Engineering Manager. Prior to joining Forest, Mr. Harpham was a Technical Advisor with Ensign Oil & Gas Inc.
Ronald C. Nutt		51		2	Vice President, Southern Region since July 2007. Prior to joining Forest, from March 2007 to July 2007, Mr. Nutt worked for Constellation Energy Group, and from January 2003 to March 2007 at Scotia Waterous as Vice President, Engineering.

30

Name	Age		Years with Forest		Office(1)
Victor A. Wind		35		4	Corporate Controller since January 2005. Mr. Wind was previously employed by Evergreen Resources, Inc. from July 2001 to December 2004. He served in various management positions during this period, including Director of Financial Reporting and Controller. From 1997 to 2001, he served in various capacities at BDO Seidman, LLP.

⁽¹⁾

Officers are elected to serve for one-year terms at meetings immediately following the last annual meeting, or until their death, resignation, or removal from office, whichever first occurs.

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PART II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Common Stock

        Forest has one class of common shares outstanding, its common stock, par value $.10 per share ("Common Stock"). Forest's Common Stock is traded on the New York Stock Exchange under the symbol "FST." On February 20, 2009, our Common Stock was held by 1,150 holders of record. The number of holders does not include the shareholders for whom shares are held in a "nominee" or "street" name.

        The table below reflects the high and low intraday sales prices per share of the Common Stock on the New York Stock Exchange composite tape. There were no cash dividends declared on the Common Stock in 2007 or 2008. On February 25, 2009, the closing price of Forest Common Stock was $14.45.

		Common Stock
		High		Low
2007	First Quarter	$	34.25		28.84
	Second Quarter		45.05		33.26
	Third Quarter		44.72		37.43
	Fourth Quarter		52.25		42.78
2008	First Quarter	$	52.22		40.85
	Second Quarter		76.20		47.26
	Third Quarter		83.10		45.31
	Fourth Quarter		49.10		12.00

Dividend Restrictions

        Forest's present or future ability to pay dividends is governed by (i) the provisions of the New York Business Corporation Law, (ii) Forest's Restated Certificate of Incorporation and Bylaws, (iii) the indentures concerning Forest's 8% senior notes due 2011, Forest's 7³/4% senior notes due 2014, Forest's 8¹/2% senior notes due 2014, and Forest's 7¹/4% senior notes due 2019, and (iv) Forest's United States and Canadian bank credit facilities dated as of June 6, 2007, as amended. The provisions in the indentures pertaining to these senior notes and in the bank credit facilities limit our ability to make restricted payments, which include dividend payments. On March 2, 2006, Forest distributed a special stock dividend in connection with the spin-off; however, Forest has not paid cash dividends on its Common Stock during the past five years. The future payment of cash dividends, if any, on the Common Stock is within the discretion of the Board of Directors and will depend on Forest's earnings, capital requirements, financial condition, and other relevant factors. There is no assurance that Forest will pay any cash dividends. See Note 2 to the Consolidated Financial Statements for more details concerning the special stock dividend on March 2, 2006. For further information regarding our equity securities and our ability to pay dividends on our Common Stock, see Notes 4 and 6 to the Consolidated Financial Statements.

        For equity compensation plan information, see Part III, Item 12—"Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters."

Issuer Purchases of Equity Securities

        The table below sets forth information regarding repurchases of our Common Stock during the quarter and year ended December 31, 2008. The shares repurchased represent shares of our Common

32

Stock that employees elected to surrender to Forest to satisfy their tax withholding obligations upon the vesting of shares of restricted stock. Forest does not consider this a share buyback program.

Period	Total # of Shares Purchased		Average Price Per Share		Total # of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum # (or Approximate Dollar Value) of Shares that May yet be Purchased Under the Plans or Programs
January 2008		11,560	$	46.05		—		—
February 2008		—		—		—		—
March 2008		—		—		—		—
April 2008		1,804		56.81		—		—
May 2008		1,644		64.45		—		—
June 2008		932		71.27		—		—
July 2008		150		68.18		—		—
August 2008		1,741		52.40		—		—
September 2008		99		53.05		—		—
October 2008		—		—		—		—
November 2008		1,380		22.35		—		—
December 2008		152,885		17.77		—		—
Fourth Quarter Total		154,265		17.81		—		—
2008 Total		172,195		21.26		—		—

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Stock Performance Graph

        The graph below shows the cumulative total shareholder return assuming the investment of $100 on December 31, 2003 (and the reinvestment of dividends thereafter) in each of Forest Common Stock, the S&P 500 Index, and the Dow Jones U.S. Exploration and Production Index. We believe that the Dow Jones U.S. Exploration and Production Index is meaningful, because it is an independent, objective view of the performance of other similarly-sized energy companies.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Forest Oil Corporation, The S&P 500 Index
And The Dow Jones U.S. Exploration & Production Index

*$100 Invested on 12/31/03 in stock or index-including reinvestment of dividends. Fiscal year ending December 31.

        The information in this Form 10-K appearing under the heading "Stock Performance Graph" is being furnished pursuant to Item 201(e) of Regulation S-K and shall not be deemed to be "soliciting material" or "filed" with the SEC or subject to Regulation 14A or 14C, other than as provided in Item 201(e) of Regulation S-K, or to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended.

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Item 6.    Selected Financial Data.

        The following table sets forth selected financial and operating data of Forest as of and for each of the years in the five-year period ended December 31, 2008. This data should be read in conjunction with Part II, Item 7—"Management's Discussion and Analysis of Financial Condition and Results of Operations," below, and the Consolidated Financial Statements and Notes thereto. On June 6, 2007, Forest completed the acquisition of The Houston Exploration Company. On August 27, 2007, we sold all of our Alaska assets. On March 2, 2006, Forest completed the spin-off of its offshore Gulf of Mexico operations. See Note 2 to the Consolidated Financial Statements.

		Year Ended December 31,
		2008			2007		2006		2005		2004
		(In Thousands, Except Per Share Amounts, Volumes, and Prices)
FINANCIAL DATA
Revenues		$	1,647,163			1,083,892		819,992		1,072,045		912,898
Earnings (loss) from continuing operations			(1,026,323	)		169,306		166,080		151,568		123,126
Income (loss) from discontinued operations, net of tax(1)			—			—		2,422		—		(575	)
Net earnings (loss)		$	(1,026,323	)		169,306		168,502		151,568		122,551
Basic earnings (loss) per share:
	Earnings (loss) from continuing operations	$	(11.46	)		2.22		2.67		2.47		2.16
	Income (loss) from discontinued operations, net of tax		—			—		.04		—		(.01	)
	Basic earnings (loss) per common share	$	(11.46	)		2.22		2.71		2.47		2.15
Diluted earnings (loss) per share:
	Earnings (loss) from continuing operations	$	(11.46	)		2.18		2.62		2.41		2.12
	Income (loss) from discontinued operations, net of tax		—			—		.04		—		(.01	)
	Diluted earnings (loss) per common share	$	(11.46	)		2.18		2.66		2.41		2.11
Total assets		$	5,282,798			5,695,548		3,189,072		3,645,546		3,122,505
Long-term debt		$	2,735,661			1,503,035		1,204,709		884,807		888,819
Shareholders' equity		$	1,672,912			2,411,811		1,434,006		1,684,522		1,472,147
OPERATING DATA
Annual production:
	Gas (MMcf)		141,433			108,042		73,024		101,833		107,366
	Liquids (MBbls)		8,031			7,945		8,026		10,568		10,837
Average sales price(2):
	Gas (per Mcf)	$	7.45			5.79		5.58		6.36		5.34
	Liquids (per Bbl)	$	73.96			57.54		50.70		39.23		31.05

⁽¹⁾

Discontinued operations relate to the sale of the business assets of our Canadian marketing subsidiary on March 1, 2004.

⁽²⁾

Includes the effects of hedging under cash flow hedge accounting in 2004 to 2006.

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Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations.

        All expectations, forecasts, assumptions, and beliefs about our future financial results, condition, operations, strategic plans, and performance are forward-looking statements, as described in more detail in Part I, Item 1 under the heading "Forward-Looking Statements." Our actual results may differ materially because of a number of risks and uncertainties. Some of these risks and uncertainties are detailed in Part I, Item 1A—"Risk Factors," and elsewhere in this Form 10-K. Historical statements made herein are accurate only as of the date of filing of this Form 10-K with the SEC, and may be relied upon only as of that date.

        The following discussion and analysis should be read in conjunction with Forest's Consolidated Financial Statements and the Notes to Consolidated Financial Statements.

Overview

        Forest is an independent oil and gas company engaged in the acquisition, exploration, development, and production of natural gas and liquids primarily in North America. Forest was incorporated in New York in 1924, as the successor to a company formed in 1916, and has been a publicly held company since 1969. We currently conduct our operations in three geographical segments and five business units. The geographical segments are: the United States, Canada, and International. The business units are: Western, Eastern, Southern, Canada, and International. We conduct exploration and development activities in each of our geographical segments; however, substantially all of our estimated proved reserves and all of our producing properties are located in North America. Forest's total estimated proved reserves as of December 31, 2008 were approximately 2,668 Bcfe. At December 31, 2008, approximately 87% of our estimated proved oil and gas reserves were in the United States, approximately 11% were in Canada, and approximately 2% were in Italy.

2008 Highlights

        Forest's 2008 highlights were as follows:

•

Oil and gas production in 2008 increased 22% to 190 Bcfe from 156 Bcfe in 2007 and oil and natural gas revenues increased 52% to $1.6 billion from $1.1 billion in 2007.

•

Forest's year-end estimated proved reserves were a record 2,668 Bcfe, 26% higher than 2007's year-end estimated proved reserves of 2,119 Bcfe, as a result of current year acquisitions and additional discoveries despite negative reserve revisions of 213 Bcfe due primarily to significantly lower year-end spot prices. The significant decline in year-end spot prices triggered a non-cash $2.4 billion ($1.5 billion after-tax) ceiling test write-down as of December 31, 2008.

•

Completed several key acquisitions of oil and gas properties in our existing core areas in the Texas Panhandle, East Texas, North Louisiana, and South Texas. In total, we acquired 512 Bcfe of estimated proved reserves for approximately $1.4 billion during 2008. See Note 2 to the Consolidated Financial Statements for more information on our recent acquisition program.

•

Sold non-core oil and gas properties with estimated proved reserves of 93 Bcfe for cash proceeds of $310 million, including $24 million for our unproven oil and gas properties in Gabon.

2009 Strategy and Outlook

        Due to the recent downturn in the global economy as well as the dramatic decrease in oil and natural gas prices, we have chosen to significantly reduce our capital expenditures and drilling activity in 2009. Our goal in 2009 will be to keep our exploration and development capital expenditures within our cash flow from operations, while maintaining our estimated proved reserve base and production, protecting against lease expirations and non-consent penalties, and continuing to focus on cost control.

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        We plan to devote over one-third of our capital spending in 2009 to horizontal drilling in our Ark-La-Tex and Greater Buffalo Wallow core areas. We expect this horizontal drilling to generate rates of return acceptable to us in the current price and cost environment. We also plan to rely almost exclusively on our drilling subsidiary, Lantern, to drill our wells rather than employing third-party drilling rigs whenever possible.

        We have a divestiture program which was commenced in 2008 with an announced intention to sell $450 million to $750 million of oil and gas assets that are considered non-core to Forest. Due to the current economic conditions, this program has been delayed. We hope to complete these divestitures by the end of 2010, assuming market conditions and property valuations improve, but cannot predict whether we will be able to complete any asset divestitures. If divestitures are completed, we intend to use the proceeds to reduce debt.

        By keeping our 2009 capital spending within our cash flow from operations, we hope to maintain financial flexibility and sufficient liquidity to maintain our assets and operations until margins on oil and gas production improve. In order to preserve significant borrowing capacity and flexibility under our bank credit facilities, we recently issued $600 million in senior notes due 2014 and used the net proceeds to pay down borrowings on the facilities.

        Due to the decline in the market price for oil and natural gas, Forest believes that our 2009 earnings and operating cash flow will decrease significantly compared to 2008. We also expect equipment, service, and fuel costs to decrease, but not enough to offset the decline in oil and natural gas revenues.

Results of Operations

        For the year ended December 31, 2008, Forest reported a net loss of $1.0 billion, or a loss of $11.46 per basic share, compared to net earnings of $169 million, or earnings of $2.22 per basic share, in 2007. The decrease in net earnings in 2008 compared to 2007 was due to a $2.4 billion ($1.5 billion after-tax) non-cash ceiling test impairment we recorded in the fourth quarter 2008, which was caused by the significant decline in year-end spot commodity prices. The ceiling test impairment offset significant increases in revenues, which had resulted from higher volumes at increased oil and natural gas prices.

        For each of the years ended December 31, 2007 and 2006, Forest reported net earnings of $169 million, or $2.22 per basic share in 2007 and $2.71 per basic share in 2006. Earnings from operations were $388 million for the year ended December 31, 2007 as compared to $273 million for the year ended December 31, 2006. Earnings from operations in 2007 were $115 million higher than in 2006 primarily due to higher revenues attributable mainly to the acquisition of Houston Exploration in June 2007.

        Discussion of the components of the changes in our annual results follows. Comparability between 2008 and 2007, as well as between 2007 and 2006, was significantly impacted by our acquisition of Houston Exploration in June 2007 and the sale of the Alaska assets in August 2007. Details for the acquisition and divestiture transactions are included in Note 2 to the Consolidated Financial Statements.

Oil and Gas Production and Revenues

        Oil and gas production volumes, revenues, and weighted average sales prices, by product and location for the years ended December 31, 2008, 2007, and 2006, are set forth in the table below. This

37

table does not include miscellaneous marketing and processing revenues of $1 million and $6 million for the years ended December 31, 2007 and 2006, respectively.

		Year Ended December 31,
		2008								2007								2006
		Gas		Oil		NGLs		Total		Gas		Oil		NGLs		Total		Gas			Oil			NGLs		Total
		(MMcf)		(MBbls)		(MBbls)		(MMcfe)		(MMcf)		(MBbls)		(MBbls)		(MMcfe)		(MMcf)			(MBbls)			(MBbls)		(MMcfe)
Production volumes:
	United States		118,120		3,778		3,151		159,694		82,963		4,504		2,381		124,273		48,674			5,243			1,644		89,996
	Canada		23,313		802		300		29,925		25,079		793		267		31,439		24,350			739			400		31,184
Totals			141,433		4,580		3,451		189,619		108,042		5,297		2,648		155,712		73,024			5,982			2,044		121,180
Revenues (In Thousands):
	United States	$	890,417		365,913		140,339		1,396,669		493,321		305,873		93,624		892,818		302,050			326,024			52,636		680,710
	Canada		162,769		69,520		18,213		250,502		132,601		46,037		11,625		190,263		123,408			37,605			16,559		177,572
	Total before hedging		1,053,186		435,433		158,552		1,647,171		625,922		351,910		105,249		1,083,081		425,458			363,629			69,195		858,282
	Less hedging effects(1)		—		—		—		—		—		—		—		—		(17,893	)		(25,920	)		—		(43,813	)
Totals		$	1,053,186		435,433		158,552		1,647,171		625,922		351,910		105,249		1,083,081		407,565			337,709			69,195		814,469
Average sales price:
	United States	$	7.54		96.85		44.54		8.75		5.95		67.91		39.32		7.18		6.21			62.18			32.02		7.56
	Canada		6.98		86.68		60.71		8.37		5.29		58.05		43.54		6.05		5.07			50.89			41.40		5.69
	Combined		7.45		95.07		45.94		8.69		5.79		66.44		39.75		6.96		5.83			60.79			33.85		7.08
	Less hedging effects(1)		—		—		—		—		—		—		—		—		(.25	)		(4.34	)		—		(.36	)
Totals		$	7.45		95.07		45.94		8.69		5.79		66.44		39.75		6.96		5.58			56.45			33.85		6.72

⁽¹⁾

Commodity swaps and collars accounted for as cash flow hedges. See Part II, Item 7A—"Quantitative and Qualitative Disclosures about Market Risk" below concerning our hedging activities.

Production Volumes and Oil and Gas Revenues

        Net oil and gas production in 2008 was 189.6 Bcfe, or an average of 518 MMcfe per day, a 22% increase from 155.7 Bcfe, or an average of 427 MMcfe per day, in 2007. The net increase in oil and gas production in 2008 was primarily attributable to continued drilling and acquisition activity, partially offset by normal production declines on existing wells and the sale of the Alaska assets in August 2007. Oil and natural gas revenues in 2008 were $1.6 billion, a 52% increase as compared to $1.1 billion in 2007. The increase in oil and natural gas revenues of $564 million was due to the 22% increase in production and a 25% increase in the average realized sales price, which increased to $8.69 per Mcfe in 2008 from $6.96 per Mcfe in 2007.

        Net oil and gas production in 2007 was 155.7 Bcfe, or an average of 427 MMcfe per day, a 28% increase from 121.2 Bcfe, or an average of 332 MMcfe per day, in 2006. The net increase in oil and gas production was primarily attributable to the additional production from drilling activities and from the Houston Exploration acquisition in June 2007, which was partially offset by the spin-off of our offshore Gulf of Mexico properties in early March 2006, the sale of the Alaska assets in August 2007, and normal production declines on existing wells. Oil and natural gas revenues before hedging effects in 2007 were $1.1 billion, a 26% increase as compared to $858 million in 2006. The increase in oil and natural gas revenues before hedging effects of $225 million was due to the 28% increase in production, offset by a 2% decrease in the average realized sales price (before the effects of hedging), to $6.96 per Mcfe in 2007 from $7.08 per Mcfe in 2006.

Hedge Effects

        The table above also presents the effects of the derivative instruments (e.g., commodity swaps and collars) that we designated as cash flow hedges in 2006. Beginning in March 2006, we elected to discontinue the use of cash flow hedge accounting for all of our commodity derivatives. Accordingly,

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gains or losses recognized (i.e., cash settlements) in connection with hedging activities for the majority of 2006 and all of 2007 and 2008 are reflected in "Realized and unrealized gains and losses on derivative instruments" under Other income and expense in our Consolidated Statements of Operations rather than being included as part of Revenues. See Realized and Unrealized Gains and Losses—Derivative Instruments below for information on gains and losses recognized on derivative instruments not designated as cash flow hedges during the last three years.

Oil and Gas Production Expense

        The table below sets forth the detail of oil and gas production expense for the years ended December 31, 2008, 2007, and 2006:

	Year Ended December 31,
	2008		2007		2006
	(In Thousands, Except per Mcfe Data)
Production expense:
Lease operating expenses	$	167,830		167,473		154,874
Production and property taxes		82,147		55,264		39,041
Transportation and processing costs		19,472		20,200		21,876
Production expense	$	269,449		242,937		215,791
Production expense per Mcfe:
Lease operating expenses	$	.89		1.08		1.28
Production and property taxes		.43		.35		.32
Transportation and processing costs		.10		.13		.18
Production expense per Mcfe	$	1.42		1.56		1.78

Lease Operating Expenses

        Lease operating expenses in 2008 were consistent with 2007 levels despite a 22% increase in production volumes. On a per-Mcfe basis, lease operating expenses decreased 18% to $.89 per Mcfe in 2008 from $1.08 per Mcfe in 2007. Lease operating expenses were $167 million in 2007, an increase of 8% compared to $155 million in 2006. On a per-Mcfe basis, lease operating expenses decreased 16% to $1.08 per Mcfe in 2007 from $1.28 per Mcfe in 2006. The decrease in lease operating expenses on a per-Mcfe basis for each period was primarily due to lower average per-unit lease operating expenses from the assets acquired from Houston Exploration in June 2007, the divestiture of the Alaska assets in August 2007, and cost control initiatives.

Production and Property Taxes

        Production and property taxes, which primarily consist of severance taxes paid on the value of the oil and gas produced, generally fluctuate proportionately to our oil and gas revenues. As a percentage of oil and natural gas revenue, excluding hedging losses included as a reduction of oil and natural gas revenues in 2006, production and property taxes were 5.0%, 5.1%, and 4.5% for the years ended December 31, 2008, 2007, and 2006, respectively. Normal fluctuations will occur between periods based on the approval of incentive tax credits in Texas, changes in tax rates, and changes in the assessed values of property and equipment for purposes of ad valorem taxes.

Transportation and Processing Costs

        Transportation and processing costs were $19 million, or $.10 per Mcfe, in 2008 compared to $20 million, or $.13 per Mcfe, in 2007. The per-unit decrease was primarily due to lower per-unit

39

transportation costs recognized in 2008 as a result of the sale of the Alaska assets in August 2007. Transportation and processing costs were $20 million, or $.13 per Mcfe, in 2007 compared to $22 million, or $.18 per Mcfe, in 2006. The decrease of $.05 on a per-Mcfe basis in 2007 was due primarily to lower per-unit transportation costs incurred in Alaska in 2007 compared to the prior year and due to the sale of the Alaska assets in August 2007.

General and Administrative Expense

        The following table summarizes the components of general and administrative expense incurred during the periods indicated:

	Year Ended December 31,
	2008			2007			2006
	(In Thousands, Except Per Mcfe Data)
Stock-based compensation costs	$	27,012			17,681			22,048
Other general and administrative costs		95,002			89,697			58,108
General and administrative costs capitalized		(47,282	)		(43,627	)		(31,848	)
General and administrative expense	$	74,732			63,751			48,308
General and administrative expense per Mcfe	$	.39			.41			.40

        General and administrative expense increased approximately $11 million to $75 million in 2008 from $64 million in 2007. The 17% increase in general and administrative expense was primarily related to increased stock-based compensation as well as increased employee salary and benefit costs and rent expense associated with having a full-year of additional personnel which were added as a result of the acquisition of Houston Exploration in June 2007. The increase in general and administrative expense of $15 million in 2007 compared to 2006 was also due to the increased employee salary and benefit costs resulting from the acquisition of Houston Exploration in June 2007, offset by a reduction to stock-based compensation costs. The percentage of general and administrative costs capitalized under the full cost method of accounting remained relatively constant between the three years, ranging between 39% and 41%.

        Forest recorded stock-based compensation cost in the amount of $27 million in 2008, $18 million in 2007, and $22 million in 2006, of which approximately $10 million in 2006 was attributed to a partial settlement of Forest's restricted stock awards and phantom stock unit awards in connection with the Spin-off. The increase in stock-based compensation of $9 million in 2008 from 2007 was primarily due to stock-based awards granted in 2008. The decrease in stock-based compensation of $4 million in 2007 from 2006 was due to the $10 million partial settlement in 2006, partially offset by the recognition of stock-based compensation associated with restricted stock and stock options granted in 2007.

Depreciation and Depletion; Undeveloped Properties

	Year Ended December 31,
	2008		2007		2006
	(In Thousands, Except Per Mcfe Data)
Depreciation and depletion expense	$	532,181		390,338		266,881
Depreciation and depletion expense per Mcfe	$	2.81		2.51		2.20

        Depreciation, depletion, and amortization expense ("DD&A") increased $.30 per Mcfe in 2008 compared to 2007 primarily due to price-related negative reserve revisions during 2008 caused by a decrease in oil and gas prices at December 31, 2008 compared to December 31, 2007 as well as the acquisition of Houston Exploration in June 2007. The increase of $.31 per Mcfe in 2007 compared to 2006 was primarily due to the acquisition of Houston Exploration. DD&A on a per-unit basis is

40

expected to be lower in 2009 due to the $2.4 billion non-cash ceiling test impairment recorded in the fourth quarter of 2008.

        The following costs of unproved properties were not subject to depletion at the periods indicated:

December 31,	United States		Canada		International		Total
	(In Thousands)
2008	$	834,596		69,248		60,183		964,027
2007		445,949		63,951		58,610		568,510
2006		149,687		53,034		58,538		261,259

        The increase in the total unproved properties of $395 million to $964 million in 2008 from $569 million in 2007 is attributable to the several acquisitions made during 2008 with significant undeveloped acreage positions. The increase in the total unproved properties of $308 million in 2007 from $261 million in 2006 is primarily attributable to the Houston Exploration acquisition completed in 2007. See Note 2 to the Consolidated Financial Statements for additional information on acquisitions and divestitures.

Accretion of Asset Retirement Obligations

        Accretion expense of $8 million in 2008, $6 million in 2007, and $7 million in 2006 was related to the accretion of Forest's asset retirement obligations pursuant to Statement of Financial Accounting Standards ("SFAS") No. 143, Accounting for Asset Retirement Obligations. SFAS No. 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related long-lived asset. Subsequent to initial measurement, the asset retirement obligation is required to be accreted each period to its present value. See Note 1 to the Consolidated Financial Statements for additional information on our asset retirement obligations.

Impairment of Oil and Gas Properties

        In the fourth quarter of 2008, Forest recorded a ceiling test impairment of its U.S. oil and gas properties pursuant to the ceiling test limitation prescribed by the SEC for companies using the full cost method of accounting. The write-down totaled $2.4 billion ($1.5 billion after-tax) and was primarily a result of a significant decline in oil and gas prices in the fourth quarter of 2008. Additional write-downs of the full cost pools in the United States and Canada may be required in 2009 if oil and gas prices continue to decline, unproved property values decrease, estimated proved reserve volumes are revised downward or costs incurred in exploration, development, or acquisition activities in the respective full cost pools exceed the discounted future net cash flows from the additional reserves, if any, attributable to each of the cost pools. The December 31, 2008 NYMEX spot prices for natural gas and oil were $5.71 per MMBtu and $44.60 per barrel, respectively, and spot prices have declined since then. Based on current prices as of February 25, 2009, it is likely we will record an additional ceiling test impairment in the first quarter of 2009.

        Forest also recorded impairments related to its international properties of $4 million in 2006, including $2 million related to a dry hole drilled in Gabon and $2 million related to expired concessions in Italy.

41

Gain on Sale of Assets

        In 2008, Forest recognized a $21 million gain on the sale of all of its unproven oil and gas properties in Gabon for net proceeds of $24 million. In 2007, Forest sold its overriding royalty interests in Australia for net proceeds of $7 million, which resulted in a gain on the sale of $7 million.

Interest Expense

        The following table summarizes interest expense incurred during the periods indicated.

	Year Ended December 31,
	2008			2007			2006
	(In Thousands)
Interest costs	$	143,534			127,063			75,508
Interest costs capitalized		(17,855	)		(13,901	)		(3,721	)
Interest expense	$	125,679			113,162			71,787

        Interest expense in 2008 totaled $126 million compared to $113 million 2007. The $13 million increase in interest expense was primarily due to increased interest expense on the credit facilities, which was caused by higher average borrowings throughout the year, offset somewhat by lower interest rates. Interest expense also increased given the fact that the $750 million of senior notes that were issued in June 2007 in conjunction with the Houston Exploration acquisition were outstanding for all of 2008; however, this increase was offset by decreased interest expense associated with Alaska credit agreements which were paid off in August 2007. Interest capitalization increased by $4 million due to higher interest costs and larger investments in unproved properties in 2008 as compared to 2007. Interest costs related to significant unproved properties that are under development are capitalized to oil and gas properties under the full cost method of accounting.

        Interest expense in 2007 totaled $113 million compared to $72 million 2006. The $41 million increase in interest in 2007 from 2006 is primarily due to the $750 million of senior notes that we issued in June 2007 and the Alaska credit agreements, which were entered into in December 2006 and were paid off in August 2007. The increase in interest capitalized in 2007 from 2006 is due to the acquisition of Houston Exploration, which also included a large investment in unproved properties.

Realized and Unrealized Gains and Losses

Derivative Instruments

        The table below sets forth realized and unrealized gains and losses on derivatives recognized under Other income and expense in our Consolidated Statements of Operations for the periods indicated. Since March 2006, when Forest elected to discontinue cash flow hedge accounting for all of its derivative instruments, Forest has recognized all unrealized mark-to-market gains and losses as a gain or loss on derivative instruments in Other income and expense in the Consolidated Statements of Operations. In addition, cash settlements, or realized gains and losses, on derivative instruments are also recorded as a gain or loss on derivative instruments in Other income and expense in the Consolidated Statements of Operations. The amounts shown in the table below for 2006 represent amounts related to ineffective hedges or derivatives that did not meet the criteria to qualify for cash

42

flow hedge accounting prior to our discontinuance of cash flow hedge accounting. See Note 9 and Note 10 to the Consolidated Financial Statements for more information on our derivative instruments.

		Year Ended December, 31
		2008			2007			2006
		(In Thousands)
Realized losses (gains) on derivatives, net:
	Oil(1)	$	71,198			(2,587	)		29,743
	Gas(2)		(16,126	)		(72,904	)		(5,879	)
	Interest		889			(474	)		—
Subtotal realized			55,961			(75,965	)		23,864
Unrealized (gains) losses on derivatives, net:
	Oil		(118,151	)		123,099			(36,953	)
	Gas		(98,618	)		(10,321	)		(46,676	)
	Interest		(4,721	)		4,721			—
Subtotal unrealized			(221,490	)		117,499			(83,629	)
Realized and unrealized (gains) losses on derivatives, net		$	(165,529	)		41,534			(59,765	)

⁽¹⁾

Includes total proceeds of $7 million received in 2007 upon termination of two oil swaps, which collectively covered 1,000 Bbl per day for 2009 and 500 Bbl per day for 2010.

⁽²⁾

Includes total proceeds of $19 million received in 2008 upon termination of two gas swaps and one gas collar, which collectively covered 40 Bbtu per day for 2009.

Foreign Currency Exchange

        Realized and unrealized foreign currency exchange gains and losses relate to the outstanding intercompany indebtedness between Forest Oil Corporation and our Canadian subsidiary. Since the intercompany debt is denominated in U.S. dollars, the strengthening of the U.S. dollar in 2008 and 2006 resulted in an unrealized foreign exchange loss in those years. Conversely, the weakening of the U.S. dollar in 2007 resulted in unrealized foreign currency exchange gains in 2007. Realized foreign currency exchange gains and losses relate to repayments of the indebtedness to Forest Oil Corporation by our Canadian subsidiary. The table below shows the components of realized and unrealized foreign currency exchange for the years ended December 31, 2008, 2007, and 2006.

	Year Ended December, 31
	2008		2007			2006
	(In Thousands)
Realized foreign currency exchange losses (gains)	$	959		(7,721	)		(315	)
Unrealized foreign currency exchange losses (gains)		19,481		(7,694	)		3,931
Realized and unrealized foreign currency exchange losses (gains), net	$	20,440		(15,415	)		3,616

Other Investments

        Unrealized losses on other investments totaled $34 million and $5 million for the years ended December 31, 2008 and 2007, respectively. The unrealized losses on other investments relate to fair value adjustments to the shares of Pacific Energy Resources, Ltd. common stock and a zero-coupon senior subordinated note due 2014 from Pacific Energy Resources, Ltd. that were each received as a portion of the total consideration for the sale of our Alaska assets. See Note 2 and Note 9 to the Consolidated Financial Statements for more information on these investments.

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Other Income and Expense

        The components of other income and expense for the years ended December 31, 2008, 2007, and 2006 were as follows:

		Year Ended December 31,
		2008			2007			2006
		(In Thousands)
Franchise taxes		$	1,612			2,322			1,410
Share of income of equity method investee			—			(275	)		(2,334	)
Debt extinguishment costs			97			12,215			—
Other, net			(133	)		(2,214	)		1,135
	Total other expense, net	$	1,576			12,048			211

        Franchise taxes are taxes paid to various states based on capital investment deployed in those states, determined by apportioning total capital as defined by statute. Forest's share of income of equity method investee related to our 40% ownership of a pipeline company that transports crude oil in Alaska, which was included in the sale of the Alaska assets in August 2007. Debt extinguishment costs in 2007 related to the complete repayment of the Alaska Credit Agreements and included $5 million in prepayment premiums and $7 million of unamortized debt issue costs.

Income Tax

        The table below sets forth Forest's total income tax from continuing operations and effective tax rates for the periods presented:

	Year Ended December 31,
	2008			2007			2006
	(In Thousands, Except Percentages)
Current income tax	$	11,139			5,999			2,126
Deferred income tax		(585,817	)		56,396			88,777
Total income tax	$	(574,678	)		62,395			90,903
Effective tax rate		36	%		27	%		35	%

        Our combined U.S. and Canadian effective tax rate generally approximates 35% to 36% but will fluctuate based on the percentage of pre-tax income generated in the U.S. versus Canada. Our effective rate in 2007 was 27% due to a reduction in income taxes of approximately $21 million related to statutory rate reductions enacted in Canada, the release of valuation allowances, and a lower apportioned effective state income tax rate. See Note 5 to the Consolidated Financial Statements for a reconciliation of our income taxes at the statutory rate to income taxes at our effective rate for each period presented.

Results of Discontinued Operations

        On March 1, 2004, the assets and business operations of our Canadian marketing subsidiary were sold and the subsidiary's results of operations were reported as discontinued operations in the Consolidated Statements of Operations. In 2006, Forest received an additional $3.6 million contingent payment ($2.4 million net of tax) from the buyer, which is also reflected as income from discontinued operations in the Consolidated Statements of Operations.

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Liquidity and Capital Resources

        Our exploration, development, and acquisition activities require us to make significant operating and capital expenditures. Historically, we have used cash flow from operations and our bank credit facilities as our primary sources of liquidity. To fund large and other exceptional transactions, such as acquisitions and debt refinancing transactions, we have looked to the private and public capital markets as another source of financing and, as market conditions have permitted, we have engaged in asset monetization transactions.

        Changes in the market prices for oil and natural gas directly impact our level of cash flow generated from operations. Currently, natural gas accounts for approximately 75% of our estimated proved reserves and, as a result, our operations and cash flow are more sensitive to fluctuations in the price for natural gas. We employ a hedging strategy in order to try to minimize the adverse effects of wide fluctuations in commodity prices on our cash flow. As of February 25, 2009, we had hedged, via commodity swaps and collar instruments, approximately 83 Bcfe of our 2009 production and 40 Bcfe of our 2010 production. This level of hedging will provide a measure of certainty of the cash flow that we will receive for a portion of our production in 2009 and 2010. In the future, we may determine to increase or decrease our hedging positions. As of February 25, 2009, all of our derivatives counterparties were commercial banks that are parties to our credit facilities, or their affiliates. See Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk—Commodity Price Risk" below for further details concerning our hedging activities.

        The other primary sources of liquidity include our U.S. credit facility and our Canadian credit facility, which had combined commitments totaling $1.8 billion as of December 31, 2008. These facilities are used to fund daily operations and to fund acquisitions and refinance debt, as needed and if available. The credit facilities are secured by our assets and mature in June 2012. See the heading "Bank Credit Facilities" below for further details.

        The public and private capital markets have served as our primary source of financing to fund large acquisitions and other exceptional transactions. In the past, we have issued debt and equity in both the public and private capital markets. For example, on February 17, 2009, we issued $600 million principal amount of 8¹/2% senior notes due 2014 in a private offering, and in 2008, we issued $250 million principal amount of additional 7¹/4% senior notes in a private offering. Our ability to access the debt and equity capital markets on economical terms is affected by general economic conditions, the domestic and global financial markets, the credit ratings assigned to our debt by independent credit rating agencies, our operational and financial performance, the value and performance of our equity and debt securities, prevailing commodity prices, and other macroeconomic factors outside of our control. Notwithstanding that we recently completed a $600 million issuance of senior notes, the continuing economic crisis and distressed financial markets have impacted our business and limited our ability to access the capital markets on economical terms as funding from these markets has diminished significantly. For example, during the fourth quarter of 2008, the capital markets were essentially frozen and not available to Forest on terms we found acceptable; however, in February 2009 we were able to issue $600 million of new senior notes in a private offering. We cannot be certain that funding will be available to us in the debt and equity markets in the future, if needed, nor can we be certain that such funding will be available on acceptable terms.

        We also have engaged in asset dispositions as a means of generating additional cash to fund expenditures and enhance our financial flexibility. For example, during 2008, we sold certain non-strategic assets for total proceeds of approximately $310 million. However, due to significant declines in oil and natural gas prices and the turmoil in the financial and credit markets over the last year, the level of activity in the market for oil and gas properties has greatly diminished, as has the pool of available buyers. We intend to pursue asset dispositions in the future, including our previously announced intention to sell $450 million to $750 million of non-core properties. Due to the current

45

economic conditions, however, this program has been delayed. We hope to complete these divestitures by year end 2010, assuming market conditions and property valuations improve, but cannot predict whether we will be able to complete any asset divestitures.

        We believe that our cash flow provided by operating activities and funds available under our credit facilities will be sufficient to fund our operating and capital expenditures budget, and our short-term contractual obligations during 2009. However, if our revenue and cash flow decrease in the future as a result of further deterioration in domestic and global economic conditions and a continuation of declining commodity prices, we may have to reduce further our spending levels. We believe that this financial flexibility to adjust our spending levels will provide us with sufficient liquidity to meet our financial obligations should economic conditions not improve during 2009. See Part I, Item 1A,—"Risk Factors," for a discussion of the risks and uncertainties that affect our business and financial and operating results.

Bank Credit Facilities

        As of December 31, 2008, we had syndicated bank revolving credit agreements with total lender commitments of $1.8 billion. The commitments under the credit agreements consisted of a $1.65 billion U.S. credit facility through a syndicate of banks led by JPMorgan Chase Bank, N.A. (the "U.S. Credit Facility") and a $150 million Canadian credit facility through a syndicate of banks led by JPMorgan Chase Bank, N.A., Toronto Branch (the "Canadian Credit Facility," and together with the U.S. Credit Facility, the "Credit Facilities"). The Credit Facilities will mature in June 2012.

        Forest's availability under the Credit Facilities is governed by a borrowing base (the "Global Borrowing Base"). The determination of the Global Borrowing Base is made by the lenders, applying their own assumptions in their sole discretion, taking into consideration the estimated value of Forest's oil and gas properties based on pricing models determined by the lenders at such time, 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 to the semi-annual redeterminations, 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. Because the process for determining the Global Borrowing Base involves evaluating the estimated value of our oil and gas properties using pricing models determined by the lenders at that time, the recent decline in oil and gas commodity prices, or a further decline in those prices, could result in a determination to decrease the Global Borrowing Base in the future.

        The Global Borrowing Base is also subject to change in the event (i) we issue senior notes, in which case the Global Borrowing Base will immediately be reduced by an amount equal to $0.30 for every $1.00 principal amount of any newly issued senior notes, excluding any senior notes that we may issue to refinance senior notes that were outstanding on May 9, 2008, or (ii) if we sell oil and natural gas properties included in the Global Borrowing Base having a fair market value in excess of 10% of the Global Borrowing Base then in effect. The Global Borrowing Base is subject to other automatic adjustments under the facilities. As a result of issuing $600 million of 8¹/2% senior notes due 2014 in February 2009, our borrowing base was lowered from $1.8 billion to $1.62 billion effective February 17, 2009. As a result of the adjustment to the Global Borrowing Base, we reallocated amounts under the U.S. Credit Facility and Canadian Credit Facility and currently have allocated $1.47 billion to the U.S. Credit Facility and $150 million to the Canadian Credit Facility. A lowering of the Global Borrowing Base could require us to repay indebtedness in excess of the Global Borrowing Base in order to cover the deficiency. The automatic lowering of the Global Borrowing Base on February 17, 2009 did not result in any deficiency, and therefore we did not have to repay any amounts.

        Borrowings under the U.S. Credit Facility bear interest at one of two rates as may be elected by Forest. Loans will bear interest at a rate that is based on interest rates applicable to dollar deposits in

46

the London interbank market ("LIBO Rate"), or a rate based on the greater of the prime rate announced by the global administrative agent or the federal funds rate plus ¹/2 of 1%. Loans under the Canadian Credit Facility will bear interest at a rate that may be based on the base rate announced by the Canadian administrative agent, the LIBO Rate, a rate based on the greater of the rate for U.S. dollar denominated loans made by the Canadian administrative agent and the federal funds rate plus ¹/2 of 1%, or a banker's acceptance rate.

        The Credit Facilities include various covenants and restrictive provisions 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. If we were to fail to perform our obligations under these covenants or other covenants and obligations, it could cause an event of default and the Credit Facilities could be terminated and amounts outstanding could be declared immediately due and payable by the lenders, subject to notice and cure periods in certain cases. Such events of default include non-payment, breach of warranty, non-performance of 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 Credit Facility. In addition, 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. An acceleration of our indebtedness under the Credit Facilities could in turn result in an event of default under the indentures for our senior notes, which in turn could result in the acceleration of the senior notes. For example, the indentures for our 8% senior notes due 2011 and our 7³/4% senior notes due 2014 include as events of default, among others, a default on indebtedness that results in the acceleration of indebtedness in an amount greater than $10 million; each of the indentures for our 8¹/2% senior notes due 2014 and our 7¹/4% senior notes due 2019 include a similar event of default if the amount involved is greater than $25 million.

        The Credit Facilities are collateralized by a portion of our assets. We are required to mortgage and grant a security interest in the greater of 75% of the present value of our consolidated proved oil and gas properties, or 1.875 multiplied by the allocated U.S. borrowing base. We also have pledged the stock of several subsidiaries to the lenders to secure the Credit Facilities. Under certain circumstances, we could be obligated to pledge additional assets as collateral. If Forest's corporate credit ratings assigned by Moody's and S&P improve and meet pre-established levels, the collateral requirements would not apply and, at our request, the banks would release their liens and security interests on our properties. In addition to these collateral requirements, one of our subsidiaries, Forest Oil Permian Corporation, is a subsidiary guarantor of the Credit Facilities.

        The lending group under our U.S. Credit Facility includes the following institutions: JPMorgan Chase Bank, N.A. ("JPMorgan Chase"), Bank of America, N.A. ("Bank of America"), Citibank, N.A. ("Citibank"), BNP Paribas, BMO Capital Markets Financing, Inc. ("BMO"), Credit Suisse, Cayman Islands Branch ("Credit Suisse"), Deutsche Bank AG New York Branch ("Deutsche Bank"), U.S. Bank National Association, The Bank of Nova Scotia ("Bank of Nova Scotia"), Fortis Capital Corp. ("Fortis"), Bank of Scotland plc, UBS Loan Finance LLC, Compass Bank, Wells Fargo Bank, N.A. ("Wells Fargo"), Mizuho Corporate Bank, Ltd., Toronto Dominion (Texas) LLC, Barclays Bank PLC ("Barclays"), Bank of Oklahoma N.A., Export Development Canada, Guaranty Bank and Trust Company, Union Bank of California, N.A., and ABN Amro Bank N.V. The lenders under our Canadian Credit Facility include: JPMorgan Chase Bank, N.A., Toronto Branch ("JPM Toronto", with JPMorgan Chase, collectively "JPMorgan"), Bank of Montreal, The Toronto-Dominion Bank (together with Toronto Dominion (Texas) LLC, "Toronto Dominion"), Bank of America, N.A., Canada Branch, and Citibank, N.A., Canadian Branch. Of the $1.8 billion total commitments under the Credit Facilities, JPMorgan, Bank of America, BNP Paribas, Credit Suisse, Deutsche Bank, Bank of Nova Scotia, Toronto Dominion, and Wells Fargo hold approximately 62% of the total commitments, with each of

47

these eight lenders holding an equal share. With respect to the other 38% of the total commitments, no single lender holds more than 4.2% of the total commitments.

        From time to time, we engage in other transactions with a number of the lenders under the Credit Facilities. Such lenders or their affiliates may serve as underwriter or initial purchaser of our debt and equity securities, act as agent or directly purchase our production, or serve as counterparties to our commodity and interest rate derivative agreements. As of February 25, 2009, our primary derivative counterparties included the following lenders and their affiliates: BMO, BNP Paribas, Barclays, Credit Suisse, Deutsche Bank, Fortis, Bank of Nova Scotia, Toronto Dominion, and Wells Fargo. As of February 25, 2009, our derivative transactions with BMO, Credit Suisse, Fortis, Bank of Nova Scotia, BNP Paribas, and Toronto Dominion account for approximately 73 Bcfe, or 88% of our 2009 hedged production, and 32 Bcfe, or 82% of our 2010 hedged production. Our obligations under our existing derivative agreements with our lenders are secured by the security documents executed by the parties under our Credit Facilities. See Item 7A—"Quantitative and Qualitative Disclosures about Market Risk—Commodity Price Risk," below for additional details concerning our derivative arrangements.

        At December 31, 2008, there were outstanding borrowings of $1.2 billion under the U.S. Credit Facility at a weighted average interest rate of 2.2%, and there were outstanding borrowings of $94.4 million under the Canadian Credit Facility at a weighted average interest rate of 3.0%. We also had used the Credit Facilities for approximately $2.7 million in letters of credit, leaving an unused borrowing amount under the Credit Facilities of approximately $512.8 million at December 31, 2008. At March 2, 2009, there were outstanding borrowings of $753.0 million under the U.S. Credit Facility at a weighted average interest rate of 1.8%, and there were outstanding borrowings of $97.6 million under the Canadian Credit Facility at a weighted average interest rate of 2.3%. We also had used the Credit Facilities for approximately $2.7 million in letters of credit, leaving an unused borrowing amount under the Credit Facilities of approximately $766.7 million at March 2, 2009.

Credit Ratings

        Our credit risk is evaluated by two independent rating agencies based on publicly available information and information obtained during our ongoing discussions with the rating agencies. Moody's Investor Services and Standard & Poor's Rating Services currently rate each series of our senior notes and, in addition, they have assigned Forest a general credit rating. Our Credit Facilities include provisions that are linked to our credit ratings. For example, our collateral requirements will vary based on our credit ratings; however, we do not have any credit rating triggers that would accelerate the maturity of amounts due under credit facilities or the debt issued under the indentures for our senior notes. The indentures for our senior notes also include terms linked to our credit ratings. These terms allow us greater flexibility if our credit ratings improve to investment grade and other tests have been satisfied, in which event we would not be obligated to comply with certain restrictive covenants included in the indentures. Our ability to raise funds and the costs of any financing activities will be affected by our credit rating at the time any such financing activities are conducted.

Historical Cash Flow

        Net cash provided by operating activities, net cash used by investing activities, and net cash provided by financing activities for the years ended December 31, 2008, 2007, and 2006 were as follows:

	Year Ended December 31,
	2008			2007			2006
	(In Thousands)
Net cash provided by operating activities	$	1,070,040			708,245			422,478
Net cash used by investing activities		(2,093,493	)		(1,093,221	)		(909,891	)
Net cash provided by financing activities		1,016,258			359,552			513,832

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        Cash flows provided by operating activities are primarily affected by production volumes and commodity prices, net of the effects of settlements of our derivative contracts, and changes in working capital. The increases in net cash provided by operating activities of $362 million in 2008 as compared to 2007 and $286 million in 2007 as compared to 2006 were primarily due to higher production volumes and commodity prices in each of the periods being compared.

        Cash flows used by investing activities are primarily comprised of the acquisition, exploration, and development of oil and gas properties net of dispositions of oil and gas properties. The increase in net cash used by investing activities in 2008 as compared to 2007 was primarily due to increased acquisition, exploration, and development expenditures in 2008 and decreased proceeds from asset sales in 2008. Cash used by investing activities also increased in 2007 as compared to 2006 primarily due to an increase in cash used for acquisitions, exploration, and development of oil and gas properties in 2007, offset by an increase in proceeds from the sale of oil and gas properties in 2007. The major components of cash used by investing activities for the years ended December 31, 2008, 2007, and 2006 were as follows:

	Year Ended December 31,
	2008			2007			2006
	(In Thousands)
Acquisition, exploration, and development of oil and gas properties	$	(2,338,488	)		(1,563,100	)		(894,448	)
Proceeds from sale of assets		309,940			502,048			6,507
Acquisition of other fixed assets		(66,005	)		(32,169	)		(21,950	)
Other		1,060			—			—
Net cash used by investing activities	$	(2,093,493	)		(1,093,221	)		(909,891	)

        Net cash provided by financing activities in 2008 included net bank proceeds of $1.0 billion, the issuance of additional 7¹/4% senior notes due 2019 for net proceeds of $247 million, proceeds from the exercise of stock options and the employee stock purchase plan of $18 million, and the redemption of our 8% senior notes due 2008 of $265 million. Net cash provided by financing activities of $360 million in 2007 included the issuance of the 7¹/4% senior notes due 2019 for net proceeds of $739 million, net bank proceeds of $171 million, and proceeds from the exercise of stock options and from the employee stock purchase plan of $13 million, offset by the repayment of the Alaska credit agreements of $375 million and repayment of Houston Exploration's bank debt of $177 million. Net cash provided by financing activities in 2006 of $514 million included net bank proceeds of $130 million, proceeds from the Alaska credit agreements (net of issuance costs) of $368 million, $22 million of proceeds from the Spin-off, and proceeds from the exercise of stock options and from the employee stock purchase plan of approximately $7 million.

49

Capital Expenditures

        Expenditures for property acquisitions, exploration, and development were as follows:

		Year Ended December 31,
		2008		2007		2006
		(In Thousands)
Property acquisitions:
	Proved properties	$	804,616		1,744,093		262,534
	Unproved properties		566,952		449,346		53,788
			1,371,568		2,193,439		316,322
Exploration:
	Direct costs		329,897		137,475		250,344
	Overhead capitalized		18,304		10,722		12,121
			348,201		148,197		262,465
Development:
	Direct costs		1,017,362		622,466		344,725
	Overhead capitalized		28,978		32,905		19,727
			1,046,340		655,371		364,452
Total capital expenditures(1)		$	2,766,109		2,997,007		943,239

⁽¹⁾

Total capital expenditures include cash expenditures, accrued cash expenditures, and non-cash capital expenditures including the value of common stock issued in conjunction with property acquisitions and stock-based compensation capitalized under the full cost method of accounting. (See Note 2 to the Consolidated Financial Statements for information on property acquisitions.) Total capital expenditures also include estimated discounted asset retirement obligations of $15 million, $38 million, and $2 million related to assets placed in service during the years ended December 31, 2008, 2007, and 2006, respectively.

        Due to significant changes in the overall economy as well as the price for oil and natural gas, we have chosen to significantly reduce our capital expenditures and drilling activity in 2009 compared with 2008. We intend to keep our exploration and development capital spending within our cash flows from operations and have established a capital budget of approximately $500 million to $600 million for the year ending December 31, 2009. Some of the factors impacting the level of capital expenditures in 2009 include crude oil and natural gas prices, the volatility in these prices, the cost and availability of oil field services, general economic and market conditions, and weather disruptions.

Contractual Obligations

        The following table summarizes our contractual obligations as of December 31, 2008:

	2009		2010		2011		2012		2013		After 2013		Total
	(In Thousands)
Bank debt(1)	$	29,334		29,334		29,334		1,297,126		—		—		1,385,128
Senior notes(2)		107,003		107,003		391,053		84,203		85,273		1,549,636		2,324,171
Operating leases(3)		17,557		17,228		17,026		16,281		15,298		14,026		97,416
Unconditional purchase obligations(4)		44,614		7,419		772		278		—		—		53,083
Other liabilities(5)		9,919		10,621		11,394		8,966		9,581		84,997		135,478
Derivative liabilities(6)		1,284		2,600		—		—		—		—		3,884
Total contractual obligations	$	209,711		174,205		449,579		1,406,854		110,152		1,648,659		3,999,160

⁽¹⁾

Bank debt consists of the outstanding balances under our U.S. and Canadian credit facilities as of December 31, 2008 and the anticipated interest payments due under the terms of the credit facilities using the interest rates in effect and debt balances at December 31, 2008.

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⁽²⁾

Senior notes consist of the principal obligations on our senior notes and senior subordinated notes and anticipated interest payments due on each.

⁽³⁾

Operating leases consist of leases for drilling rigs, office facilities, office equipment, and vehicles.

⁽⁴⁾

Unconditional purchase obligations consist primarily of firm commitments for drilling rigs, pipeline capacity, and seismic and tubular purchases.

⁽⁵⁾

Other liabilities represent current and noncurrent liabilities that are comprised of benefit obligations and asset retirement obligations, for which neither the ultimate settlement amounts nor their timings can be precisely determined in advance. See "Critical Accounting Policies, Estimates, Judgments, and Assumptions" below for a more detailed discussion of the nature of the accounting estimates involved in estimating asset retirement obligations.

⁽⁶⁾

Derivative liabilities represent the fair value of liabilities for commodity derivatives as of December 31, 2008. The ultimate settlement amounts of our derivative liabilities are unknown, because they are subject to continuing market risk. See "Critical Accounting Policies, Estimates, Judgments, and Assumptions" below for a more detailed discussion of the nature of the accounting estimates involved in valuing derivative instruments.

        Forest also makes delay rental payments to lessors during the primary terms of oil and gas leases to delay drilling or production of wells, usually for one year. Although we are not obligated to make such payments, discontinuing them would result in the loss of the oil and gas lease. Our total maximum commitment under these leases, through 2016, totaled approximately $12 million as of December 31, 2008.

Off-balance Sheet Arrangements

        From time-to-time, we enter into off-balance sheet arrangements and transactions that can give rise to off-balance sheet obligations. As of December 31, 2008, the off-balance sheet arrangements and transactions that we have entered into include (i) undrawn letters of credit, (ii) operating lease agreements, (iii) drilling commitments, and (iv) contractual obligations for which the ultimate settlement amounts are not fixed and determinable, such as gas transportation commitments and derivative contracts that are sensitive to future changes in commodity prices. Forest does not believe that any of these arrangements are reasonably likely to materially affect its liquidity or availability of, or requirements for, capital resources.

Surety Bonds

        In the ordinary course of our business and operations, we are required to post surety bonds from time to time with third parties, including governmental agencies. As of February 25, 2009, we had obtained surety bonds from a number of insurance and bonding institutions covering certain of our operations in the United States and Canada in the aggregate amount of approximately $13 million. See Part I, Item 1—"Business—Regulation" for further information.

Critical Accounting Policies, Estimates, Judgments, and Assumptions

Full Cost Method of Accounting

        The accounting for our business is subject to special accounting rules that are unique to the oil and gas industry. There are two allowable methods of accounting for oil and gas business activities: the full cost method and the successful efforts method. The differences between the two methods can lead to significant variances in the amounts reported in our financial statements. We have elected to follow the full cost method, which is described below.

        Under the full cost method, separate cost centers are maintained for each country in which we incur costs. All costs incurred in the acquisition, exploration, and development of properties (including costs of surrendered and abandoned leaseholds, delay lease rentals, dry holes, and overhead related to exploration and development activities) are capitalized. The fair value of estimated future costs of site restoration, dismantlement, and abandonment activities is capitalized, and a corresponding asset retirement obligation liability is recorded. Capitalized costs applicable to each full cost center are depleted using the units of production method based on conversion to common units of measure using

51

one barrel of oil as an equivalent to six thousand cubic feet of natural gas. Changes in estimates of reserves or future development costs are accounted for prospectively in the depletion calculations. Assuming consistent production year over year, our depletion expense will be significantly higher or lower if we significantly decrease or increase our estimates of remaining proved reserves.

        Investments in unproved properties are not depleted pending the determination of the existence of proved reserves. Unproved properties are assessed periodically to ascertain whether impairment has occurred. Unproved properties whose costs are individually significant are assessed individually by considering the primary lease terms of the properties, the holding period of the properties, and geographic and geologic data obtained relating to the properties. Where it is not practicable to assess individually the amount of impairment of properties for which costs are not individually significant, such properties are grouped for purposes of assessing impairment. The amount of impairment assessed is added to the costs to be amortized in the appropriate full cost pool, or reported as impairment expense in the Consolidated Statements of Operations, as applicable.

        Companies that use the full cost method of accounting for oil and gas exploration and development activities are required to perform a ceiling test each quarter. The full cost ceiling test is an impairment test prescribed by SEC Regulation S-X Rule 4-10. The ceiling test is performed each quarter on a country-by-country basis. The test determines a limit, or ceiling, on the book value of oil and gas properties. That limit is basically the after tax present value of the future net cash flows from proved crude oil and natural gas reserves, as adjusted for asset retirement obligations and the effect of cash flow hedges. This ceiling is compared to the net book value of the oil and gas properties reduced by any related net deferred income tax liability. If the net book value reduced by the related deferred income taxes exceeds the ceiling, an impairment or non-cash write-down is required. Forest recorded a $2.4 billion ($1.5 billion after-tax) ceiling test impairment in the fourth quarter of 2008. The December 31, 2008 NYMEX spot prices for natural gas and oil were $5.71 per MMBtu and $44.60 per barrel, respectively, and spot prices have declined since then. Based on current prices as of February 25, 2009, it is likely we will record an additional ceiling test impairment in the first quarter of 2009.

        In countries or areas where the existence of proved reserves has not yet been determined, leasehold costs, seismic costs, and other costs incurred during the exploration phase remain capitalized as unproved property costs until proved reserves have been established or until exploration activities cease. If exploration activities result in the establishment of proved reserves, amounts are reclassified as proved properties and become subject to depreciation, depletion, and amortization, and the application of the ceiling limitation. Unproved properties are assessed periodically to ascertain whether impairment has occurred. An impairment of unproved property costs may be indicated through evaluation of drilling results, relinquishment of drilling rights, or other information.

        Under the alternative successful efforts method of accounting, surrendered, abandoned, and impaired leases, delay lease rentals, exploratory dry holes, and overhead costs are expensed as incurred. Capitalized costs are depleted on a property-by-property basis. Impairments are also assessed on a property-by-property basis and are charged to expense when assessed.

        The full cost method is used to account for our oil and gas exploration and development activities, because we believe it appropriately reports the costs of our exploration programs as part of an overall investment in discovering and developing proved reserves.

Goodwill

        Goodwill is tested for impairment on at least an annual basis in the second quarter of the year. In addition, we test goodwill for impairment if events or circumstances change between annual tests indicating a possible impairment.

52

        In the first step of testing for goodwill impairment, we estimate the fair value of each reporting unit, which we have determined to be our geographic operating segments, and compare the fair value with the carrying value of the net assets assigned to each reporting unit. If the fair value of a reporting unit is greater than the carrying value of the net assets assigned to the reporting unit, then no impairment results. If the fair value is less than its carrying value, then we would perform a second step and determine the fair value of the goodwill. In this second step, the fair value of goodwill is determined by deducting the fair value of a reporting unit's identifiable assets and liabilities from the fair value of the reporting unit as a whole, as if that reporting unit had just been acquired and the purchase price were being initially allocated. If the fair value of the goodwill is less than its carrying value for a reporting unit, an impairment charge would be recorded to earnings in our Consolidated Statement of Operations.

        To determine the fair value of each of our reporting units, we use a discounted cash flow model to value our total estimated reserves, which include proved, probable, and possible reserves. This approach relies on significant judgments about the quantity of reserves, the timing of the expected production, the pricing that will be in effect at the time of production, and the appropriate discount rates to be used. Our discount rate assumptions are based on an assessment of Forest's weighted average cost of capital.

        We did not record an impairment charge as a result of our goodwill impairment test in the second quarter of 2008, nor as a result of the non-recurring test we performed in the fourth quarter of 2008. However, there can be no assurance that our goodwill will not be impaired at any time in the future.

Oil and Gas Reserve Estimates

        Our estimates of proved reserves are based on the quantities of oil and gas that geological and engineering data demonstrate, with reasonable certainty, to be recoverable in future years from known reservoirs under existing economic and operating conditions. The accuracy of any reserve estimate is a function of the quality of available data, engineering and geological interpretation, and judgment. For example, we must estimate the amount and timing of future operating costs, production and property taxes, development costs, and workover costs, all of which may in fact vary considerably from actual results. In addition, as prices and cost levels change from year to year, the estimate of proved reserves also changes. Any significant variance in these assumptions could materially affect the estimated quantity and value of our reserves. Despite the inherent imprecision in these engineering estimates, our reserves are used throughout our financial statements. For example, since we use the units-of-production method to amortize our oil and gas properties, the quantity of reserves could significantly impact our DD&A expense. Our oil and gas properties are also subject to a "ceiling test" limitation based in part on the quantity of our proved reserves. Finally, these reserves are the basis for our supplemental oil and gas disclosures included in Note 17 to the Consolidated Financial Statements.

        Reference should be made to "Independent Audit of Reserves" under Part I, Item 1—"Business," and "Our proved reserves are estimates and depend on many assumptions. Any material inaccuracies in these assumptions could cause the quantity and value of our oil and gas reserves, and our revenue, profitability, and cash flow, to be materially different from our estimates," under Part I, Item 1A—"Risk Factors," in this Form 10-K.

Accounting for Derivative Instruments

        We follow the provisions of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 requires the accounting recognition of all derivative instruments as either assets or liabilities at fair value. Under the provisions of SFAS 133, we may or may not elect to designate a derivative instrument as a hedge against changes in the fair value of an asset or a liability (a "fair value hedge") or against exposure to variability in expected future cash flows (a "cash flow

53

hedge"). The accounting treatment for the changes in fair value of a derivative instrument is dependent upon whether or not a derivative instrument is a cash flow hedge or a fair value hedge, and upon whether or not the derivative is designated as a hedge. Changes in fair value of a derivative designated as a cash flow hedge are recognized, to the extent the hedge is effective, in other comprehensive income until the hedged item is recognized in earnings. Changes in the fair value of a derivative instrument designated as a fair value hedge, to the extent the hedge is effective, have no effect on the statement of operations, because changes in fair value of the derivative offsets changes in the fair value of the hedged item. Where hedge accounting is not elected or if a derivative instrument does not qualify as either a fair value hedge or a cash flow hedge, changes in fair value are recognized in earnings as other income or expense. Since March 2006, we have elected not to use hedge accounting. Accordingly, after March 2006, all changes in the fair values of our derivative instruments have been and will continue to be recognized in earnings as unrealized gains or losses in "Realized and unrealized gains or losses on derivative instruments, net" in our Consolidated Statements of Operations.

        The estimated fair values of our derivative instruments require substantial judgment. We use the income approach in determining the fair value of our derivative instruments, utilizing present value techniques for valuing our swaps and basis swaps and option-pricing models for valuing our collars. Inputs to these valuation techniques include published forward prices, volatilities, and credit risk considerations, including the incorporation of published interest rates and credit spreads. The values we report in our financial statements change as these estimates are revised to reflect actual results, changes in market conditions, or other factors, many of which are beyond our control.

        Due to the volatility of oil and natural gas prices, the estimated fair values of our commodity derivative instruments are subject to large fluctuations from period to period. For example, a hypothetical 10% increase in the forward oil and natural gas prices used to calculate the fair values of our commodity derivative instruments at December 31, 2008 would decrease the net fair value of our commodity derivative instruments at December 31, 2008 by approximately $53 million. It has been our experience that commodity prices are subject to large fluctuations, and we expect this volatility to continue. Actual gains or losses recognized related to our commodity derivative instruments will likely differ from those estimated at December 31, 2008 and will depend exclusively on the price of the commodities on the specified settlement dates provided by the derivative contracts.

Valuation of Deferred Tax Assets

        We use the asset and liability method of accounting for income taxes. Under this method, income tax assets and liabilities are generally determined based on differences between the financial statement carrying values of assets and liabilities and their respective income tax bases (temporary differences). Income tax assets and liabilities are measured using the tax rates expected to be in effect when the temporary differences are likely to reverse. The effect on income tax assets and liabilities of a change in tax rates is included in operations in the period in which the change is enacted. The book value of income tax assets is limited to the amount of the tax benefit that is more likely than not to be realized in the future.

        In assessing the value of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon future taxable income during the periods in which related temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the amount of deferred tax liabilities, historical taxable income, and projections for future taxable income over the periods for which the deferred tax assets will reverse, management believes it is more likely than not that we will realize the benefits of these deferred tax assets, net of the existing valuation allowances at December 31, 2008. The amount of the deferred tax asset considered realizable, however,

54

could be reduced in the near term if estimates of future taxable income during relevant periods are reduced.

Asset Retirement Obligations

        Forest has obligations to remove tangible equipment and restore locations at the end of the oil and gas production operations. Estimating the future restoration and removal costs, or asset retirement obligations, is difficult and requires management to make estimates and judgments, because most of the obligations are many years in the future, and contracts and regulations often have vague descriptions of what constitutes removal. Asset removal technologies and costs are constantly changing, as are regulatory, political, environmental, safety, and public relations considerations.

        Inherent in the calculation of the present value of our asset retirement obligations ("ARO") under SFAS No. 143 are numerous assumptions and judgments, including the ultimate settlement amounts, inflation factors, credit adjusted discount rates, timing of settlement, and changes in the legal, regulatory, environmental, and political environments. To the extent future revisions to these assumptions impact the present value of the existing ARO liability, a corresponding adjustment is made to the oil and gas property balance. Increases in the discounted ARO liability resulting from the passage of time are reflected as accretion expense in the Consolidated Statements of Operations.

Impact of Recently Issued Accounting Pronouncements

        In December 2007, the Financial Accounting Standards Board ("FASB") issued SFAS No. 141 (Revised), Business Combinations ("SFAS 141(R)"), which significantly changes the financial accounting and reporting of business combination transactions. SFAS 141(R) establishes principles and requirements for how an acquirer in a business combination: (i) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree, (ii) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase, and (iii) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141(R) applies prospectively to business combinations that are completed or close on or after the beginning of the first annual reporting period that begins on or after December 15, 2008. Accordingly, we have adopted this pronouncement as of January 1, 2009. This pronouncement may have a material impact on the accounting for any acquisition we may make after January 1, 2009.

        In February 2008, the FASB issued FASB Staff Position No. 157-2, Effective Date of FASB Statement No. 157 ("FSP 157-2"). FSP 157-2 delayed the effective date of SFAS No. 157, Fair Value Measurements, for one year to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years, for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Accordingly, we have adopted this pronouncement as of January 1, 2009. We do not expect the adoption of this pronouncement to have a material impact on our financial position or results of operations.

        In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133 ("SFAS 161"). SFAS 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. This statement is effective for fiscal years and interim periods beginning after November 15, 2008. Accordingly, we have adopted this pronouncement as of January 1, 2009. The adoption of this pronouncement will have no impact on our financial position or results of operations, but may require expanded disclosures about derivative instruments.

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        In June 2008, the FASB issued FASB Staff Position No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities ("FSP EITF 03-6-1"), which addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing basic earnings per share under the two-class method described in SFAS No. 128, Earnings per Share. All prior period earnings per share data presented shall be adjusted retrospectively to conform with the provisions of this pronouncement. FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those years. Accordingly, we have adopted this pronouncement as of January 1, 2009. We do not expect the adoption of FSP EITF 03-6-1 to have a material impact on our financial position or results of operations. We are currently evaluating the impact that the adoption of this pronouncement will have on our earnings per share calculations, but in general believe that our basic earnings per share will decrease as earnings will now be attributable to both common stock and share-based payment participating securities.

        In December 2008, the SEC adopted revisions to its oil and gas disclosure requirements that are intended to align them with current practices and changes in technology. Key changes brought about by the amendments include:

•

The replacement of the single-day year-end pricing assumption with a twelve-month average pricing assumption for both disclosure and full cost accounting purposes;

•

Permitting voluntary disclosure of probable and possible reserves;

•

Expanding the range of acceptable technologies used to establish the reasonable certainty of reserves;

•

Easing the standard for inclusion of proved undeveloped reserves ("PUDs") by replacing the "certainty" standard for areas beyond one offsetting drilling unit from a productive well with a "reasonable certainty" standard;

•

Requiring narrative disclosures regarding PUDs, including material changes in PUDs during the year, investments and progress made during the year to convert PUDs to proved developed reserves, and discussion regarding the Company's plans for development of its PUDs;

•

Requiring disclosure of the qualifications of the technical person primarily responsible for preparing the reserves estimates or conducting the reserves audit and a discussion of the internal controls used to assure objectivity in the reserve estimation process;

•

Requiring the filing of the independent reserve engineers' summary report if a reserves audit has been performed; and

•

Permitting the disclosure of an optional reserves sensitivity analysis table to illustrate the impact of different price and/or cost assumptions on reserves, provided the price and/or cost assumptions are disclosed.

        The amendments provide that companies must begin complying with these new requirements for registration statements filed on or after January 1, 2010, and for annual reports on Form 10-K for fiscal years ending on December 31, 2009, with early adoption prohibited. We are currently evaluating the impact that the adoption of this pronouncement will have on our financial position, results of operations, and disclosures.

        In December 2008, the FASB issued FASB Staff Position No. FAS 132(R)-1, Employers' Disclosures About Postretirement Benefit Plan Assets ("FSP FAS 132(R)-1"), which provides guidance on an employer's disclosures about plan assets of a defined benefit pension or other postretirement benefit plan. FSP FAS 132(R)-1 states that disclosures concerning plan assets should provide users of financial

56

statements with an understanding of: investment policies and strategies; categories of plan assets; fair value measurements of plan assets; and significant concentrations of risk. The disclosures required by FSP FAS 132(R)-1 shall be provided for fiscal years ending after December 15, 2009. We are currently evaluating the impact that the adoption of this pronouncement will have on our plan asset disclosures.

Item 7A.    Quantitative and Qualitative Disclosures about Market Risk.

        We are exposed to market risk, including the effects of adverse changes in commodity prices, foreign currency exchange rates, and interest rates as discussed below.

Commodity Price Risk

        We produce and sell natural gas, crude oil, and natural gas liquids for our own account in the United States and Canada. As a result, our financial results are affected when prices for these commodities fluctuate. Such effects can be significant.

Hedging Program

        In order to reduce the impact of fluctuations in commodity prices, or to protect the economics of property acquisitions, we make use of an oil and gas hedging strategy. Under our hedging strategy, we enter into commodity swaps, collars, and other financial instruments with counterparties who, in general, are participants in our credit facilities. These arrangements, which are based on prices available in the financial markets at the time the contracts are entered into, are settled in cash and do not require physical deliveries of hydrocarbons.

Swaps

        In a typical commodity swap agreement, we receive the difference between a fixed price per unit of production and a price based on an agreed upon published, third-party index if the index price is lower than the fixed price. If the index price is higher, we pay the difference. By entering into swap agreements, we effectively fix the price that we will receive in the future for the hedged production. Our current swaps are settled in cash on a monthly basis. As of December 31, 2008, we had entered into the following swaps:

	Swaps
	Natural Gas (NYMEX HH)						Oil (NYMEX WTI)
	Bbtu Per Day(1)		Weighted Average Hedged Price per MMBtu		Fair Value (In Thousands)		Barrels Per Day		Weighted Average Hedged Price per Bbl		Fair Value (In Thousands)
Calendar 2009		160	$	8.24	$	118,494		4,500	$	69.01	$	23,436
Calendar 2010		—		—		—		1,500		72.95		4,608

⁽¹⁾

10 Bbtu per day is subject to a $6.00 written put.

Costless Collars

        Forest also enters into collar agreements with third parties. A collar agreement is similar to a swap agreement, except that we receive the difference between the floor price and the index price only if the index price is below the floor price; and we pay the difference between the ceiling price and the index

57

price only if the index price is above the ceiling price. As of December 31, 2008, we had entered into the following collars:

	Costless Collars
	Natural Gas (NYMEX HH)
	Bbtu Per Day		Weighted Average Hedged Floor and Ceiling Price per MMBtu	Fair Value (In Thousands)
Calendar 2009		40	$7.31/9.76	$	21,820

Basis Swaps

        Forest also uses basis swaps in connection with natural gas swaps in order to fix the price differential between the NYMEX price and the index price at which the natural gas production is sold. As of December 31, 2008, we had entered into the following basis swaps:

	Basis Swaps
	Bbtu per Day		Fair Value (In Thousands)
Calendar 2009		185	$	4,353
Calendar 2010		90		(2,600	)

        The fair value of all our commodity derivative instruments based on various inputs, including published forward prices, at December 31, 2008 was a net asset of approximately $170.1 million.

        In January and February 2009, Forest entered into the following additional gas swaps and basis swaps:

	Swaps
					Basis Swaps
	Natural Gas (NYMEX HH)
	Bbtu Per Day		Weighted Average Hedged Price per MMBtu		Bbtu Per Day
February – December 2009		—	$	—		20
Calendar 2010		100		6.52		—

Interest Rate Swaps

        Forest may enter into interest rate swap agreements in an attempt to normalize the mix of fixed and floating interest rates within its debt portfolio. In June 2008, Forest terminated all of its outstanding interest rate swaps for a net gain of $.4 million. In February 2009, the Company entered into an interest rate swap intended to exchange the 8.5% fixed interest rate on $100.0 million of the Company's 8¹/2% senior notes for a variable rate based on one-month LIBOR plus 6% over the term of the 8¹/2% senior notes.

Fair Value Reconciliation

        The table below sets forth the changes that occurred in the fair values of our open derivative contracts during the year ended December 31, 2008, beginning with the fair value of our derivative contracts on December 31, 2007. Due to the volatility of oil and natural gas prices, the estimated fair values of our commodity derivative instruments are subject to large fluctuations from period to period. It has been our experience that commodity prices are subject to large fluctuations, and we expect this volatility to continue. Actual gains and losses recognized related to our commodity derivative

58

instruments will likely differ from those estimated at December 31, 2008 and will depend exclusively on the price of the commodities on the specified settlement dates provided by the derivative contracts.

	Fair Value of Derivative Contracts
	Commodity			Interest Rate			Total
	(In Thousands)
As of December 31, 2007	$	(76,119	)		(4,721	)		(80,840	)
Settlements of acquired derivatives		29,461			—			29,461
Net increase in fair value		161,697			3,832			165,529
Net contract losses recognized		55,072			889			55,961
As of December 31, 2008	$	170,111			—			170,111

Foreign Currency Exchange Risk

        We conduct business in several foreign currencies and thus are subject to foreign currency exchange rate risk on cash flows related to sales, expenses, financing, and investing transactions. In the past, we have not entered into any foreign currency forward contracts or other similar financial instruments to manage this risk. Expenditures incurred relative to the foreign concessions held by Forest outside of North America have been primarily United States dollar-denominated, as have cash proceeds related to property sales and farmout arrangements. Substantially all of our Canadian revenues and costs are denominated in Canadian dollars. While the value of the Canadian dollar does fluctuate in relation to the U.S. dollar, we believe that any currency risk associated with our Canadian operations would not have a material impact on our results of operations.

Interest Rate Risk

        The following table presents principal amounts and related interest rates by year of maturity for Forest's debt obligations at December 31, 2008:

		2011			2012			2013			2014			2019			Total
		(Dollar Amounts in Thousands)
Bank credit facilities:
	Variable rate	$	—			1,284,415			—			—			—			1,284,415
	Average interest rate(1)		—			2.28	%		—			—			—			2.28	%
Long-term debt:
	Fixed rate	$	285,000			—			1,112			150,000			1,000,000			1,436,112
	Coupon interest rate		8.00	%		—			7.00	%		7.75	%		7.25	%		7.45	%
	Effective interest rate(2)		7.71	%		—			7.00	%		6.56	%		7.25	%		7.27	%

⁽¹⁾

As of December 31, 2008.

⁽²⁾

The effective interest rate on the 8% senior notes due 2011 and the 7³/4% senior notes due 2014 is reduced from the coupon rate as a result of amortization of gains related to the termination of related interest rate swaps.

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Item 8.    Financial Statements and Supplementary Data.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of Forest Oil Corporation

        We have audited the accompanying consolidated balance sheets of Forest Oil Corporation and subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2008. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Forest Oil Corporation and subsidiaries as of December 31, 2008 and 2007, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2008, in conformity with U.S. generally accepted accounting principles.

        We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Forest Oil Corporation's internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2009 expressed an unqualified opinion thereon.

	Ernst & Young LLP
Denver, Colorado February 26, 2009

60

FOREST OIL CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)

			December 31,
			2008			2007
ASSETS
Current assets:
	Cash and cash equivalents		$	2,205			9,685
	Accounts receivable			157,226			201,617
	Derivative instruments			169,387			30,006
	Deferred income taxes			—			23,854
	Other investments			2,327			34,694
	Inventory			78,683			9,486
	Other current assets			63,221			52,032
		Total current assets		473,049			361,374
Property and equipment, at cost:
	Oil and gas properties, full cost method of accounting:
		Proved, net of accumulated depletion of $5,502,782 and $2,742,539		3,449,510			4,414,710
		Unproved		964,027			568,510
	Net oil and gas properties			4,413,537			4,983,220
	Other property and equipment, net of accumulated depreciation and amortization of $37,260 and $30,011			99,627			42,595
		Net property and equipment		4,513,164			5,025,815
Goodwill				253,646			265,618
Derivative instruments				4,608			—
Other assets				38,331			42,741
			$	5,282,798			5,695,548
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Accounts payable and accrued liabilities		$	424,941			361,089
	Accrued interest			7,143			7,693
	Derivative instruments			1,284			72,675
	Deferred income taxes			54,583			—
	Current portion of long-term debt			—			266,002
	Asset retirement obligations			5,852			2,562
	Other current liabilities			27,608			28,361
		Total current liabilities		521,411			738,382
Long-term debt				2,735,661			1,503,035
Asset retirement obligations				91,139			87,943
Derivative instruments				2,600			38,171
Deferred income taxes				185,587			853,427
Other liabilities				73,488			62,779
		Total liabilities		3,609,886			3,283,737
Commitments and contingencies (Note 12)
Shareholders' equity:
	Preferred stock, none issued and outstanding			—			—
	Common stock, 97,039,751 and 88,379,409 shares issued and outstanding			9,704			8,838
	Capital surplus			2,354,903			1,966,569
	(Accumulated deficit) retained earnings			(729,293	)		306,062
	Accumulated other comprehensive income			37,598			130,342
		Total shareholders' equity		1,672,912			2,411,811
			$	5,282,798			5,695,548

See accompanying Notes to Consolidated Financial Statements.

61

FOREST OIL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS

				Year Ended December 31,
				2008			2007			2006
				(In Thousands, Except Per Share Amounts)
Revenues				$	1,647,163			1,083,892			819,992
Operating expenses:
	Lease operating expenses				167,830			167,473			154,874
	Production and property taxes				82,147			55,264			39,041
	Transportation and processing costs				19,472			20,200			21,876
	General and administrative (including stock-based compensation)				74,732			63,751			48,308
	Depreciation and depletion				532,181			390,338			266,881
	Accretion of asset retirement obligations				7,602			6,064			7,096
	Impairment of oil and gas properties				2,369,055			—			3,668
	Gain on sale of assets				(21,063	)		(7,176	)		—
	Spin-off costs				—			—			5,416
			Total operating expenses		3,231,956			695,914			547,160
Earnings (loss) from operations					(1,584,793	)		387,978			272,832
Other income and expense:
	Interest expense				125,679			113,162			71,787
	Realized and unrealized (gains) losses on derivative instruments, net				(165,529	)		41,534			(59,765	)
	Realized and unrealized foreign currency exchange losses (gains), net				20,440			(15,415	)		3,616
	Unrealized losses on other investments, net				34,042			4,948			—
	Other expense, net				1,576			12,048			211
			Total other income and expense		16,208			156,277			15,849
Earnings (loss) before income taxes and discontinued operations					(1,601,001	)		231,701			256,983
Income tax:
	Current				11,139			5,999			2,126
	Deferred				(585,817	)		56,396			88,777
			Total income tax		(574,678	)		62,395			90,903
Earnings (loss) from continuing operations					(1,026,323	)		169,306			166,080
	Income from discontinued operations, net of tax				—			—			2,422
Net earnings (loss)				$	(1,026,323	)		169,306			168,502
Basic earnings (loss) per common share:
		Earnings (loss) from continuing operations		$	(11.46	)		2.22			2.67
		Income from discontinued operations, net of tax			—			—			.04
		Basic earnings (loss) per common share		$	(11.46	)		2.22			2.71
Diluted earnings (loss) per common share:
		Earnings (loss) from continuing operations		$	(11.46	)		2.18			2.62
		Income from discontinued operations, net of tax			—			—			.04
		Diluted earnings (loss) per common share		$	(11.46	)		2.18			2.66

See accompanying Notes to Consolidated Financial Statements.

62

FOREST OIL CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

		Common Stock						Capital Surplus			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive (Loss) Income			Treasury Stock			Total Shareholders' Equity
		(In Thousands)
Balances at January 1, 2006			64,548		$	6,455			1,529,102			217,293			(18,220	)		(50,108	)		1,684,522
	Exercise of stock options		289			28			6,019			(8	)		—			27			6,066
	Tax benefit of stock options exercised		—			—			25			—			—			—			25
	Employee stock purchase plan		28			4			741			—			—			—			745
	Restricted stock issued, net of forfeitures		(6	)		(1	)		—			—			—			—			(1	)
	Retirement of treasury stock		(1,861	)		(186	)		(49,895	)		—			—			50,081			—
	Amortization of stock-based compensation		—			—			20,158			—			—			—			20,158
	Tax benefit of acquired net operating losses		—			—			8,337			—			—			—			8,337
	Pro rata distribution of MERI common stock to shareholders (Note 2)		—			—			(298,827	)		(247,991	)		7,549			—			(539,269	)
Comprehensive earnings:
	Net earnings		—			—			—			168,502			—			—			168,502
	Reclassification of hedges to earnings, net of tax		—			—			—			—			50,581			—			50,581
	Change in fair value of hedges, net of tax		—			—			—			—			30,873			—			30,873
	Decrease in unfunded postretirement benefits, net of tax		—			—			—			—			2,333			—			2,333
	Foreign currency translation		—			—			—			—			1,134			—			1,134
	Total comprehensive earnings																				253,423
Balances at December 31, 2006			62,998			6,300			1,215,660			137,796			74,250			—			1,434,006
	Acquisition of Houston Exploration		23,990			2,399			724,013			—			—			—			726,412
	Exercise of stock options		652			65			11,720			—			—			—			11,785
	Employee stock purchase plan		33			3			1,057			—			—			—			1,060
	Restricted stock issued, net of cancellations		736			74			(74	)		—			—			—			—
	Amortization of stock-based compensation		—			—			15,504			—			—			—			15,504
	Adoption of FIN 48		—			—			—			(1,040	)		—			—			(1,040	)
	Restricted stock redeemed and other		(30	)		(3	)		(1,311	)		—			—			—			(1,314	)
Comprehensive earnings:
	Net earnings		—			—			—			169,306			—			—			169,306
	Decrease in unfunded postretirement benefits, net of tax		—			—			—			—			1,295			—			1,295
	Foreign currency translation		—			—			—			—			54,797			—			54,797
	Total comprehensive earnings																				225,398
Balances at December 31, 2007			88,379			8,838			1,966,569			306,062			130,342			—			2,411,811
	Acquisition of Texas properties		7,250			725			358,875			—			—			—			359,600
	Exercise of stock options		784			78			16,279			—			—			—			16,357
	Employee stock purchase plan		45			5			1,378			—			—			—			1,383
	Restricted stock issued, net of cancellations		684			68			(68	)		—			—			—			—
	Amortization of stock-based compensation		—			—			26,770			—			—			—			26,770
	Adoption of EITF 06-4 and EITF 06-10 (Note 8)		—			—			—			(9,032	)		—			—			(9,032	)
	Adjustment to pro rata distribution of MERI common stock (Note 2)		—			—			(12,385	)		—			—			—			(12,385	)
	Restricted stock redeemed and other		(102	)		(10	)		(2,515	)		—			—			—			(2,525	)
Comprehensive loss:
	Net loss		—			—			—			(1,026,323	)		—			—			(1,026,323	)
	Increase in unfunded postretirement benefits, net of tax		—			—			—			—			(8,007	)		—			(8,007	)
	Foreign currency translation		—			—			—			—			(84,737	)		—			(84,737	)
	Total comprehensive loss																				(1,119,067	)
Balances at December 31, 2008			97,040		$	9,704			2,354,903			(729,293	)		37,598			—			1,672,912

See accompanying Notes to Consolidated Financial Statements.

63

FOREST OIL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS

					Year Ended December 31,
					2008			2007			2006
					(In Thousands)
Operating activities:
	Net earnings (loss)				$	(1,026,323	)		169,306			168,502
		Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
			Depreciation and depletion			532,181			390,338			266,881
			Unrealized (gains) losses on derivative instruments, net			(221,490	)		117,499			(83,629	)
			Deferred income tax			(585,817	)		56,396			90,004
			Impairment of oil and gas properties			2,369,055			—			3,668
			Stock-based compensation expense			17,171			10,895			13,240
			Accretion of asset retirement obligations			7,602			6,064			7,096
			Gain on sale of assets			(21,063	)		(7,176	)		—
			Unrealized foreign currency exchange loss (gain)			19,481			(7,694	)		3,931
			Unrealized losses on other investments, net			34,042			4,948			—
			Other, net			(2,549	)		1,402			5,899
			Changes in operating assets and liabilities, net of effects of acquisitions and divestitures:
				Accounts receivable		42,854			353			(640	)
				Other current assets		(80,214	)		1,557			(39,860	)
				Accounts payable and accrued liabilities		15,796			(9,592	)		9,200
				Accrued interest and other current liabilities		(30,686	)		(26,051	)		(21,814	)
			Net cash provided by operating activities			1,070,040			708,245			422,478
Investing activities:
	Capital expenditures for property and equipment:
			Acquisition of Houston Exploration, net of cash acquired (Note 2)			—			(775,365	)		—
			Exploration, development, and other acquisition costs			(2,338,488	)		(787,735	)		(894,448	)
			Other fixed assets			(66,005	)		(32,169	)		(21,950	)
	Proceeds from sales of assets					309,940			502,048			6,507
	Other, net					1,060			—			—
			Net cash used by investing activities			(2,093,493	)		(1,093,221	)		(909,891	)
Financing activities:
	Proceeds from bank borrowings					3,203,360			1,536,526			1,562,778
	Repayments of bank borrowings					(2,195,101	)		(1,365,178	)		(1,432,574	)
	Issuance of 71/4% senior notes, net of issuance costs					247,188			739,176			—
	Redemption of 8% senior notes					(265,000	)		—			—
	Repurchases of 7% senior subordinated notes					(4,710	)		—			—
	Repayments of Alaska Credit Agreements					—			(375,000	)		—
	Repayments of bank debt assumed in acquisition					—			(176,885	)		—
	Proceeds from Alaska Credit Agreements, net of issuance costs					—			—			367,706
	Proceeds from Spin-off					—			—			21,670
	Proceeds from the exercise of options and from employee stock purchase plan					17,740			12,845			6,811
	Other, net					12,781			(11,932	)		(12,559	)
			Net cash provided by financing activities			1,016,258			359,552			513,832
Effect of exchange rate changes on cash						(285	)		1,945			(486	)
Net (decrease) increase in cash and cash equivalents						(7,480	)		(23,479	)		25,933
Cash and cash equivalents at beginning of year						9,685			33,164			7,231
Cash and cash equivalents at end of year					$	2,205			9,685			33,164
Cash paid during the year for:
	Interest				$	141,993			125,276			76,979
	Income taxes					2,530			6,445			5,590

See accompanying Notes to Consolidated Financial Statements.

64

FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008, 2007, and 2006

(1)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Description of the Business

        Forest Oil Corporation ("Forest") is an independent oil and gas company engaged in the acquisition, exploration, development, and production of natural gas and liquids primarily in North America. Forest was incorporated in New York in 1924, as the successor to a company formed in 1916, and has been a publicly held company since 1969. Forest is active in several of the major exploration and producing areas in the United States and in Canada and has exploratory and development interests in two other foreign countries.

Basis of Presentation and Principles of Consolidation

        The consolidated financial statements include the accounts of Forest Oil Corporation and its consolidated subsidiaries (collectively, "Forest" or the "Company"). Significant intercompany balances and transactions are eliminated. The Company consolidates all subsidiaries in which it controls over 50% of the voting interests. Entities in which the Company does not have a direct or indirect majority voting interest are generally accounted for using the equity method. Under the equity method, the initial investment in the affiliated entity is recorded at cost and subsequently increased or reduced to reflect the Company's share of gains or losses or dividends received from the affiliate. The Company's share of the income or losses of the affiliate is included in the Company's reported net earnings.

        Certain amounts in prior years' financial statements have been reclassified to conform to the 2008 financial statement presentation.

Assumptions, Judgments, and Estimates

        In the course of preparing the consolidated financial statements, management makes various assumptions, judgments, and estimates to determine the reported amounts of assets, liabilities, revenue, and expenses, and in the disclosures of commitments and contingencies. Changes in these assumptions, judgments, and estimates will occur as a result of the passage of time and the occurrence of future events and, accordingly, actual results could differ from amounts previously established.

        The more significant areas requiring the use of assumptions, judgments, and estimates relate to volumes of oil and gas reserves used in calculating depletion, the amount of future net revenues used in computing the ceiling test limitations, and the amount of future capital costs and abandonment obligations used in such calculations. Assumptions, judgments, and estimates are also required in determining impairments of investments in unproved properties, valuing deferred tax assets and goodwill, and estimating fair values of derivative instruments.

Cash Equivalents

        The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.

Property and Equipment

        The Company uses the full cost method of accounting for oil and gas properties. Separate cost centers are maintained for each country in which the Company has operations. During the periods presented, the Company's primary oil and gas operations were conducted in the United States and Canada. All costs incurred in the acquisition, exploration, and development of properties (including costs of surrendered and abandoned leaseholds, delay lease rentals, dry holes, and overhead related to

65

(1)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)

exploration and development activities) and the fair value of estimated future costs of site restoration, dismantlement, and abandonment activities are capitalized. For the years ended December 31, 2008, 2007, and 2006, Forest capitalized $47.3 million, $43.6 million, and $31.8 million of general and administrative costs (including stock-based compensation), respectively. Interest costs related to significant unproved properties that are under development are also capitalized to oil and gas properties. During 2008, 2007, and 2006, the Company capitalized $17.9 million, $13.9 million, and $3.7 million, respectively, of interest costs attributed to unproved properties.

        Investments in unproved properties, including capitalized interest costs, are not depleted pending determination of the existence of proved reserves. Unproved properties are assessed periodically to ascertain whether impairment has occurred. Unproved properties whose costs are individually significant are assessed individually by considering the primary lease terms of the properties, the holding period of the properties, and geographic and geologic data obtained relating to the properties. Where it is not practicable to assess individually the amount of impairment of properties for which costs are not individually significant, such properties are grouped for purposes of assessing impairment. The amount of impairment assessed is added to the costs to be amortized, or is reported as a period expense, as appropriate.

        Pursuant to full cost accounting rules, the Company must perform a ceiling test each quarter on its proved oil and gas assets within each separate cost center. The ceiling test provides that capitalized costs less related accumulated depletion and deferred income taxes for each cost center may not exceed the sum of (1) the present value of future net revenue from estimated production of proved oil and gas reserves using current prices, excluding the future cash outflows associated with settling asset retirement obligations that have been accrued on the balance sheet, at a discount factor of 10%; plus (2) the cost of properties not being amortized, if any; plus (3) the lower of cost or estimated fair value of unproved properties included in the costs being amortized, if any; less (4) income tax effects related to differences in the book and tax basis of oil and gas properties. Should the net capitalized costs for a cost center exceed the sum of the components noted above, a ceiling test impairment charge would be recognized to the extent of the excess capitalized costs. As a result of this limitation on capitalized costs, the accompanying financial statements included a provision for a ceiling test impairment of oil and gas property costs in 2008 of $2.4 billion in the United States. Based on current prices as of February 25, 2009, it is likely we will record an additional ceiling test impairment in the first quarter of 2009.

        Gain or loss is not recognized on the sale of oil and gas properties unless the sale significantly alters the relationship between capitalized costs and estimated proved oil and gas reserves attributable to a cost center.

        Depletion of proved oil and gas properties is computed on the units-of-production method, whereby capitalized costs, as adjusted for future development costs and asset retirement obligations, are amortized over the total estimated proved reserves. Furniture and fixtures, leasehold improvements, computer hardware and software, and other equipment are depreciated on the straight-line or declining balance method, based upon estimated useful lives of the assets ranging from three to fifteen years.

Asset Retirement Obligations

        Forest records estimated future asset retirement obligations pursuant to the provisions of Statement of Financial Accounting Standards ("SFAS") No. 143, Accounting for Asset Retirement Obligations ("SFAS 143"). SFAS 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred with a corresponding increase in the carrying amount of the related long-lived asset. Subsequent to initial measurement, the asset retirement obligation is required to be accreted each period to its present value. Capitalized costs are depleted as

66

(1)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)

a component of the full cost pool using the units-of-production method. Forest's asset retirement obligations consist of costs related to the plugging of wells, the removal of facilities and equipment, and site restoration on oil and gas properties.

        The following table summarizes the activity for the Company's asset retirement obligations for the years ended December 31, 2008 and 2007:

	Year Ended December 31,
	2008			2007
	(In Thousands)
Asset retirement obligations at beginning of period	$	90,505			64,102
Accretion expense		7,602			6,064
Liabilities incurred		10,375			5,195
Liabilities settled		(5,867	)		(2,512	)
Disposition of properties		(7,262	)		(17,476	)
Liabilities assumed		2,747			36,424
Revisions of estimated liabilities		1,836			(3,843	)
Impact of foreign currency exchange rate		(2,945	)		2,551
Asset retirement obligations at end of period		96,991			90,505
Less: current asset retirement obligations		(5,852	)		(2,562	)
Long-term asset retirement obligations	$	91,139			87,943

Financial Instruments

        The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash equivalents, derivative instruments, and accounts receivable. The Company's cash equivalents and derivative instruments are placed with major financial institutions. The Company attempts to minimize credit risk exposure to purchasers of the Company's oil and natural gas through formal credit policies, monitoring procedures, and letters of credit when considered necessary.

        The Company used various assumptions and methods in estimating fair value disclosures for financial instruments. The carrying amounts of cash and cash equivalents and accounts receivable approximated their fair value due to the short maturity of these instruments. The fair values of derivative instruments were based on published forward prices, volatilities, and credit risk considerations, including the incorporation of published interest rates and credit spreads. The carrying amount of the Company's credit facilities approximated fair value, because the interest rates on the credit facilities are variable. The fair values of the Company's senior notes and senior subordinated notes were estimated based on quoted market prices, if available, or quoted market prices of comparable instruments. The carrying values and fair values of the Company's debt instruments (other than its credit facilities) are summarized below for the periods presented:

	December 31, 2008				December 31, 2007
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In Thousands)
8% Senior Notes due 2008	$	—		—		266,002		267,650
8% Senior Notes due 2011		291,350		256,500		293,482		296,400
7% Senior Subordinated Notes due 2013		1,087		912		5,664		5,618
73/4% Senior Notes due 2014		158,219		123,000		159,763		152,250
71/4% Senior Notes due 2019		1,000,590		780,000		750,000		753,750

67

(1)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)

Revenues

Oil and Gas Sales

        The Company recognizes revenues when they are realized or realizable and earned. Revenues are considered realized or realizable and earned when: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the seller's price to the buyer is fixed or determinable and (iv) collectibility is reasonably assured.

        When the Company has an interest with other producers in properties from which natural gas is produced, the Company uses the entitlements method to account for any imbalances. Imbalances occur when the Company sells more or less product than it is entitled to under its ownership percentage. Revenue is recognized only on the entitlement percentage of volumes sold. Any amount that the Company sells in excess of its entitlement is treated as a liability and is not recognized as revenue. Any amount of entitlement in excess of the amount the Company sells is recognized as revenue and a receivable is accrued. At December 31, 2008 and 2007, the Company had gas imbalance payables of $9.8 million and $8.4 million, respectively, and gas imbalance receivables of $8.1 million and $9.2 million, respectively.

        In 2008, sales to two purchasers were approximately 13% and 12% of the Company's total revenue. In 2006, sales to two purchasers were approximately 14% and 13% of the Company's total revenue. In 2007, there were no purchasers who exceeded 10% of the Company's total revenue.

Marketing, Processing, and Other

        "Marketing, processing, and other" primarily consists of marketing fees earned from third-party marketing arrangements and fees earned attributable to volumes processed on behalf of third parties through Company-owned gas processing plants.

Accounts Receivable

        The components of accounts receivable include the following:

		December 31,
		2008			2007
		(In Thousands)
Oil and gas sales		$	94,911			150,258
Joint interest billings			46,357			44,810
Other			16,376			7,011
Allowance for doubtful accounts			(418	)		(462	)
	Total accounts receivable	$	157,226			201,617

        Forest's accounts receivable are primarily from purchasers of the Company's oil and natural gas production and from other exploration and production companies which own working interests in the properties that the Company operates. This industry concentration could adversely impact Forest's overall credit risk, because the Company's customers and working interest owners may be similarly affected by changes in economic and financial market conditions, commodity prices, and other conditions. Forest's oil and gas production is sold to various purchasers in accordance with the Company's credit policies and procedures. These policies and procedures take into account, among other things, the creditworthiness of potential purchasers and concentrations of credit risk. Forest generally requires letters of credit or parental guarantees for receivables from parties that are deemed to have sub-standard credit or other financial concerns, unless the Company can otherwise mitigate the

68

(1)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)

perceived credit exposure. Forest believes that the loss of one or more of the Company's current oil and gas purchasers would not have a material adverse effect on the Company's ability to sell its production, because any individual purchaser could be readily replaced by another purchaser, absent a broad market disruption.

Income Taxes

        The Company accounts for income taxes in accordance with the provisions of SFAS No. 109, Accounting for Income Taxes ("SFAS 109"). Under SFAS 109, deferred tax liabilities and assets are recognized for the expected future tax consequences of temporary differences between financial accounting bases and tax bases of assets and liabilities. The tax benefits of tax loss carryforwards and other deferred tax benefits are recorded as an asset to the extent that management assesses the utilization of such assets to be more likely than not. When the future utilization of some portion of the deferred tax asset is determined not to be more likely than not, a valuation allowance is provided to reduce the recorded deferred tax assets. Management believes that it could implement tax planning strategies to prevent certain of these carryforwards from expiring.

Foreign Currency Translation

        The functional currency of Canadian Forest Oil Ltd. ("Canadian Forest"), the Company's wholly-owned Canadian subsidiary, is the Canadian dollar. Assets and liabilities related to Canadian Forest are generally translated at end-of-period exchange rates, and related translation adjustments are generally reported as a component of shareholders' equity in accumulated other comprehensive income. Statement of operations accounts are translated at the average of the exchange rates for the period.

        During 2008, 2007, and 2006, Forest realized approximately $1.0 million, $(7.7) million, and $(.3) million, respectively, of foreign currency exchange losses (gains) in connection with the repayment of intercompany debt owed to Forest Oil Corporation by Canadian Forest. During 2008, 2007, and 2006, Forest recorded approximately $19.5 million, $(7.7) million, and $3.9 million, respectively, of unrealized losses (gains) related to the intercompany debt since it is denominated in U.S. dollars.

Discontinued Operations

        On March 1, 2004, the assets and business operations of our Canadian marketing subsidiary were sold and the subsidiary's results of operations were reported as discontinued operations in the Consolidated Statements of Operations. In 2006, Forest received an additional $3.6 million contingent payment ($2.4 million net of tax) from the buyer, which is also reflected as income from discontinued operations in the Consolidated Statements of Operations.

Earnings per Share

        Basic earnings (loss) per share is computed by dividing net earnings (loss) attributable to common stock by the weighted average number of common shares outstanding during each period. Diluted earnings (loss) per share is computed by adjusting the average number of common shares outstanding for the dilutive effect, if any, of stock options, unvested restricted stock grants, and unvested phantom stock units. Stock options, unvested restricted stock grants, and unvested phantom stock units were not included in the calculation of diluted loss per share for the year ended December 31, 2008 as their

69

(1)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)

inclusion would have an antidilutive effect. The following sets forth the calculation of basic and diluted earnings (loss) per share.

		Year Ended December 31,
		2008			2007		2006
		(In Thousands, Except Per Share Amounts)
Earnings (loss) from continuing operations		$	(1,026,323	)		169,306		166,080
Income from discontinued operations, net of tax			—			—		2,422
Net earnings (loss)		$	(1,026,323	)		169,306		168,502
Weighted average common shares outstanding during the period			89,591			76,101		62,226
Add dilutive effects of stock options, unvested restricted stock grants, and unvested phantom stock units			—			1,650		1,205
Weighted average common shares outstanding during the period, including the effects of dilutive securities			89,591			77,751		63,431
Basic earnings (loss) per common share:
	From continuing operations	$	(11.46	)		2.22		2.67
	From discontinued operations		—			—		.04
	Basic earnings (loss) per common share	$	(11.46	)		2.22		2.71
Diluted earnings (loss) per common share:
	From continuing operations	$	(11.46	)		2.18		2.62
	From discontinued operations		—			—		.04
	Diluted earnings (loss) per common share	$	(11.46	)		2.18		2.66

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).

Accounting for Derivative Instruments

        The Company follows the provisions of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"). SFAS 133 requires the accounting recognition of all derivative instruments as either assets or liabilities at fair value. Under the provisions of SFAS 133, the Company may or may not elect to designate a derivative instrument as a hedge against changes in the fair value of an asset or a liability (a "fair value hedge") or against exposure to variability in expected future cash flows (a "cash flow hedge").

Treasury Stock

        In May 2006, Forest retired its treasury stock. The Company had historically accounted for treasury stock acquisitions using the cost method. Under this method, for reissuance of treasury stock, to the extent that the reissuance price was more than the cost, the excess was recorded as an increase

70

(1)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)

to capital surplus. If the reissuance price was less than the cost, the difference was also recorded to capital surplus to the extent there was a cumulative treasury stock paid in capital balance.

Debt Issue Costs

        Included in other assets are costs associated with the issuance of our senior notes and our revolving bank credit facilities. The remaining unamortized debt issue costs at December 31, 2008 and 2007 totaled $23.5 million and $19.7 million, respectively, and are being amortized over the life of the respective debt instruments. The increase in 2008 includes the debt issue costs associated with the May 2008 issuance of the $250 million 7¹/4% senior notes due 2019.

Inventory

        Inventories were comprised of $78.7 million and $9.5 million of materials and supplies as of December 31, 2008 and 2007, respectively. The Company's materials and supplies inventory, which is acquired for use in future drilling or repair operations, is primarily comprised of oil and gas drilling or repair items such as tubing, casing, operating supplies, and ordinary maintenance materials and parts.

Goodwill

        The Company accounts for goodwill in accordance with SFAS No. 142, Goodwill and Other Intangible Assets, and is required to make an annual impairment assessment in lieu of periodic amortization. The Company performs its annual goodwill impairment test in the second quarter of the year. In addition, the Company tests goodwill for impairment if events or circumstances change between annual tests indicating a possible impairment. The impairment assessment requires the Company to make estimates regarding the fair value of the reporting unit to which goodwill has been assigned. Although the Company bases its fair value estimate on assumptions it believes to be reasonable, those assumptions are inherently unpredictable and uncertain. Downward revisions of estimated reserve quantities, increases in future cost estimates, divestiture of a significant component of the reporting unit, or depressed oil and natural gas prices could lead to an impairment of goodwill in future periods. The Company had no goodwill impairments for the years ended December 31, 2008, 2007, and 2006.

        A portion of our goodwill is assigned to the Canadian geographical business segment, and normal fluctuations will occur between periods based upon changes in foreign currency exchange rates. Forest recognized $168.0 million of goodwill associated with the Houston Exploration acquisition, which occurred in June 2007, as discussed in Note 2.

Comprehensive Earnings (Loss)

        Comprehensive earnings (loss) is a term used to refer to net earnings (loss) plus other comprehensive income (loss). Other comprehensive income (loss) is comprised of revenues, expenses, gains, and losses that under generally accepted accounting principles are reported as separate components of shareholders' equity instead of net earnings (loss). Items included in the Company's other comprehensive income (loss) during the last three years include: foreign currency gains (losses) related to the translation of the assets and liabilities of the Company's Canadian operations; changes in the unfunded postretirement benefits; and unrealized gains (losses) related to the changes in fair value of derivative instruments designated as cash flow hedges.

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(1)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)

        The components of accumulated other comprehensive earnings (loss) for the years ended December 31, 2008, 2007, and 2006 are as follows:

	Foreign Currency Translation			Unfunded Postretirement Benefits(1)			Unrealized Gain (Loss) on Derivative Instruments, Net(1)			Accumulated Other Comprehensive Income (Loss)
	(In Thousands)
Balance at January 1, 2006	$	79,413			(8,630	)		(89,003	)		(18,220	)
2006 activity		1,134			2,333			89,003			92,470
Balance at December 31, 2006		80,547			(6,297	)		—			74,250
2007 activity		54,797			1,295			—			56,092
Balance at December 31, 2007		135,344			(5,002	)		—			130,342
2008 activity		(84,737	)		(8,007	)		—			(92,744	)
Balance at December 31, 2008	$	50,607			(13,009	)		—			37,598

⁽¹⁾

Net of tax.

Impact of Recently Issued Accounting Pronouncements

        In December 2007, the Financial Accounting Standards Board ("FASB") issued SFAS No. 141 (Revised), Business Combinations ("SFAS 141(R)"), which significantly changes the financial accounting and reporting of business combination transactions. SFAS 141(R) establishes principles and requirements for how an acquirer in a business combination: (i) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree, (ii) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase, and (iii) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141(R) applies prospectively to business combinations that are completed or close on or after the beginning of the first annual reporting period that begins on or after December 15, 2008. Accordingly, the Company has adopted this pronouncement as of January 1, 2009. This pronouncement may have a material impact on the accounting for any acquisition the Company may make after January 1, 2009.

        In February 2008, the FASB issued FASB Staff Position No. 157-2, Effective Date of FASB Statement No. 157 ("FSP 157-2"). FSP 157-2 delayed the effective date of SFAS No. 157, Fair Value Measurements, for one year to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years, for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Accordingly, the Company has adopted this pronouncement as of January 1, 2009. The Company does not expect the adoption of this pronouncement to have a material impact on its financial position or results of operations.

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(1)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)

        In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133 ("SFAS 161"). SFAS 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. This statement is effective for fiscal years and interim periods beginning after November 15, 2008. Accordingly, the Company has adopted this pronouncement as of January 1, 2009. The adoption of this pronouncement will have no impact on the Company's financial position or results of operations, but may require expanded disclosures about derivative instruments.

        In June 2008, the FASB issued FASB Staff Position No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities ("FSP EITF 03-6-1"), which addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing basic earnings per share under the two-class method described in SFAS No. 128, Earnings per Share. All prior period earnings per share data presented shall be adjusted retrospectively to conform with the provisions of this pronouncement. FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those years. Accordingly, the Company has adopted this pronouncement as of January 1, 2009. The Company does not expect the adoption of FSP EITF 03-6-1 to have a material impact on its financial position or results of operations. The Company is currently evaluating the impact that the adoption of this pronouncement will have on its earnings per share calculations, but in general believes that its basic earnings per share will decrease as earnings will now be attributable to both common stock and share-based payment participating securities.

        In December 2008, the Securities and Exchange Commission ("SEC") adopted revisions to its oil and gas disclosure requirements that are intended to align them with current practices and changes in technology. Key changes brought about by the amendments include:

•

The replacement of the single-day year-end pricing assumption with a twelve-month average pricing assumption for both disclosure and full cost accounting purposes;

•

Permitting voluntary disclosure of probable and possible reserves;

•

Expanding the range of acceptable technologies used to establish the reasonable certainty of reserves;

•

Easing the standard for inclusion of proved undeveloped reserves ("PUDs") by replacing the "certainty" standard for areas beyond one offsetting drilling unit from a productive well with a "reasonable certainty" standard;

•

Requiring narrative disclosures regarding PUDs, including material changes in PUDs during the year, investments and progress made during the year to convert PUDs to proved developed reserves, and discussion regarding the Company's plans for development of its PUDs;

•

Requiring disclosure of the qualifications of the technical person primarily responsible for preparing the reserves estimates or conducting the reserves audit and a discussion of the internal controls used to assure objectivity in the reserve estimation process;

•

Requiring the filing of the independent reserve engineers' summary report if a reserves audit has been performed; and

73

(1)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)

•

Permitting the disclosure of an optional reserves sensitivity analysis table to illustrate the impact of different price and/or cost assumptions on reserves, provided the price and/or cost assumptions are disclosed.

        The amendments provide that companies must begin complying with these new requirements for registration statements filed on or after January 1, 2010, and for annual reports on Form 10-K for fiscal years ending on December 31, 2009, with early adoption prohibited. The Company is currently evaluating the impact that the adoption of this pronouncement will have on the Company's financial position, results of operations, and disclosures.

        In December 2008, the FASB issued FASB Staff Position No. FAS 132(R)-1, Employers' Disclosures About Postretirement Benefit Plan Assets ("FSP FAS 132(R)-1"), which provides guidance on an employer's disclosures about plan assets of a defined benefit pension or other postretirement benefit plan. FSP FAS 132(R)-1 states that disclosures concerning plan assets should provide users of financial statements with an understanding of: investment policies and strategies; categories of plan assets; fair value measurements of plan assets; and significant concentrations of risk. The disclosures required by FSP FAS 132(R)-1 shall be provided for fiscal years ending after December 15, 2009. The Company is currently evaluating the impact that the adoption of this pronouncement will have on the Company's plan asset disclosures.

(2)    ACQUISITIONS AND DIVESTITURES:

Acquisitions

Texas Properties Acquisition

        On September 30, 2008, Forest acquired producing oil and natural gas properties located in its Greater Buffalo Wallow and Ark-La-Tex core areas from Cordillera Texas, L.P. Forest paid approximately $570 million in cash, subject to customary post-closing adjustments to reflect an economic effective date of July 1, 2008, and issued 7.25 million shares of Forest's common stock, valued at approximately $360 million (based on a September 30, 2008 closing price), to the seller for the acquired assets. Forest funded the cash component of the purchase price primarily using advances under its credit facilities.

Ark-La-Tex Properties Acquisition

        On May 2, 2008, Forest acquired producing oil and natural gas properties located primarily in its core Ark-La-Tex region in East Texas and North Louisiana. Forest paid approximately $284 million, as adjusted to reflect an economic effective date of April 1, 2008, for the assets using funds advanced under its credit facilities.

Acquisition of Houston Exploration

        On June 6, 2007, Forest completed the acquisition of The Houston Exploration Company ("Houston Exploration") in a cash and stock transaction totaling approximately $1.5 billion and the assumption of Houston Exploration's debt. Houston Exploration was an independent natural gas and oil producer engaged in the exploration, development, exploitation, and acquisition of natural gas and oil reserves in North America. Houston Exploration had operations in four producing regions within the United States: South Texas, East Texas, the Arkoma Basin of Arkansas, and the Uinta and DJ Basins in the Rocky Mountains. Pursuant to the terms and conditions of the agreement and plan of merger, Forest paid total merger consideration of $750 million in cash and issued approximately 24 million common shares, valued at $30.28 per share. The cash component of the merger

74

(2)    ACQUISITIONS AND DIVESTITURES: (Continued)

consideration was financed from a private placement of $750 million of 7¹/4% senior notes due 2019 and borrowings under the Company's credit facilities. Immediately following the completion of the merger, Forest repaid all of Houston Exploration's outstanding bank debt totaling $177 million.

        The acquisition, which was accounted for using the purchase method of accounting, has been included in Forest's Consolidated Financial Statements since June 6, 2007, the date the acquisition closed. The following table represents the allocation of the total purchase price of Houston Exploration to the acquired assets and liabilities of Houston Exploration as of December 31, 2008. The allocation represents the estimated fair values assigned to each of the assets acquired and liabilities assumed.

			(In Thousands)
Fair value of Houston Exploration's net assets:
	Net working capital, including cash of $3.5 million		$	(809	)
	Proved oil and gas properties			1,741,823
	Unproved oil and gas properties			448,100
	Goodwill			168,043
	Other assets			14,537
	Derivative instruments			(45,170	)
	Long-term debt			(182,532	)
	Asset retirement obligations			(36,424	)
	Deferred income taxes			(584,049	)
	Other liabilities			(18,210	)
	Total fair value of net assets		$	1,505,309
Consideration paid for Houston Exploration's net assets:
	Forest common stock issued		$	726,412
	Cash consideration paid			749,694
	Aggregate purchase consideration paid to Houston Exploration stockholders			1,476,106
	Plus:
		Cash settlement for Houston Exploration stock options		20,075
		Direct merger costs incurred		9,128
	Total consideration paid		$	1,505,309

        Goodwill of $168.0 million was recognized to the extent that the consideration paid exceeded the fair value of the net assets acquired and has been assigned to the U.S. geographical business segment. Goodwill is not expected to be deductible for tax purposes. The principal factors that contributed to the recognition of goodwill include the mix of complementary high-quality assets in certain of our existing core areas, lower-risk exploitation opportunities, expected increased cash flow from operations available for investing activities, and opportunities for cost savings through administrative and operational synergies.

        Included in the working capital assumed at the acquisition date was a severance accrual of $28.9 million for costs to involuntarily terminate employees of Houston Exploration. Management determined it would be necessary to eliminate certain overlapping positions to achieve cost savings through administrative and operational synergies. Management has finalized its termination plan as a

75

(2)    ACQUISITIONS AND DIVESTITURES: (Continued)

result of the acquisition and all severance payments have been made. The following table summarizes the activity in the severance accrual through December 31, 2008 since the acquisition date.

	(In Thousands)
Severance accrual at June 6, 2007	$	28,850
Cash payments(1)		(11,519	)
Net adjustment(2)		(1,694	)
Severance accrual at December 31, 2007		15,637
Cash payments(1)		(15,286	)
Net adjustment(2)		(351	)
Severance accrual at December 31, 2008	$	—

⁽¹⁾

Represents cash severance and excise tax payments to involuntarily terminated employees of Houston Exploration as well as the related employer tax payments paid by the Company.

⁽²⁾

Represents the net adjustment made to the accrual as the Company continued to finalize the termination plan. This net adjustment was made to the cost of the acquired company.

        The following summary pro forma combined statement of operations data of Forest for the years ended December 31, 2007 and 2006 has been prepared to give effect to the merger as if the merger had occurred on January 1, 2007 and 2006, respectively. The pro forma financial information is not necessarily indicative of the results that might have occurred had the transaction taken place on January 1, 2007 and 2006, and is not intended to be a projection of future results. Future results may vary significantly from the results reflected in the following pro forma financial information because of normal production declines, changes in commodity prices, future acquisitions and divestitures, future development and exploration activities, and other factors. The pro forma financial information also gives pro forma effect to Forest's spin-off of its offshore Gulf of Mexico operations completed in March 2006 and Houston Exploration's sale of substantially all of its offshore Gulf of Mexico operations completed in June 2006, as though each disposition occurred on January 1, 2006.

		Year Ended December 31,
		2007		2006
		(In Thousands, Except Per Share Amounts)
Revenues		$	1,304,849		1,220,447
Earnings from continuing operations			181,591		172,101
Net earnings			181,591		174,523
Basic earnings per common share:
	From continuing operations	$	2.09		2.00
	Basic earnings per common share		2.09		2.02
Diluted earnings per common share:
	From continuing operations	$	2.06		1.98
	Diluted earnings per common share		2.06		2.00

Cotton Valley Acquisition

        On March 31, 2006, Forest completed the acquisition of oil and natural gas properties located primarily in the Cotton Valley trend in East Texas. Forest paid approximately $255 million, as adjusted to reflect an economic effective date of February 1, 2006. Forest funded this acquisition utilizing its bank credit facilities.

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(2)    ACQUISITIONS AND DIVESTITURES: (Continued)

Divestitures

Miscellaneous Divestitures

        During the year ended December 31, 2008, Forest sold various non-core U.S. and international oil and natural gas properties for total proceeds of $309.9 million. These divestitures included the sale of all of Forest's properties in Gabon for net proceeds of $23.9 million that resulted in a gain on the sale of $21.1 million in the third quarter. During the year ended December 31, 2007, Forest sold various properties for total proceeds of $39.4 million, including an overriding royalty interest in Australia for net proceeds of $7.2 million that resulted in a gain on the sale of $7.2 million. In addition, in August 2007, the Company entered into a sale-leaseback transaction whereby the Company sold its drilling rigs for cash proceeds of $62.6 million and simultaneously entered into an operating lease with the buyer which provides for monthly rental payments of $.9 million for a term of seven years. A deferred gain of $33.3 million resulted from the sale of the drilling rigs and is being amortized over the term of the lease.

Sale of Alaska Assets

        On August 27, 2007, Forest sold all of its assets located in Alaska (the "Alaska Assets") to Pacific Energy Resources Ltd. ("PERL"). The total consideration received for the Alaska Assets included $400 million in cash, 10 million shares of PERL common stock (subject to certain restrictions) (the "PERL Shares"), and a zero coupon senior subordinated note from PERL due 2014 in the principal amount at stated maturity of $60.8 million (the "PERL Note"). A portion of the cash consideration, $269 million, was applied to prepay all amounts due under the Alaska credit agreements, including accrued interest and prepayment premiums. Consideration received by Forest in the form of the PERL common stock and the zero coupon senior subordinated note are being held in other investments within the Consolidated Balance Sheet. Forest accounts for these investments as trading securities in accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities. Investments in debt and equity securities classified as trading securities are recorded at fair value with unrealized gains and losses recognized in "Other income and expense" in the Consolidated Statements of Operations. See Note 9 to the Consolidated Financial Statements.

Spin-off and Merger of Offshore Gulf of Mexico Operations

        On March 2, 2006, Forest completed the spin-off of its offshore Gulf of Mexico operations by means of a special dividend, which consisted of a pro rata spin-off (the "Spin-off") of all outstanding shares of Forest Energy Resources, Inc. (hereinafter known as Mariner Energy Resources, Inc. or "MERI"), a total of approximately 50.6 million shares of common stock, to holders of record of Forest common stock as of the close of business on February 21, 2006. Immediately following the Spin-off, MERI was merged with a subsidiary of Mariner Energy, Inc. ("Mariner") (the "Mariner Merger"). Mariner's common stock commenced trading on the New York Stock Exchange on March 3, 2006.

        The Spin-off was a tax-free transaction for federal income tax purposes. Prior to the Mariner Merger, as part of the Spin-off, MERI paid Forest $176.1 million. The $176.1 million was drawn on a newly created bank credit facility established by MERI immediately prior to the Spin-off. This credit facility and associated liability were included in the Spin-off. Subsequent to the closing, in 2006, Forest received additional net cash proceeds of $21.7 million from MERI for a total of $197.8 million. In accordance with the transaction agreements, Forest and MERI had submitted post-closing adjustments from which Forest paid MERI a total of $5.8 million during 2007. Additional adjustments were made to the cash component of the Spin-off based on the resolution of certain matters that were the subject of arbitration, which concluded in January 2009, between Forest and MERI. These adjustments resulted

77

(2)    ACQUISITIONS AND DIVESTITURES: (Continued)

in a net amount paid to MERI of $16.6 million, of which $12.4 million is represented as an adjustment to the pro rata distribution in shareholders' equity.

        The table below sets forth the assets and liabilities included in the Spin-off as of the date of the distribution (in thousands):

	Working capital	$	(12,383	)
	Proved oil and gas properties, net of accumulated depletion		1,033,289
	Unproved oil and gas properties		38,523
	Other assets		7,919
	Derivative instruments		(17,087	)
	MERI credit facility		(176,102	)
	Asset retirement obligations		(150,182	)
	Deferred income taxes		(184,483	)
	Other liabilities		(225	)
	Accumulated other comprehensive income		7,549
Net decrease to capital surplus and retained earnings		$	546,818

        The following table presents the revenues and direct operating expenses of the offshore Gulf of Mexico operations reported in the Consolidated Statements of Operations for the period presented. As the Spin-off of the offshore Gulf of Mexico operations was concluded in 2006, the Company did not have operating activity from offshore Gulf of Mexico operations during 2007 or 2008.

		Year Ended December 31, 2006
		(In Thousands)
Revenues		$	46,289
Oil and gas production expense:
	Lease operating expenses		18,296
	Transportation and processing costs		344
	Production and property taxes		151
Revenues in excess of direct operating expenses		$	27,498

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(3)    PROPERTY AND EQUIPMENT:

        Net property and equipment at December 31, 2008 and 2007 consists of the following:

		2008			2007
		(In Thousands)
Oil and gas properties:
Proved		$	8,952,292			7,157,249
Unproved			964,027			568,510
Accumulated depletion			(5,502,782	)		(2,742,539	)
	Net oil and gas properties		4,413,537			4,983,220
Other property and equipment:
Furniture and fixtures, computer hardware and software, and other equipment			136,887			72,606
Accumulated depreciation and amortization			(37,260	)		(30,011	)
	Net other property and equipment		99,627			42,595
Total net property and equipment		$	4,513,164			5,025,815

        The following table sets forth a summary of oil and gas property costs not being depleted at December 31, 2008, by the year in which such costs were incurred:

		Total		2008		2007		2006		2005 and Prior
		(In Thousands)
United States:
	Acquisition costs	$	683,107		519,915		137,881		21,930		3,381
	Exploration costs		151,489		100,268		16,688		28,805		5,728
	Total United States		834,596		620,183		154,569		50,735		9,109
Canada:
	Acquisition costs		16,090		—		—		—		16,090
	Exploration costs		53,158		29,546		13,339		7,380		2,893
	Total Canada		69,248		29,546		13,339		7,380		18,983
International:
	Acquisition costs		740		—		—		—		740
	Exploration costs		59,443		4,808		1,552		2,822		50,261
	Total International		60,183		4,808		1,552		2,822		51,001
Total		$	964,027		654,537		169,460		60,937		79,093

        The majority of the United States and Canada unproved oil and gas property costs, or those not being depleted, relate to oil and gas property acquisitions discussed in Note 2 as well as work-in-progress on various exploration projects. The Company expects that substantially all of its unproved property costs in the U.S. and Canada as of December 31, 2008 will be reclassified to proved properties within five years. Forest also holds interests in various projects located outside North America. Costs related to these international interests of $60.2 million are not being depleted pending determination of the existence of proved reserves. Forest's exploration project in South Africa accounts for the majority of the international costs not being amortized. In 2008, the Company continued to pursue commercial development of the Ibhubesi field discovery in South Africa. The Company also completed ancillary documents as part of the production right application filed in 2007 and continued efforts toward securing gas contracts for the Ibhubesi field.

79

(4)    DEBT:

        Components of debt are as follows:

	December 31, 2008									December 31, 2007
	Principal		Unamortized Premium (Discount)			Other(3)		Total		Principal			Unamortized Premium (Discount)			Other(3)			Total
	(In Thousands)
U.S. Credit Facility	$	1,190,000		—			—		1,190,000		165,000			—			—			165,000
Canadian Credit Facility		94,415		—			—		94,415		129,126			—			—			129,126
8% Senior Notes due 2008(1)		—		—			—		—		265,000			(48	)		1,050			266,002
8% Senior Notes due 2011		285,000		3,875			2,475		291,350		285,000			5,167			3,315			293,482
7% Senior Subordinated Notes due 2013(2)		1,112		(25	)		—		1,087		5,822			(158	)		—			5,664
73/4% Senior Notes due 2014		150,000		(1,273	)		9,492		158,219		150,000			(1,512	)		11,275			159,763
71/4% Senior Notes due 2019(1)		1,000,000		590			—		1,000,590		750,000			—			—			750,000
Total debt		2,720,527		3,167			11,967		2,735,661		1,749,948			3,449			15,640			1,769,037
Less: current portion of long-term debt		—		—			—		—		(265,000	)		48			(1,050	)		(266,002	)
Long-term debt	$	2,720,527		3,167			11,967		2,735,661		1,484,948			3,497			14,590			1,503,035

⁽¹⁾

The 8% senior notes due 2008 became due and payable on June 15, 2008. In May 2008, the Company issued an additional $250 million in principal amount of 7¹/4% senior notes due 2019 at 100.25% of par for proceeds of $247.2 million (net of related offering costs) and used the net proceeds and borrowings under its credit facilities to redeem the $265 million in principal amount outstanding of 8% senior notes that matured on June 15, 2008. The Company had previously issued $750 million in principal amount of 7¹/4% senior notes due 2019 at par in connection with the Houston Exploration acquisition in June 2007.

⁽²⁾

In May 2008, the Company repurchased $3.0 million in principal amount of 7% senior subordinated notes due 2013 at 99.9375% of par value. In September 2008, the Company repurchased an additional $1.8 million in principal amount of 7% senior subordinated notes due 2013 at 99.0000% of par value.

⁽³⁾

Represents the unamortized portion of gains realized upon termination of interest rate swaps that were accounted for as fair value hedges. The gains are being amortized as a reduction of interest expense over the terms of the notes.

Bank Credit Facilities

        As of December 31, 2008, the Company had syndicated bank revolving credit agreements with total lender commitments of $1.8 billion. The credit agreements consisted of a $1.65 billion U.S. credit facility through a syndicate of banks led by JPMorgan Chase Bank, N.A. (the "U.S. Credit Facility") and a $150 million Canadian credit facility through a syndicate of banks led by JPMorgan Chase Bank, N.A., Toronto Branch (the "Canadian Credit Facility," and together with the U.S. Credit Facility, the "Credit Facilities"). The Credit Facilities will mature in June 2012.

        Forest's availability under the Credit Facilities is governed by a borrowing base (the "Global Borrowing Base"). The determination of the Global Borrowing Base is made by the lenders, applying their own assumptions in their sole discretion, taking into consideration the estimated value of Forest's oil and gas properties based on pricing models determined by the lenders at such time, 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 to the semi-annual redeterminations, 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. Because the process for determining the Global Borrowing Base involves evaluating the estimated value of Forest's oil and gas properties using pricing models determined by the lenders at that time, the recent decline in oil and gas commodity prices, or a further decline in those prices, could result in a determination to decrease the Global Borrowing Base in the future.

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(4)    DEBT: (Continued)

        The Global Borrowing Base is also subject to change in the event (i) the Company issues senior notes, in which case the Global Borrowing Base will immediately be reduced by an amount equal to $0.30 for every $1.00 principal amount of any newly issued senior notes, excluding any senior notes that the Company may issue to refinance senior notes that were outstanding on May 9, 2008, or (ii) if the Company sells oil and natural gas properties included in the Global Borrowing Base having a fair market value in excess of 10% of the Global Borrowing Base then in effect. The Global Borrowing Base is subject to other automatic adjustments under the facilities. As a result of issuing $600 million of 8¹/2% senior notes due 2014 in February 2009, Forest's borrowing base was lowered from $1.8 billion to $1.62 billion effective February 17, 2009. As a result of the adjustment to the Global Borrowing Base, the Company reallocated amounts under the U.S. Credit Facility and Canadian Credit Facility and currently have allocated $1.47 billion to the U.S. Credit Facility and $150 million to the Canadian Credit Facility. A lowering of the Global Borrowing Base could require the Company to repay indebtedness in excess of the Global Borrowing Base in order to cover the deficiency. The automatic lowering of the Global Borrowing Base on February 17, 2009 did not result in any deficiency, and therefore the Company did not have to repay any amounts.

        Borrowings under the U.S. Credit Facility bear interest at one of two rates as may be elected by Forest. Loans will bear interest at a rate that is based on interest rates applicable to dollar deposits in the London interbank market ("LIBO Rate"), or a rate based on the greater of the prime rate announced by the global administrative agent or the federal funds rate plus ¹/2 of 1%. Loans under the Canadian Credit Facility will bear interest at a rate that may be based on the base rate announced by the Canadian administrative agent, the LIBO Rate, a rate based on the greater of the rate for U.S. dollar denominated loans made by the Canadian administrative agent and the federal funds rate plus ¹/2 of 1%, or a banker's acceptance rate.

        The Credit Facilities include various covenants and restrictive provisions 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. If the Company were to fail to perform its obligations under these covenants or other covenants and obligations, it could cause an event of default and the Credit Facilities could be terminated and amounts outstanding could be declared immediately due and payable by the lenders, subject to notice and cure periods in certain cases. Such events of default include non-payment, breach of warranty, non-performance of 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 Credit Facility. In addition, 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. An acceleration of the Company's indebtedness under the Credit Facilities could in turn result in an event of default under the indentures for the Company's senior notes, which in turn could result in the acceleration of the senior notes. For example, the indentures for our 8% senior notes due 2011 and our 7³/4% senior notes due 2014 include as events of default, among others, a default on indebtedness that results in the acceleration of indebtedness in an amount greater than $10 million; each of the indentures for our 8¹/2% senior notes due 2014 and our 7¹/4% senior notes due 2019 include a similar event of default if the amount involved is greater than $25 million.

        The Credit Facilities are collateralized by a portion of the Company's assets. The Company is required to mortgage and grant a security interest in the greater of 75% of the present value of our consolidated proved oil and gas properties, or 1.875 multiplied by the allocated U.S. borrowing base. The Company also has pledged the stock of several subsidiaries to the lenders to secure the Credit Facilities. Under certain circumstances, the Company could be obligated to pledge additional assets as

81

(4)    DEBT: (Continued)

collateral. If Forest's corporate credit ratings assigned by Moody's and S&P improve and meet pre-established levels, the collateral requirements would not apply and, at the Company's request, the banks would release their liens and security interests on the Company's properties. In addition to these collateral requirements, one of the Company's subsidiaries, Forest Oil Permian Corporation, is a subsidiary guarantor of the Credit Facilities.

        The lending group under the Company's U.S. Credit Facility includes the following institutions: JPMorgan Chase Bank, N.A. ("JPMorgan Chase"), Bank of America, N.A. ("Bank of America"), Citibank, N.A. ("Citibank"), BNP Paribas, BMO Capital Markets Financing, Inc. ("BMO"), Credit Suisse, Cayman Islands Branch ("Credit Suisse"), Deutsche Bank AG New York Branch ("Deutsche Bank"), U.S. Bank National Association, The Bank of Nova Scotia ("Bank of Nova Scotia"), Fortis Capital Corp. ("Fortis"), Bank of Scotland plc, UBS Loan Finance LLC, Compass Bank, Wells Fargo Bank, N.A. ("Wells Fargo"), Mizuho Corporate Bank, Ltd., Toronto Dominion (Texas) LLC, Barclays Bank PLC ("Barclays"), Bank of Oklahoma N.A., Export Development Canada, Guaranty Bank and Trust Company, Union Bank of California, N.A., and ABN Amro Bank N.V. The lenders under the Company's Canadian Credit Facility include: JPMorgan Chase Bank, N.A., Toronto Branch ("JPM Toronto", with JPMorgan Chase, collectively "JPMorgan"), Bank of Montreal, The Toronto-Dominion Bank (together with Toronto Dominion (Texas) LLC, "Toronto Dominion"), Bank of America, N.A., Canada Branch, and Citibank, N.A., Canadian Branch. Of the $1.8 billion total commitments under the Credit Facilities, JPMorgan, Bank of America, BNP Paribas, Credit Suisse, Deutsche Bank, Bank of Nova Scotia, Toronto Dominion, and Wells Fargo hold approximately 62% of the total commitments, with each of these eight lenders holding an equal share. With respect to the other 38% of the total commitments, no single lender holds more than 4.2% of the total commitments.

        At December 31, 2008, there were outstanding borrowings of $1.2 billion under the U.S. Credit Facility at a weighted average interest rate of 2.2%, and there were outstanding borrowings of $94.4 million under the Canadian Credit Facility at a weighted average interest rate of 3.0%. The Company also had used the Credit Facilities for approximately $2.7 million in letters of credit, leaving an unused borrowing amount under the Credit Facilities of approximately $512.8 million at December 31, 2008.

7¹/4% Senior Notes Due 2019

        On May 22, 2008, Forest issued an additional $250 million in principal amount of 7¹/4% senior notes due 2019 (the "7¹/4% Notes") at 100.25% of par for net proceeds of $247.2 million, after deducting initial purchaser discounts. The additional 7¹/4% Notes were used to redeem a portion of the Company's 8% senior notes due 2008 that matured on June 15, 2008. The additional 7¹/4% Notes were issued under an existing 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. Forest previously issued an aggregate principal amount of $750 million in 7¹/4% Notes under the Indenture, and there is now a total of $1 billion in 7¹/4% Notes outstanding. The 7¹/4% Notes are jointly and severally guaranteed by Forest Permian on an unsecured basis. Interest is payable on June 15 and December 15 of each year. The 7¹/4% Notes will mature on June 15, 2019.

        Forest may redeem up to 35% of the 7¹/4% 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 7¹/4% Notes at any

82

(4)    DEBT: (Continued)

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	103.6	%
2013	102.4	%
2014	101.2	%
2015 and thereafter	100.0	%

        Forest may also redeem the 7¹/4% 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.

        Forest and its restricted subsidiaries are subject to certain negative covenants under the Indenture governing the 7¹/4% 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.

8% Senior Notes Due 2011

        In December 2001, Forest issued $160 million in principal amount of 8% senior notes due 2011 (the "8% Notes Due 2011") at par for proceeds of $157.5 million (net of related offering costs). In July 2004, Forest issued an additional $125 million in principal amount of 8% Notes Due 2011 at 107.75% of par for proceeds of $133.3 million (net of related offering costs). The 8% Notes due 2011 are redeemable, at the Company's option, in whole or in part, at any time at the principal amount, plus accrued interest, and a make-whole premium. Interest is payable on June 15 and December 15 of each year.

7% Senior Subordinated Notes Due 2013

        In connection with the acquisition of Houston Exploration, Forest assumed $5.8 million of 7% senior subordinated notes due 2013 (the "7% Notes") originally issued by Houston Exploration in June 2003. The 7% Notes may be redeemed at the option of the Company, in whole or in part, at any time on or after June 15, 2008 at a price equal to 100% of the principal amount plus accrued but unpaid interest, if any, plus a specified premium that decreases yearly from 3.5% in 2008 to 0% in 2011 and thereafter. On May 22, 2008, Forest repurchased $3.0 million in principal amount of the 7% Notes at 99.9375% of par value. On September 3, 2008, Forest repurchased an additional $1.8 million in principal amount of the 7% Notes at 99.0000% of par value. Interest is payable on June 15 and December 15 of each year.

7³/4% Senior Notes Due 2014

        In April 2002, Forest issued $150 million in principal amount of 7³/4% senior notes due 2014 (the "7³/4% Notes") at 98.09% of par for proceeds of $146.8 million (net of related offering costs). The 7³/4% Notes are redeemable, at the Company's option, at any time on or after May 1, 2007, at the

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(4)    DEBT: (Continued)

approximate redemption rates set forth below, plus accrued and unpaid interest. Interest is payable on May 1 and November 1 of each year.

	Redemption Rate
2009		101.3	%
2010 and thereafter		100.0	%

Alaska Credit Agreements

        On December 8, 2006, Forest, through its wholly-owned subsidiaries, Forest Alaska Operating LLC and Forest Alaska Holding LLC (together "Forest Alaska"), issued, on a non-recourse basis to Forest, term loan financing facilities in the aggregate principal amount of $375 million. The issuance was comprised of two term loan facilities, including a $250 million first lien credit agreement and a $125 million second lien credit agreement (together the "Alaska Credit Agreements"). The loan proceeds were used to fund a $350 million distribution to Forest, which Forest used to pay down its U.S. credit facility, and to provide Forest Alaska working capital for its operations and pay transaction fees and expenses.

        During the year ended December 31, 2007, Forest Alaska made scheduled repayments of $1.3 million and a voluntary prepayment of $110.0 million on the first lien credit agreement. In conjunction with the sale of the Alaska Assets on August 27, 2007, Forest used a portion of the $400 million of cash proceeds to repay the remaining $263.7 million principal balance outstanding under the Alaska Credit Agreements. During the year ended December 31, 2007, Forest recognized debt extinguishment costs of $12.2 million associated with payments on the Alaska Credit Agreements. The debt extinguishment costs included $5.0 million in prepayment premiums on the Alaska Credit Agreements and $7.2 million of unamortized debt issuance costs.

8% Senior Notes Due 2008

        On June 15, 2008, Forest redeemed $265 million in principal amount of 8% senior notes due in 2008 (the "8% Notes due 2008") that matured as of that date. The Company used net proceeds received from the issuance of additional 7¹/4% Notes and borrowings under its credit facilities to fund the redemption of the 8% Notes due 2008.

Principal Maturities

        Principal maturities of the Company's debt at December 31, 2008 are as follows (in thousands):

	Principal Maturities
2011	$	285,000
2012		1,284,415
2013		1,112
Thereafter		1,150,000

Subsequent Event—8¹/2% Senior Notes Due 2014

        On February 17, 2009, Forest issued $600 million in principal amount of 8¹/2% senior notes due 2014 (the "8¹/2% Notes") at 95.15% of par for net proceeds of $559.8 million, after deducting initial purchaser discounts. Proceeds from the 8¹/2% Notes were used to pay down outstanding balances on the Company's U.S. Credit Facility. The 8¹/2% Notes are jointly and severally guaranteed by Forest Permian

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(4)    DEBT: (Continued)

on an unsecured basis. Interest is payable on February 15 and August 15 of each year, beginning August 15, 2009. The 8¹/2% Notes will mature on February 15, 2014. Forest may redeem up to 35% of the 8¹/2% Notes at any time prior to February 15, 2012, on one or more occasions, with the proceeds from certain equity offerings at a redemption price equal to 108.5% of the principal amount, plus accrued but unpaid interest.

        Forest may also redeem the 8¹/2% Notes in whole or in part and at any time, at a "make-whole" redemption price equal to the greater of (i) 100% of the principal amount of the 8¹/2% Notes to be redeemed or (ii) the sum of the remaining scheduled payments of principal and interest on the 8¹/2% Notes discounted to the date of redemption at an applicable Treasury yield rate plus 0.50%, plus, in either case, accrued but unpaid interest.

(5)    INCOME TAXES:

Income Tax Provision

        The table below sets forth the provision for income taxes from continuing operations for the periods presented.

		Year Ended December 31,
		2008			2007			2006
		(In Thousands)
Current:
	Federal	$	3,979			3,503			1,341
	Foreign		3,381			(1,798	)		140
	State		3,779			4,294			645
			11,139			5,999			2,126
Deferred:
	Federal		(590,078	)		58,536			77,445
	Foreign		23,312			(2,098	)		3,643
	State, net		(19,051	)		(42	)		7,689
			(585,817	)		56,396			88,777
		$	(574,678	)		62,395			90,903

        The Company's current income tax expense for the periods presented was due primarily to federal alternative minimum tax, and to Texas state income taxes in 2008 and 2007 and Alaska state income taxes in 2007 and 2006. Deferred income taxes generally result from recognizing income and expenses at different times for financial and tax reporting. In the U.S., the largest differences are the tax effects of book recognition of the ceiling test impairment in 2008, unrealized gains and losses with respect to derivative instruments, and the capitalization of certain development, exploration, and other costs under the full cost method of accounting. In Canada, differences result in part from accelerated cost recovery of oil and gas capital expenditures for tax purposes.

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(5)    INCOME TAXES: (Continued)

        Income (loss) from continuing operations before income taxes and discontinued operations consists of the following for the periods presented:

	Year Ended December 31,
	2008			2007		2006
	(In Thousands)
United States Federal	$	(1,673,671	)		177,999		211,785
Foreign		72,670			53,702		45,198
	$	(1,601,001	)		231,701		256,983

        A reconciliation of income tax computed by applying the United States statutory federal income tax rate is as follows:

	Year Ended December 31,
	2008			2007			2006
	(In Thousands)
Federal income tax at 35% of income before income taxes and discontinued operations	$	(560,364	)		81,095			89,944
State income taxes, net of federal income tax benefits		(18,895	)		2,960			7,616
Change in the valuation allowance for deferred tax assets		1,956			(1,831	)		(1,464	)
Effect of differing tax rates in Canada		(3,971	)		(1,517	)		(160	)
Effect of Canadian statutory rate reductions		(4,455	)		(16,815	)		(12,292	)
Effect of state statutory rate reductions		(1,940	)		(2,397	)		(5,706	)
Effects related to the Spin-off		—			—			7,209
Effect of state and foreign tax on permanent differences		7,353			277			(252	)
Effect of foreign withholding		1,981			—			—
Other		3,657			623			6,008
Total income tax	$	(574,678	)		62,395			90,903

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(5)    INCOME TAXES: (Continued)

Net Deferred Tax Liabilities

        The components of the net deferred tax liability by geographical segment at December 31, 2008 and 2007 are as follows:

		December 31, 2008
		United States			Canada			Total
		(In Thousands)
Deferred tax assets:
Allowance for doubtful accounts		$	441			—			441
Investment in PERL common stock and Note			14,536			—			14,536
Accrual for post retirement benefits			7,903			261			8,164
Stock-based compensation accruals under SFAS 123(R)			9,071			227			9,298
Net operating loss carryforwards			37,579			—			37,579
Capital loss carryforward			—			2,408			2,408
Depletion carryforward			7,301			—			7,301
Alternative minimum tax credit carryforward			34,093			—			34,093
Other			10,875			1,265			12,140
	Total gross deferred tax assets		121,799			4,161			125,960
	Less valuation allowance		(1,075	)		(2,767	)		(3,842	)
	Net deferred tax assets		120,724			1,394			122,118
Deferred tax liabilities:
Property and equipment			(207,215	)		(93,614	)		(300,829	)
Unrealized gains on derivative contracts, net			(61,459	)		—			(61,459	)
	Total gross deferred tax liabilities		(268,674	)		(93,614	)		(362,288	)
Net deferred tax liabilities		$	(147,950	)		(92,220	)		(240,170	)

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(5)    INCOME TAXES: (Continued)

		December 31, 2007
		United States			Canada			Total
		(In Thousands)
Deferred tax assets:
Allowance for doubtful accounts		$	443			—			443
Investment in PERL common stock and Note			1,776			—			1,776
Accrual for post retirement benefits			4,703			—			4,703
Stock-based compensation accruals under SFAS 123(R)			7,755			—			7,755
Net operating loss carryforwards			142,436			238			142,674
Capital loss carryforward			—			3,004			3,004
Depletion carryforward			7,137			—			7,137
Alternative minimum tax credit carryforward			10,352			—			10,352
Unrealized losses on derivative contracts, net			29,394			—			29,394
Other			15,537			1,817			17,354
	Total gross deferred tax assets		219,533			5,059			224,592
	Less valuation allowance		(27,036	)		(811	)		(27,847	)
	Net deferred tax assets		192,497			4,248			196,745
Deferred tax liabilities:
Property and equipment			(932,508	)		(92,401	)		(1,024,909	)
Other			—			(1,409	)		(1,409	)
	Total gross deferred tax liabilities		(932,508	)		(93,810	)		(1,026,318	)
Net deferred tax liabilities		$	(740,011	)		(89,562	)		(829,573	)

        The net deferred tax liabilities are reflected in the Consolidated Balance Sheets as follows:

	December 31, 2008
	United States			Canada			Total
	(In Thousands)
Current deferred tax liabilities	$	(54,583	)		—			(54,583	)
Non-current deferred tax liabilities		(93,367	)		(92,220	)		(185,587	)
Net deferred tax liabilities	$	(147,950	)		(92,220	)		(240,170	)

	December 31, 2007
	United States			Canada			Total
	(In Thousands)
Current deferred tax assets	$	23,854			—			23,854
Non-current deferred tax liabilities		(763,865	)		(89,562	)		(853,427	)
Net deferred tax liabilities	$	(740,011	)		(89,562	)		(829,573	)

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(5)    INCOME TAXES: (Continued)

        The net changes in the total valuation allowance for the years ended December 31, 2008, 2007, and 2006 were as follows:

	2008			2007			2006
	(In Thousands)
Net decrease in the valuation allowance for deferred tax assets attributable to reassessment of the amount of tax losses of acquired subsidiary expected to be utilized	$	—			—			(8,337	)
Decrease in the valuation allowance for net expiring operating loss carryforwards		(25,960	)		—			(9,967	)
Other increases (decreases) in the valuation allowance for deferred tax assets		1,956			(1,831	)		(1,465	)
Net decrease in the valuation allowance	$	(24,004	)		(1,831	)		(19,769	)

        The decrease in the valuation allowance for 2008 of $24.0 million relates to a decrease of $26.0 million of tax loss carryforwards of an acquired subsidiary that expired unused, offset by increases for Canadian foreign exchange translation losses and other Canadian tax loss carryforwards. The decrease in the valuation allowance for 2007 of $1.8 million relates to adjustments to Canadian tax loss carryforwards. In 2006, $18.4 million of the decrease in the valuation allowance relates to tax loss carryforwards of an acquired subsidiary which were previously provided against. Of this amount, $10.0 million relates to tax loss carryforwards that expired unused in 2006. In 2006, the Company determined that it was more likely than not that $8.3 million would be realized in the future, and this amount was released with a corresponding adjustment to capital surplus. The other decreases in the valuation allowance of $1.5 million relate to adjustments to state and Canadian tax loss carryforwards.

        The Company has a net deferred tax asset of $1.4 million in international locations. The Company has, in prior years, established a valuation allowance equal to the $1.4 million net deferred tax asset as the Company currently does not have production in the related international locations.

Tax Attributes

Net Operating Losses

        U.S. federal net operating loss carryforwards at December 31, 2008 were approximately $152.7 million. Of this amount, approximately $37.2 million relates to excess stock compensation that will not give rise to a financial statement benefit. The Company's federal net operating losses are scheduled to expire in years 2018 through 2027.

        The Company's ability to use some of its net operating loss carryforwards and certain other tax attributes to reduce current and future U.S. federal taxable income is subject to limitations under the Internal Revenue Code. In particular, the Company's ability to utilize such carryforwards is limited due to the occurrence of "Ownership Changes" within the meaning of Section 382 of the Internal Revenue Code. The Company has established a valuation allowance against its net operating loss carryforwards in the amount of $1.1 million, recognizing the effects of Section 382 on its ability to ever realize these carryforwards.

        The statute of limitations is closed for the Company's U.S. federal income tax returns for years ending on or before December 31, 2004. Pre-acquisition returns of acquired businesses are also closed for tax years ending on or before December 31, 2004, except for those related to Houston Exploration which have been held open until September 14, 2009. However, the Company has utilized, and will continue to utilize, net operating losses ("NOLs") (including NOLs of acquired businesses) in its open tax years. The earliest available NOLs were generated in the tax year beginning January 1, 1998, but

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(5)    INCOME TAXES: (Continued)

are potentially subject to adjustment by the federal tax authorities in the tax year in which they are utilized. Thus, the Company's earliest U.S. federal income tax return that is closed to potential audit adjustments is the tax year ending December 31, 1991. The Company's most recent Canadian income tax return that is closed to potential audit adjustments is the tax year ended December 31, 2003.

        In accordance with SFAS 123(R), windfall deductions from the exercise of stock-based compensation awards that do not result in a reduction in income taxes payable, should not be recorded. The Company uses the "with and without method" for realization of the tax benefits of the windfall deductions. As a result, net operating losses related to the windfall deductions of $37.2 million will be recorded in capital surplus when realized as a reduction of income taxes payable.

Alternative Minimum Tax Credits

        The Alternative Minimum Tax ("AMT") credit carryforward available to reduce future U.S. federal regular taxes equaled an aggregate amount of $34.1 million at December 31, 2008, including $23.3 million acquired in conjunction with the Houston Exploration acquisition. This amount may be carried forward indefinitely.

Canadian Tax Pools

        Canadian tax pools relating to the exploration, development, and production of oil and natural gas that are available to reduce future Canadian federal income taxes equaled an aggregate amount of approximately $273.4 million ($333.0 million CDN) at December 31, 2008. The Canadian tax pools include approximately $29.4 million ($35.8 million CDN) acquired from predecessor companies that are limited in use to income derived from assets acquired. These tax pool balances are deductible on a declining balance basis ranging from 4% to 100% of the balance annually, and are composed of costs incurred for oil and gas properties, and developmental and exploration expenditures, as follows:

	2008		2007
	(In Thousands of Canadian Dollars)
Canadian exploration expense (deductible at 100% annually)	$	3,805		8,481
Canadian development expense (deductible at 30% annually)		165,277		146,927
Canadian oil and gas property expense (deductible at 10% annually)		51,545		47,941
Canadian capital cost allowance (deductible at 4% - 45% annually)		112,374		100,652
	$	333,001		304,001

        Other Canadian tax pools and loss carryforwards available to reduce future Canadian federal income taxes were approximately $10.4 million ($13.0 million CDN) at December 31, 2008, which may be carried forward indefinitely.

Undistributed Earnings from Canadian Operations

        The Company's Canadian operations generated book income (after tax) of approximately $49.1 million during 2008. As of December 31, 2008, the Company's Canadian operations had reported accumulated undistributed book earnings of approximately $188.7 million. The Company has not provided deferred tax liabilities with respect to U.S. income tax or Canadian withholding taxes related to these undistributed earnings. During 2008, all cash flow generated in Canada was reinvested in Canadian capital expenditures. Based on its current plans, the Company intends that future cash flows generated by Canadian operations will continue to be reinvested in Canadian exploration, development, or acquisition activities or utilized to satisfy external and intercompany debt of the Canadian operations. Should the Company distribute Canadian earnings, we may be subject to U.S. income taxes

90

(5)    INCOME TAXES: (Continued)

and Canadian withholding taxes. It is not practicable to estimate the amount of such taxes that may be payable if such a distribution occurs. The Company currently has no foreign tax credits to offset such taxes.

Accounting for Uncertainty in Income Taxes

        The Company adopted FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes", an interpretation of SFAS 109, "Accounting for Income Taxes" ("FIN 48"), on January 1, 2007. As a result of the implementation of FIN 48 the Company recognized a liability for uncertain tax benefits of approximately $1.0 million, which was accounted for as a reduction to the January 1, 2007 balance of retained earnings. The adoption of FIN 48 increased the Company's previously recognized liability for uncertain tax benefits of $.5 million to $1.5 million. The $1.5 million liability does not relate to uncertainties about the timing of items of income or deduction and would affect the Company's effective tax rate if recognized in the Company's income tax provision. The Company records interest accrued related to unrecognized tax benefits in interest expense and penalties in other expense, to the extent they apply. The Company recognized no significant interest or penalties at the date of its adoption of FIN 48.

        In conjunction with the Houston Exploration acquisition, Forest assumed an additional liability for uncertain tax benefits of $1.6 million. There was no change in the amount of unrecognized tax benefits during the year ended December 31, 2008 and the Company does not expect any significant change in the total amounts of unrecognized tax benefits within the twelve months ending December 31, 2009.

        A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows (in thousands):

	Year Ended December 31,
	2008		2007
Gross unrecognized tax benefits at beginning of period	$	3,167		487
Increases in tax positions for prior years		—		1,040
Increases in tax positions for acquired entities		—		1,640
Gross unrecognized tax benefits at end of period	$	3,167		3,167

        The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $3.2 million, net of estimated accrued interest and penalties.

(6)    SHAREHOLDERS' EQUITY:

Common Stock

        At December 31, 2008, the Company had 200.0 million shares of Common Stock, par value $.10 per share, authorized and 97.0 million shares outstanding.

Rights Agreement

        In October 1993, the Board of Directors adopted a shareholders' rights plan and entered into the Rights Agreement. The Company distributed one Preferred Share Purchase Right (the "Rights") for each outstanding share of the Company's Common Stock. The Rights are exercisable only if a person or group acquires 20% or more of the Company's Common Stock or announces a tender offer that would result in ownership by a person or group of 20% or more of the Common Stock. In October 2003, the Board of Directors of Forest entered into the First Amended and Restated Rights Agreement and issued rights

91

(6)    SHAREHOLDERS' EQUITY: (Continued)

that will expire on October 29, 2013, unless earlier exchanged or redeemed, that entitle the holder thereof to purchase 1/100th of a preferred share at an initial purchase price of $120.

(7)    STOCK-BASED COMPENSATION:

        The table below sets forth total stock-based compensation recorded during the years ended December 31, 2008, 2007, and 2006 under the provisions of SFAS 123(R), and the remaining unamortized amounts and the weighted average amortization period remaining as of December 31, 2008.

		Stock Options			Restricted Stock			Phantom Stock Units			Total(1)
		(In Thousands)
Year ended December 31, 2008:
	Total stock-based compensation costs	$	2,677			23,565			242			26,484
	Less: stock-based compensation costs capitalized		(1,171	)		(8,546	)		(124	)		(9,841	)
	Stock-based compensation costs expensed	$	1,506			15,019			118			16,643
Unamortized stock-based compensation costs as of December 31, 2008		$	2,400			46,884			1,589	(2)		50,873
Weighted average amortization period remaining			1.6 years			2.1 years			2.0 years			2.1 years
Year ended December 31, 2007:
	Total stock-based compensation costs	$	5,006			10,142			2,177			17,325
	Less: stock-based compensation costs capitalized		(1,485	)		(3,920	)		(1,381	)		(6,786	)
	Stock-based compensation costs expensed	$	3,521			6,222			796			10,539
Year ended December 31, 2006:
	Total stock-based compensation costs	$	5,348			14,551			1,890			21,789
	Less: stock-based compensation costs capitalized		(1,645	)		(5,279	)		(1,194	)		(8,118	)
	Stock-based compensation costs expensed	$	3,703			9,272			696			13,671

⁽¹⁾

The Company also maintains an employee stock purchase plan (which is not included in the table above) under which $.5 million, $.4 million, and $.3 million of compensation cost was recognized for the years ended December 31, 2008, 2007, and 2006, respectively, under the provisions of SFAS 123(R).

⁽²⁾

Based on the closing price of the Company's Common Stock on December 31, 2008.

Equity Incentive Plans

        In 2007, the Company adopted the Forest Oil Corporation 2007 Stock Incentive Plan (the "2007 Plan") under which qualified and non-qualified stock options, restricted stock, phantom stock units, and other awards may be granted to employees, consultants, and non-employee directors. The aggregate number of shares of Common Stock that the Company may issue under the 2007 Plan may not exceed 2.7 million shares. The exercise price of an option shall not be less than the fair market value of one share of Common Stock on the date of grant. Options granted under the 2007 Plan generally vest in increments of 25% on each of the first four anniversary dates of the date of grant and have a term of ten years. Restricted stock awards generally vest three years from the date of the grant.

92

(7)    STOCK-BASED COMPENSATION: (Continued)

As of December 31, 2008, the Company had 1,478,603 shares available to be issued under the 2007 Plan.

        In 2001, the Company adopted the Forest Oil Corporation 2001 Stock Incentive Plan (the "2001 Plan") under which qualified and non-qualified stock options, restricted stock, and other awards may be granted to employees, consultants, and non-employee directors. In 2003, the Company amended the 2001 Plan to increase the number of shares reserved for issuance. The aggregate number of shares of Common Stock that the Company may issue under the 2001 Plan may not exceed 5.0 million shares. The exercise price of an option shall not be less than the fair market value of one share of Common Stock on the date of grant. Options under the 2001 Plan generally vest in increments of 25% on each of the first four anniversary dates of the date of grant and have a term of ten years. Restricted stock awards generally vest three years from the date of the grant. As of December 31, 2008, the Company had 104,292 shares available to be issued under the 2001 Plan. As a result of the Spin-off, outstanding stock options and the shares available for grant for all employees under the 2001 Plan were adjusted to reflect the economic effect of the Spin-off.

Stock Options

        The following table summarizes stock option activity in the Company's stock-based compensation plans for the years ended December 31, 2008, 2007, and 2006. During 2006 the number of shares and the exercise price of the outstanding stock options were adjusted so that the fair value of each award was the same immediately before and after the Spin-off, in accordance with anti-dilution provisions of the incentive plans.

	Number of Shares			Weighted Average Exercise Price		Aggregate Intrinsic Value (In Thousands)(1)		Number of Shares Exercisable
Outstanding at January 1, 2006		2,578,235		$	27.78	$	45,889		1,348,599
Granted		—			—
Exercised		(58,337	)		28.71		1,255
Cancelled		(98,587	)		30.91
Outstanding at March 2, 2006		2,421,311			27.63		55,723
Adjustment to give effect to Spin-off		1,176,804			—
Granted		55,000			36.61
Exercised		(231,470	)		18.96		3,536
Cancelled		(93,366	)		20.94
Outstanding at December 31, 2006		3,328,279			18.80		46,279		2,338,751
Granted		666,655			42.16
Exercised		(652,220	)		18.07		15,610
Cancelled		(401,208	)		40.07
Outstanding at December 31, 2007		2,941,506			21.35		87,816		2,275,314
Granted		—			—
Exercised		(788,641	)		21.14		30,372
Cancelled		(55,598	)		32.88
Outstanding at December 31, 2008		2,097,267			21.13		376		1,898,316

⁽¹⁾

The intrinsic value of a stock option is the amount by which the current market value of the underlying stock exceeds the exercise price of the option.

93

(7)    STOCK-BASED COMPENSATION: (Continued)

        Stock options are granted at the fair market value of one share of Common Stock on the date of grant. Options granted to non-employee directors vest immediately and options granted to officers and other employees vest ratably over four years. All outstanding options had a term of ten years at the date of grant.

        The fair value of each option granted in 2007 and 2006 was estimated using the Black-Scholes option pricing model. The following assumptions were used to compute the weighted average fair market value of options granted during the periods presented:

	2007	2006
Expected life of options	5.4 years	10 years
Risk free interest rates	4.65% - 5.13%	4.64% - 5.13%
Estimated volatility	32%	45%
Dividend yield	0.0%	0.0%
Weighted average fair market value of options granted during the year	$16.14	$23.35

        The following table summarizes information about options outstanding at December 31, 2008:

	Stock Options Outstanding								Stock Options Exercisable
Range of Exercise Prices	Number of Options		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Aggregate Intrinsic Value (In Thousands)		Number Exercisable		Weighted Average Exercise Price		Aggregate Intrinsic Value (In Thousands)
$10.01 – 16.10		424,817		4.20	$	15.22	$	376		424,817	$	15.22	$	376
16.11 – 16.85		514,371		4.49		16.84		—		514,371		16.84		—
16.88 – 20.47		308,394		2.82		18.83		—		306,908		18.82		—
20.60 – 20.60		454,825		5.74		20.60		—		454,825		20.60		—
20.71 – 42.41		394,860		7.28		35.46		—		197,395		31.13		—
$10.01 – 42.41		2,097,267		4.98	$	21.13	$	376		1,898,316	$	19.18	$	376

94

(7)    STOCK-BASED COMPENSATION: (Continued)

Restricted Stock and Phantom Stock Units

        The following table summarizes the restricted stock and phantom stock unit activity for the years ended December 31, 2008, 2007, and 2006. The grant date fair value of the restricted stock and phantom stock units was determined by reference to the average of the high and low stock price of a share of Common Stock as published by the New York Stock Exchange on the date of grant.

	Restricted Stock					Phantom Stock Units
	Number of Shares			Weighted Average Grant Date Fair Value		Number of Shares			Weighted Average Grant Date Fair Value
Unvested at January 1, 2006		634,000		$	43.58		72,350		$	46.07
Awarded		38,200			39.24		13,900			36.24
Vested		(200	)		46.07		—			—
Forfeited		(44,550	)		45.95		(8,300	)		46.07
Unvested at December 31, 2006		627,450			43.15		77,950			44.32
Awarded		784,700			42.17		90,700			41.01
Vested		(82,450	)		30.26		—			—
Forfeited		(48,700	)		42.20		(4,150	)		44.17
Unvested at December 31, 2007		1,281,000			43.41		164,500			42.50
Awarded		759,295			62.55		84,754			61.73
Vested		(473,800	)		45.66		(70,300	)		45.06
Forfeited		(75,700	)		46.14		(15,000	)		45.15
Unvested at December 31, 2008		1,490,795			52.31		163,954			51.10

        The restricted stock and phantom stock units generally vest on the third anniversary of the date of the award, but may vest earlier upon a qualifying disability, death, retirement, or a change in control of the Company in accordance with the term of the underlying agreement. The phantom stock units can be settled in cash, shares of Common Stock, or a combination of both. The phantom stock units have been accounted for as a liability within the consolidated financial statements.

Employee Stock Purchase Plan

        The Company has a 1999 Employee Stock Purchase Plan (the "ESPP"), under which it is authorized to issue up to 300,000 shares of Common Stock. Employees who are regularly scheduled to work more than 20 hours per week and more than five months in any calendar year may participate in the ESPP. Currently, under the terms of the ESPP, employees may elect each calendar quarter to have up to 15% of their annual base earnings withheld to purchase shares of Common Stock, up to a limit of $25,000 of Common Stock per calendar year. The purchase price of a share of Common Stock purchased under the ESPP is equal to 85% of the lower of the beginning-of-quarter or end-of-quarter market price. ESPP participants are restricted from selling the shares of Common Stock purchased under the ESPP for a period of six months after purchase. As of December 31, 2008, the Company had 83,835 shares available for issuance under the ESPP.

95

(7)    STOCK-BASED COMPENSATION: (Continued)

        The fair value of each stock purchase right granted under the ESPP during 2008, 2007, and 2006 was estimated using the Black-Scholes option pricing model. The following assumptions were used to compute the weighted average fair market value of purchase rights granted during the periods presented:

	2008	2007	2006
Expected option life	3 months	3 months	3 months
Risk free interest rates	0.85% - 1.96%	3.92% - 5.07%	4.16% - 5.08%
Estimated volatility	76%	26%	21%
Dividend yield	0.0%	0.0%	0.0%
Weighted average fair market value of purchase rights granted	$11.72	$10.88	$9.38

(8)    EMPLOYEE BENEFITS:

Pension Plans and Postretirement Benefits

        The Company has a qualified defined benefit pension plan that covers certain employees and former employees in the United States (the "Forest Pension Plan"). The Company also has a non-qualified unfunded supplementary retirement plan (the "Supplemental Executive Retirement Plan") that provides certain retired executives with defined retirement benefits in excess of qualified plan limits imposed by federal tax law. The Forest Pension Plan and the Supplemental Executive Retirement Plan were curtailed and all benefit accruals under both plans were suspended effective May 31, 1991. In addition, as a result of The Wiser Oil Company acquisition in 2004, Forest assumed a noncontributory defined benefit pension plan (the "Wiser Pension Plan"). The Wiser Pension Plan was curtailed and all benefit accruals were suspended effective December 11, 1998. In October 2000, the Wiser Pension Plan was amended to provide additional benefits by implementing a cash balance plan for the then current employees of Wiser. In December 2004, all benefit accruals under the Wiser Pension Plan were suspended. In conjunction with the Houston Exploration acquisition in June 2007, Forest assumed a non-qualified unfunded supplementary retirement plan (the "Houston Exploration SERP" together with the "Supplemental Executive Retirement Plan," the "SERP"). The Houston Exploration SERP was curtailed and all benefit accruals were suspended effective January 1, 2008. The Forest Pension Plan, the Wiser Pension Plan, and the SERP are hereinafter collectively referred to as the "Plans."

        In addition to the Plans described above, Forest also provides postretirement benefits to employees in the U.S. and Canada, their beneficiaries, and covered dependents. These benefits, which consist primarily of medical benefits payable on behalf of retirees in the U.S. and Canada, are referred to as "Postretirement Benefits" throughout this Note. The postretirement benefits in Canada are closed to new participants.

96

(8)    EMPLOYEE BENEFITS: (Continued)

Investments of the Plans

        The weighted average asset allocations of the Forest Pension Plan and Wiser Pension Plan at December 31, 2008 and 2007 are set forth in the following table:

	Forest Pension Plan						Wiser Pension Plan
	2008			2007			2008			2007
Fixed income securities		39	%		33	%		38	%		29	%
Equity securities		59	%		66	%		61	%		70	%
Other		2	%		1	%		1	%		1	%
		100	%		100	%		100	%		100	%

        The overall investment goal for pension plan assets is to achieve an investment return that allows plan assets to achieve the assumed actuarial interest rate and to exceed the rate of inflation. In order to manage risk, in terms of volatility, the portfolios are designed to avoid a loss of 20% during any single year and to express no more volatility than experienced by the S&P 500 Stock Index.

        The Plans' assets are invested with a view toward the long term in order to fulfill the obligations promised to participants as well as to control future funding levels. The Company continually reviews the levels of funding and investment strategy for each of the Plans. Generally, the strategy includes allocating the Plans' assets between equity securities and fixed income securities, depending on economic conditions and funding needs, although the strategy does not define any specified minimum exposure for any point in time. The equity and fixed income asset allocation levels in place from time to time are intended to achieve an appropriate balance between capital appreciation, preservation of capital, and current income.

Expected Benefit Payments

        In the future, it is anticipated that the Company will be required to provide benefit payments from the Forest Pension Plan trust and the Wiser Pension Plan trust and fund benefit payments directly for the SERP and the other postretirement benefits plans in 2009 through 2013 and in the aggregate for the years 2014 through 2018 in the following amounts:

	2009		2010		2011		2012		2013		2014- 2018
	(In Thousands)
Forest Pension Plan(1)	$	2,467		2,447		2,413		2,359		2,366		10,801
SERP		159		155		151		147		142		629
Wiser Pension Plan(1)		836		835		827		817		812		4,093
Postretirement benefits (U.S.)		556		555		560		540		533		2,625
Postretirement benefits (Canada)		49		59		61		64		66		363

⁽¹⁾

Benefit payments expected to be made to participants in the Forest Pension Plan and Wiser Pension Plan are expected to be paid out of funds held in trusts established for each plan.

        Forest anticipates that it will make contributions in 2009 totaling $.2 million to the Plans and $.5 million for the Postretirement Benefit plans, net of retiree contributions and expected Medicare reimbursements, as applicable.

        The following tables set forth the estimated benefit obligations, the fair value of the assets, and the funded status of the Plans and the Postretirement Benefit plans at December 31, 2008 and 2007.

97

(8)    EMPLOYEE BENEFITS: (Continued)

Amounts for the Forest Pension Plan, the SERP, and the Wiser Pension Plan are combined in the "Pension Benefits" columns.

Benefit Obligations

	Pension Benefits						Postretirement Benefits
	2008			2007			2008			2007
	(In Thousands)
Benefit obligation at the beginning of the year	$	40,421			40,556			8,576			8,457
Acquisition		—			1,064			(585	)		585
Service cost		—			—			518			467
Interest cost		2,277			2,247			495			453
Actuarial loss (gain)		399			(164	)		(599	)		(1,210	)
Benefits paid		(3,317	)		(3,282	)		(679	)		(520	)
Medicare reimbursements		—			—			59			57
Retiree contributions		—			—			68			67
Impact of foreign currency exchange rate		—			—			(234	)		220
Benefit obligation at the end of the year	$	39,780			40,421			7,619			8,576

Fair Value of Plan Assets

	Pension Benefits						Postretirement Benefits
	2008			2007			2008			2007
	(In Thousands)
Fair value of plan assets at beginning of the year	$	37,831			37,615			—			—
Actual return on plan assets		(10,652	)		2,875			—			—
Retiree contributions		—			—			68			67
Medicare reimbursements		—			—			59			57
Employer contribution		589			623			552			396
Benefits paid		(3,317	)		(3,282	)		(679	)		(520	)
Fair value of plan assets at the end of the year	$	24,451			37,831			—			—

Funded Status

	Pension Benefits						Postretirement Benefits
	2008			2007			2008			2007
	(In Thousands)
Excess of benefit obligation over plan assets	$	(15,329	)		(2,590	)		(7,619	)		(8,576	)
Unrecognized actuarial loss (gain)		22,026			9,169			(1,932	)		(1,326	)
Net amount recognized	$	6,697			6,579			(9,551	)		(9,902	)
Amounts recognized in the balance sheet consist of:
Accrued benefit liability—noncurrent	$	(15,329	)		(2,590	)		(7,619	)		(8,576	)
Accumulated other comprehensive income—net actuarial loss (gain)		22,026			9,169			(1,932	)		(1,326	)
Net amount recognized	$	6,697			6,579			(9,551	)		(9,902	)

98

(8)    EMPLOYEE BENEFITS: (Continued)

        The following table sets forth the projected and accumulated benefit obligations for the pension plans compared to the fair value of the plan assets for the periods indicated.

	December 31,
	2008		2007
	(In Thousands)
Projected benefit obligation	$	39,780		40,421
Accumulated benefit obligation		39,780		40,421
Fair value of plan assets		24,451		37,831

Annual Periodic Expense and Actuarial Assumptions

        The following tables set forth the components of the net periodic cost and the underlying weighted average actuarial assumptions for the years ended December 31, 2008, 2007, and 2006:

	Pension Benefits									Postretirement Benefits
	2008			2007			2006			2008			2007			2006
	(In Thousands)
Service cost	$	—			—			—			518			467			580
Interest cost		2,277			2,247			2,192			495			453			453
Curtailment gain(1)		—			—			—			—			—			(1,851	)
Expected return on plan assets		(2,534	)		(2,562	)		(2,430	)		—			—			—
Recognized actuarial loss (gain)		726			778			899			(91	)		(35	)		—
Amortization of prior service cost		—			—			10			—			—			—
Total net periodic expense (benefit)	$	469			463			671			922			885			(818	)
Assumptions used to determine net periodic expense:
Discount rate		5.77%			5.64% & 5.90%			5.32%			5.39% & 6.02%			3.98% & 5.75%			4.72% & 5.46%
Expected return on plan assets		7%			7%			7% & 8%			n/a			n/a			n/a
Assumptions used to determine benefit obligations:
Discount rate		5.84%			5.77%			5.64%			6.12% & 6.74%			5.39% & 6.02%			3.98% & 5.75%

⁽¹⁾

Forest recognized a $1.9 million curtailment gain in connection with the Spin-off on March 2, 2006. This gain was recorded as a reduction in general and administrative expense for the year ended December 31, 2006.

        The discount rates used to determine benefit obligations were determined by adjusting the Moody's Aa Corporate bond yield to reflect the difference between the duration of the future estimated cash flows of the Plans and the other postretirement benefit obligations and the duration of the Moody's Aa index.

        The Company estimates that net periodic expense for the year ended December 31, 2009, will include expense of $1.8 million resulting from the amortization of its related accumulated actuarial loss included in accumulated other comprehensive income at December 31, 2008.

        For measurement purposes, the annual rate of increase in the per capita cost of covered health care benefits for the U.S. Postretirement Benefits was held constant at 5.5% during 2008 and thereafter. The annual rate of increase in the per capita cost of covered health care benefits for the Canadian Postretirement Benefits was assumed to be 4% per year for the dental plan; and 10% in 2009, 9.5% in 2010, 9% in 2011, 8.5% in 2012, 8% in 2013, and 7.5% thereafter for the medical plan.

99

(8)    EMPLOYEE BENEFITS: (Continued)

        Assumed health care cost trend rates have a significant effect on the amounts reported for postretirement benefits. A one-percentage-point change in assumed health care cost trend rates would have the following effects for 2008:

	Postretirement Benefits
	1% Increase		1% Decrease
	(In Thousands)
Effect on service and interest cost components	$	176		(124	)
Effect on postretirement benefit obligation		1,143		(911	)

Employee Retirement Savings Plans

        Forest sponsors a qualified tax-deferred savings plan ("Retirement Savings Plan") for its employees in the U.S. in accordance with the provisions of Section 401(k) of the Internal Revenue Code. Employees may defer up to 80% of their compensation, subject to certain limitations. From January 1, 2004 through December 31, 2007, the Company matching percentage was 7% of eligible employee compensation. Effective January 1, 2008, the Company matching percentage increased to 8%. Expenses associated with the Company's contributions to the Retirement Savings Plan totaled $3.2 million in 2008, $2.2 million in 2007, and $1.9 million in 2006. In each of these years, the Company matched employee contributions in cash.

        Canadian Forest provides a savings plan ("Canadian Savings Plan") that is available to all of its employees. Employees may contribute up to 9% of their compensation, subject to certain limitations, with Canadian Forest matching 4% of the eligible employee compensation. The expense associated with Canadian Forest's contributions to the plan was approximately $.2 million in 2008, $.3 million in 2007, and $.2 million in 2006. All employees of Canadian Forest also participate in a defined contribution pension plan (the "Defined Contribution Pension Plan"). The expense associated with the contributions made by Canadian Forest to the Defined Contribution Pension Plan was $.3 million in both 2008 and 2007, and $.2 million in 2006.

Deferred Compensation Plan

        Forest has an Executive Deferred Compensation Plan (the "Executive Plan") pursuant to which certain officers may participate and defer a portion of their compensation after contributing the maximum allowable amount to the Retirement Savings Plan. The expense associated with the Company's matching contributions to the Executive Plan and interest was $.2 million in both 2008 and 2007, and $.3 million in 2006. The Executive Plan provides for the participants to designate how deferred amounts are deemed to be invested under several investment options. As a result, the liability recorded with respect to the deferred amounts fluctuates based on gains and losses associated with investment options selected by the participants. Total amounts deferred (including the related investment gains and losses) under the Executive Plan were approximately $3.1 million at both December 31, 2008 and 2007, respectively.

        In conjunction with the Houston Exploration acquisition, Forest assumed Houston Exploration's deferred compensation plan (the "Houston Exploration Plan"). The Houston Exploration Plan was frozen to new employees, and all deferrals into the plan (including matching contributions) were suspended on January 1, 2008. The assets of the Houston Exploration Plan are held by a grantor trust and are invested, at the direction of the employee, in various investment funds. The assets held in the trust (the main component of which is trust-owned life insurance policies) were $4.3 million and $10.5 million at December 31, 2008 and 2007, respectively. The expense associated with the Company's matching contributions to the Houston Exploration Plan was $.1 million in 2007. Total amounts

100

(8)    EMPLOYEE BENEFITS: (Continued)

deferred under the Houston Exploration Plan were $3.1 million and $7.4 million at December 31, 2008 and 2007.

Split Dollar Life Insurance

        The Company provides life insurance benefits for certain retirees and former executives under split dollar life insurance plans. Under the life insurance plans, the Company is assigned a portion of the benefits. No current employees are covered by these plans. On January 1, 2008, the Company adopted Emerging Issues Task Force ("EITF") Issue No. 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements ("EITF 06-4"), and EITF Issue No. 06-10, Accounting for Collateral Assignment Split-Dollar Life Insurance Arrangements ("EITF 06-10"). Pursuant to these pronouncements, the Company recognized a liability for the estimated cost of maintaining the insurance policies during the postretirement periods of the retirees and former executives in accordance with SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions ("SFAS 106"). Upon adoption, Forest recorded a $9.0 million liability as a change in accounting principle through a cumulative effect adjustment to retained earnings. The weighted average discount rate used to determine the initial postretirement benefit obligation and accretion expense for 2008 was 5.55%. The weighted average discount rate used to determine the postretirement benefit obligation as of December 31, 2008 was 5.64%. The Company's estimate of costs expected to be paid in 2009 to maintain these life insurance policies is $.9 million. Accretion of the discounted life insurance obligations totaled $.5 million during 2008. As of December 31, 2008, the Consolidated Balance Sheet includes a liability associated with the life insurance policies of $6.8 million and an asset of $2.6 million, with the asset representing the estimated cash surrender value of the life insurance policies.

(9)    FAIR VALUE MEASUREMENTS:

        In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements ("SFAS 157"). This statement clarifies the definition of fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The Company adopted the provisions of SFAS 157 as of January 1, 2008 for all financial and nonfinancial assets and liabilities recognized or disclosed at fair value on a recurring basis. The Company has also adopted SFAS 157 as it relates to all nonfinancial assets and liabilities that are not recognized or disclosed on a recurring basis as of January 1, 2009 pursuant to the provisions of FASB Staff Position No. FAS 157-2, Effective Date of FASB Statement No. 157. The adoption of SFAS 157 did not materially impact the Company's financial position, results of operations, or cash flow.

        SFAS 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used to measure fair value. These tiers include: Level 1, defined as unadjusted quoted prices in active markets for identical assets or liabilities; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for use when little or no market data exists, therefore requiring an entity to develop its own assumptions.

        As of December 31, 2008, the Company held certain financial assets and liabilities that are required to be measured at fair value on a recurring basis, including: (i) the Company's commodity derivative instruments and (ii) other investments, which are comprised of the PERL Note and the PERL Shares discussed in Note 2 to these Consolidated Financial Statements.

        At December 31, 2008, the Company used the market approach in determining the fair value of the PERL Shares, which are included within the Level 1 fair value hierarchy. Because the PERL Shares were initially restricted and not registered for public sale, they could not be valued within the

101

(9)    FAIR VALUE MEASUREMENTS: (Continued)

Level 1 fair value hierarchy prior to the lapsing of the restriction in August 2008. The PERL Shares were instead included within the Level 2 fair value hierarchy during this time, with the Company using the income approach in determining their fair value, utilizing an option-pricing model.

        The Company used the income approach in determining the fair value of its derivative instruments, utilizing present value techniques for valuing its swaps and basis swaps and option-pricing models for valuing its collars. Inputs to these valuation techniques include published forward prices, volatilities, and credit risk considerations, including the incorporation of published interest rates and credit spreads. All of these inputs are observable, either directly or indirectly; therefore, the Company's derivative instruments are included within the Level 2 fair value hierarchy.

        The Company also used the income approach, utilizing present value techniques, in determining the fair value of its PERL Note. Inputs to this valuation technique include various premiums that take into account specific risks related to the issuer of the PERL Note. These inputs include both observable and unobservable inputs that are significant to the valuation, with the unobservable inputs reflecting the Company's own assumptions about the assumptions that market participants would use in pricing the PERL Note; therefore, the PERL Note is included within the Level 3 fair value hierarchy.

        The Company's assets and liabilities measured and carried at fair value on a recurring basis at December 31, 2008, were as follows:

Description		Using Quoted Prices in Active Markets for Identical Assets (Level 1)		Using Significant Other Observable Inputs (Level 2)			Using Significant Unobservable Inputs (Level 3)		Total
		(In Thousands)
Assets:
	Derivative instruments	$	—		173,995			—		173,995
	Other investments		657		—			1,670		2,327
Liabilities:
	Derivative instruments		—		(3,884	)		—		(3,884	)

        The following table presents a reconciliation of the beginning and ending balances of the Company's assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2008.

			Other Investments
			(In Thousands)
Balance at December 31, 2007			$	15,023
	Total gains or (losses) (realized/unrealized):
		Included in earnings		(13,353	)
		Included in other comprehensive income		—
		Purchases, sales, issuances, and settlements (net)		—
		Transfers in and/or out of Level 3		—
Balance at December 31, 2008			$	1,670
The amount of total gains or (losses) for the period included in earnings attributable to the change in unrealized gains or losses relating to assets still held at December 31, 2008			$	(15,027	)

102

(9)    FAIR VALUE MEASUREMENTS: (Continued)

        Gains and losses (realized and unrealized) included in earnings related to the Company's assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2008 are reported in the Consolidated Statements of Operations as follows:

	Unrealized Losses on Other Investments, Net		Other Expense, Net(1)
	(In Thousands)
Total (gains) or losses included in earnings for the period	$	15,027		(1,674	)
Change in unrealized (gains) or losses relating to assets still held at December 31, 2008	$	15,027		—

⁽¹⁾

Represents imputed interest income on the PERL Note.

(10)    DERIVATIVE INSTRUMENTS:

Commodity Derivatives

        Forest periodically enters into derivative instruments such as swap, basis swap, and collar agreements in order to provide a measure of stability to Forest's cash flows in an environment of volatile oil and gas prices and to manage the exposure to commodity price risk. Forest's commodity derivative instruments generally serve as effective economic hedges of commodity price exposure; however, the Company has elected not to account for the derivatives as cash flow hedges. As such, the Company recognizes all changes in fair value of its derivative instruments in earnings rather than deferring such amounts in accumulated other comprehensive income included in shareholders' equity, as would be done if cash flow hedge accounting were utilized. Forest is exposed to risks associated with swap and collar agreements arising from movements in the prices of oil and natural gas and from non-performance by the counterparties to the swap and collar agreements.

        The tables below set forth Forest's outstanding commodity swaps and collars as of December 31, 2008. Subsequent to December 31, 2008 through February 25, 2009, the Company entered into additional natural gas swaps covering 100 Bbtu per day for Calendar 2010 at a weighted average hedged price per MMBtu of $6.52.

		Natural Gas (NYMEX HH)					Oil (NYMEX WTI)
		Bbtu Per Day(1)		Weighted Average Hedged Price per MMBtu			Barrels Per Day		Weighted Average Hedged Price per Bbl
Swaps:
	Calendar 2009		160	$	8.24			4,500	$	69.01
	Calendar 2010		—		—			1,500		72.95
Costless Collars:
	Calendar 2009		40	$	7.31/9.76	(2)		—		—

⁽¹⁾

10 Bbtu per day is subject to a $6.00 written put.

⁽²⁾

Represents weighted average hedged floor and ceiling price per MMBtu.

        Forest also uses basis swaps in connection with natural gas swaps in order to fix the price differential between the NYMEX price and the index price at which the natural gas production is sold. As of December 31, 2008, the Company had basis swaps outstanding covering 185 Bbtu and 90 Bbtu per day for 2009 and 2010, respectively. Subsequent to December 31, 2008, through February 25, 2009,

103

(10)    DERIVATIVE INSTRUMENTS: (Continued)

the Company entered into additional basis swaps covering 20 Bbtu per day for February 2009 through December 2009.

        At December 31, 2008, the fair values of Forest's commodity derivative instruments are presented within the Consolidated Balance Sheet as assets of $174.0 million, of which $169.4 million is classified as current, and liabilities of $3.9 million, of which $1.3 million is classified as current. Due to the volatility of oil and natural gas prices, the estimated fair values of Forest's commodity derivative instruments are subject to large fluctuations from period to period. Forest has experienced the effects of these commodity price fluctuations in both the current period and prior periods and expects that volatility in commodity prices will continue.

        The table below summarizes the realized and unrealized gains and losses Forest incurred related to its commodity derivative instruments for the periods indicated.

	Year Ended December 31,
	2008			2007			2006
	(In Thousands)
Realized losses (gains) on derivatives not designated as cash flow hedges(1)(2)	$	55,072			(75,491	)		23,864
Realized losses on derivatives designated as cash flow hedges(3)		—			—			43,813
Unrealized (gains) losses on derivatives not designated as cash flow hedges(1)		(216,769	)		112,778			(78,056	)
Ineffectiveness recognized on derivatives designated as cash flow hedges(1)		—			—			(5,573	)
Realized and unrealized (gains) losses on commodity derivatives, net	$	(161,697	)		37,287			(15,952	)

⁽¹⁾

Included in "Other income and expense" in the Consolidated Statement of Operations.

⁽²⁾

The years ended December 31, 2008 and 2007 include proceeds of $19.2 million and $6.9 million, respectively, received upon termination of certain oil and gas swaps and collars.

⁽³⁾

Included in "Revenues" in the Consolidated Statement of Operations. Realized gains or losses on derivatives that had previously been designated as cash flow hedges at the time the Company elected to discontinue hedge accounting were required to be included as part of "Revenues."

Interest Rate Derivatives

        The Company may enter into interest rate swap agreements in an attempt to normalize the mix of fixed and floating interest rates within its debt portfolio. In June 2008, the Company terminated all of its outstanding interest rate swaps for a net gain of $.4 million. In February 2009, the Company entered into an interest rate swap intended to exchange the 8.5% fixed interest rate on $100.0 million of the 8¹/2% Notes for a variable rate based on one-month LIBOR plus 6% over the term of the 8¹/2% Notes.

        The table below summarizes the realized and unrealized gains and losses Forest incurred related to its interest rate swaps for the periods indicated.

	Year Ended December 31,
	2008			2007			2006
	(In Thousands)
Realized losses (gains)(1)(2)	$	889			(474	)		—
Unrealized (gains) losses(1)		(4,721	)		4,721			—
Realized and unrealized (gains) losses on interest rate swaps, net	$	(3,832	)		4,247			—

⁽¹⁾

Included in "Other income and expense" in the Consolidated Statements of Operations.

⁽²⁾

The year ended December 31, 2008 includes $.4 million of net proceeds received upon termination of the interest rate swaps.

104

(11)    RELATED PARTY TRANSACTIONS:

        Beginning in 1995, the Company consummated certain transactions with The Anschutz Corporation ("Anschutz") pursuant to which Anschutz acquired a significant ownership position in the Company. As of December 31, 2008, Anschutz owned approximately 8.1% of Forest's outstanding common stock. Based on reports filed with the SEC, as of January 15, 2009, Anschutz has entered into forward sales contracts covering a portion of its Forest common stock, although Anschutz retains voting rights for these shares through the settlement dates.

        In 1998, Forest purchased certain oil and gas assets from Anschutz, including two concessions in South Africa. Over the years, the parties have entered into agreements concerning the development of these concession blocks. In March 2003, Forest entered into a Participation Agreement regarding the development of offshore South Africa acreage, including the Ibhubesi Gas Field, with The Petroleum Oil and Gas Corporation of South Africa (Pty) Limited ("PetroSA") and Anschutz Overseas South Africa (Pty) Limited ("Anschutz Overseas"). As of February 25, 2009, the parties' interests in the concessions were as follows: Forest 53.2%, Anschutz Overseas 22.8%, and PetroSA 24.0%. Forest is the operator of these concession blocks and is reimbursed by the partners for exploration expenditures and general, technical, and administrative overhead.

(12)    COMMITMENTS AND CONTINGENCIES:

        The table below shows the Company's future rental payments and unconditional purchase obligations as of December 31, 2008.

	2009		2010		2011		2012		2013		After 2013		Total
	(In Thousands)
Operating leases(1)	$	17,557		17,228		17,026		16,281		15,298		14,026		97,416
Unconditional purchase obligations(2)		44,614		7,419		772		278		—		—		53,083
	$	62,171		24,647		17,798		16,559		15,298		14,026		150,499

⁽¹⁾

Includes future rental payments for office facilities, office equipment, drilling rigs, and vehicles under the remaining terms of non-cancelable operating leases.

⁽²⁾

Includes unconditional purchase obligations for drilling rigs, pipeline capacity, and seismic and tubular purchases

        Net rental payments under non-cancelable operating leases applicable to exploration and development activities and capitalized to oil and gas properties were $15.4 million in 2008, $8.0 million in 2007, and $2.2 million in 2006. Net rental payments under non-cancelable operating leases charged to expense amounted to $5.4 million in 2008, $4.5 million in 2007, and $3.5 million in 2006. The Company has no leases that are accounted for as capital leases.

        Forest, in the ordinary course of business, is a party to various lawsuits, claims, and proceedings. While the Company believes that the amount of any potential loss upon resolution of these matters would not be material to our consolidated financial position, the ultimate outcome of these matters is inherently difficult to predict with any certainty. In the event of an unfavorable outcome, the potential loss could have an adverse effect on Forest's results of operations and cash flow in the reporting periods in which any such actions are resolved. Forest is also involved in a number of governmental proceedings in the ordinary course of business, including environmental matters.

105

(13)    OTHER INCOME AND EXPENSE:

        The components of other income and expense for the years ended December 31, 2008, 2007, and 2006 were as follows:

		Year Ended December 31,
		2008			2007			2006
		(In Thousands)
Franchise taxes		$	1,612			2,322			1,410
Share of income of equity method investee			—			(275	)		(2,334	)
Debt extinguishment costs			97			12,215			—
Other, net			(133	)		(2,214	)		1,135
	Total other expense, net	$	1,576			12,048			211

(14)    SELECTED QUARTERLY FINANCIAL DATA (unaudited):

	First Quarter			Second Quarter			Third Quarter		Fourth Quarter
	(In Thousands, Except Per Share Amounts)
2008
Revenue	$	376,530			515,182			474,160		281,291
Net earnings (loss)(1)	$	(4,732	)		(68,018	)		429,007		(1,382,580	)
Basic earnings (loss) per share	$	(.05	)		(.78	)		4.88		(14.50	)
Diluted earnings (loss) per share		(.05	)		(.78	)		4.77		(14.50	)
2007
Revenue	$	182,609			254,669			313,025		333,589
Net earnings(1)	$	6,891			76,799			57,987		27,629
Basic earnings per share	$	.11			1.11			.67		.32
Diluted earnings per share		.11			1.08			.65		.31

⁽¹⁾

Net earnings have been subject to large fluctuations due to Forest's election not to use cash flow hedge accounting as discussed in Note 10.

(15)    GEOGRAPHICAL SEGMENTS:

        Segment information has been prepared in accordance with SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information. At December 31, 2008, Forest conducted operations in one industry segment, that being the oil and gas exploration and production industry, and had three reportable geographical business segments: United States, Canada, and International. Forest's remaining activities are not significant and therefore are not reported as a separate segment, but are included as a reconciling item in the information below. The segments were determined based upon the

106

(15)    GEOGRAPHICAL SEGMENTS: (Continued)

geographical location of operations in each business segment. The segment data presented below was prepared on the same basis as the Consolidated Financial Statements.

		Oil and Gas Operations
		Year Ended December 31, 2008
		United States			Canada		International			Total Company
		(In Thousands)
Revenue		$	1,396,669			250,502		—			1,647,171
Expenses:
	Lease operating expenses		131,756			36,074		—			167,830
	Production and property taxes		78,488			3,659		—			82,147
	Transportation and processing costs		9,866			9,606		—			19,472
	Depletion		437,952			85,859		—			523,811
	Impairment of oil and gas properties		2,369,055			—		—			2,369,055
	Accretion of asset retirement obligations		6,387			1,130		85			7,602
Earnings (loss) from operations		$	(1,636,835	)		114,174		(85	)		(1,522,746	)
Capital expenditures(1)		$	2,560,940			197,953		7,216			2,766,109
Goodwill		$	239,420			14,226		—			253,646

⁽¹⁾

Includes estimated discounted asset retirement obligations of $15.0 million related to assets placed in service during the year ended December 31, 2008.

        A reconciliation of segment earnings (loss) from operations to consolidated earnings (loss) before income taxes is as follows:

	(In Thousands)
Earnings (loss) from operations for reportable segments	$	(1,522,746	)
Marketing, processing, and other		(8	)
General and administrative expense (including stock-based compensation)		(74,732	)
Administrative asset depreciation		(8,370	)
Interest expense		(125,679	)
Realized and unrealized gains on derivative instruments, net		165,529
Realized and unrealized foreign currency exchange losses		(20,440	)
Unrealized losses on other investments, net		(34,042	)
Gain on sale of assets		21,063
Other expense, net		(1,576	)
Earnings (loss) before income taxes	$	(1,601,001	)

107

(15)    GEOGRAPHICAL SEGMENTS: (Continued)

		Oil and Gas Operations
		Year Ended December 31, 2007
		United States		Canada		International			Total Company
		(In Thousands)
Revenue		$	892,818		190,263		—			1,083,081
Expenses:
	Lease operating expenses		135,983		31,490		—			167,473
	Production and property taxes		51,822		3,442		—			55,264
	Transportation and processing costs		9,729		10,471		—			20,200
	Depletion		301,048		84,181		—			385,229
	Accretion of asset retirement obligations		5,111		903		50			6,064
Earnings (loss) from operations		$	389,125		59,776		(50	)		448,851
Capital expenditures(1)		$	2,807,936		173,218		15,853			2,997,007
Goodwill		$	248,138		17,480		—			265,618

⁽¹⁾

Includes estimated discounted asset retirement obligations of $37.8 million related to assets placed in service during the year ended December 31, 2007.

        A reconciliation of segment earnings from operations to consolidated earnings before income taxes is as follows:

	(In Thousands)
Earnings from operations for reportable segments	$	448,851
Marketing, processing, and other		811
General and administrative expense (including stock-based compensation)		(63,751	)
Administrative asset depreciation		(5,109	)
Interest expense		(113,162	)
Realized and unrealized losses on derivative instruments, net		(41,534	)
Unrealized foreign currency exchange gains		15,415
Unrealized losses on other investments, net		(4,948	)
Gain on sale of assets		7,176
Other expense, net		(12,048	)
Earnings before income taxes	$	231,701

108

(15)    GEOGRAPHICAL SEGMENTS: (Continued)

		Oil and Gas Operations
		Year Ended December 31, 2006
		United States		Canada		International			Total Company
		(In Thousands)
Revenue		$	636,897		177,572		—			814,469
Expenses:
	Lease operating expenses		126,647		28,227		—			154,874
	Production and property taxes		36,060		2,981		—			39,041
	Transportation and processing costs		11,941		9,935		—			21,876
	Depletion		188,073		75,366		—			263,439
	Accretion of asset retirement obligations		6,046		1,004		46			7,096
	Impairment of oil and gas properties		—		—		3,668			3,668
Earnings (loss) from operations		$	268,130		60,059		(3,714	)		324,475
Capital expenditures(1)		$	784,250		152,005		6,984			943,239
Goodwill		$	71,377		14,869		—			86,246

⁽¹⁾

Includes estimated discounted asset retirement obligations of $2.4 million related to assets placed in service during the year ended December 31, 2006.

        A reconciliation of segment earnings from operations to consolidated earnings before income taxes and discontinued operations is as follows:

	(In Thousands)
Earnings from operations for reportable segments	$	324,475
Marketing, processing, and other		5,523
General and administrative expense (including stock-based compensation)		(48,308	)
Administrative asset depreciation		(3,442	)
Interest expense		(71,787	)
Spin-off costs		(5,416	)
Realized and unrealized gains on derivative instruments, net		59,765
Realized and unrealized foreign currency exchange losses, net		(3,616	)
Other expense, net		(211	)
Earnings before income taxes and discontinued operations	$	256,983

        Forest had revenue from two purchasers, which is reported in the United States segment, that exceeded 10% of Forest's consolidated revenue in 2008. These purchasers represented $213.8 million and $196.2 million of consolidated revenue, respectively. Forest had revenue from two purchasers that exceeded 10% of Forest's consolidated revenue in 2006. One of these purchasers represented $112.5 million of consolidated revenue, which was reported in the United States segment, and the other purchaser represented $102.9 million of consolidated revenue, which was reported in both the United States and Canada segments. There were no such purchasers in 2007.

109

(15)    GEOGRAPHICAL SEGMENTS: (Continued)

        The following tables set forth information regarding the Company's total assets by segment and long-lived assets by geographic area. Long-lived assets include net property and equipment and goodwill.

	Total Assets
	December 31,
	2008		2007		2006
	(In Thousands)
United States	$	4,476,489		4,828,582		2,534,087
Canada		726,895		791,714		595,341
International		79,414		75,252		59,644
Total assets	$	5,282,798		5,695,548		3,189,072

	Long-Lived Assets
	December 31,
	2008		2007		2006
	(In Thousands)
United States	$	3,998,129		4,487,257		2,278,733
Canada		691,009		730,418		538,844
International		77,672		73,758		58,595
Total long-lived assets	$	4,766,810		5,291,433		2,876,172

(16)    CONDENSED CONSOLIDATING FINANCIAL INFORMATION:

        The Company's 8% senior notes due 2011, 7³/4% senior notes due 2014, and 7¹/4% senior notes due 2019, as well as the 8¹/2% senior notes due 2014, have been fully and unconditionally guaranteed by a wholly-owned subsidiary of the Company (the "Guarantor Subsidiary"). The Company's remaining subsidiaries (the "Non-Guarantor Subsidiaries") have not provided guarantees. Based on this distinction, the following presents condensed consolidating financial information as of December 31, 2008 and 2007, and for the three years in the period ended December 31, 2008 on an issuer (parent company), guarantor subsidiary, non-guarantor subsidiaries, eliminating entries, and consolidated basis. Eliminating entries presented are necessary to combine the entities.

110

(16)    CONDENSED CONSOLIDATING FINANCIAL INFORMATION: (Continued)

CONDENSED CONSOLIDATING BALANCE SHEETS
(In Thousands)

			December 31, 2008												December 31, 2007
			Parent Company		Guarantor Subsidiary		Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated		Parent Company		Guarantor Subsidiary		Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
	Cash and cash equivalents		$	1,226		74		905			—			2,205		1,189		386		8,110			—			9,685
	Accounts receivable			106,941		22,003		28,584			(302	)		157,226		121,698		8,979		80,890			(9,950	)		201,617
	Other current assets			304,424		471		8,723			—			313,618		140,752		273		9,047			—			150,072
		Total current assets		412,591		22,548		38,212			(302	)		473,049		263,639		9,638		98,047			(9,950	)		361,374
Property and equipment, at cost				7,327,978		1,259,337		1,465,891			—			10,053,206		5,363,127		240,748		2,194,490			—			7,798,365
	Less accumulated depreciation, depletion and amortization			4,145,061		727,858		667,123			—			5,540,042		1,852,033		82,743		837,774			—			2,772,550
		Net property and equipment		3,182,917		531,479		798,768			—			4,513,164		3,511,094		158,005		1,356,716			—			5,025,815
Investment in subsidiaries				577,405		—		—			(577,405	)		—		740,964		—		—			(740,964	)		—
Note receivable from subsidiary				93,052		—		—			(93,052	)		—		73,307		—		—			(73,307	)		—
Goodwill				216,460		22,960		14,226			—			253,646		225,178		—		40,440			—			265,618
Due from (to) parent and subsidiaries				391,074		141,656		(532,730	)		—			—		308,381		28,409		(336,790	)		—			—
Other assets				40,607		5		2,327			—			42,939		39,424		1		3,316			—			42,741
			$	4,914,106		718,648		320,803			(670,759	)		5,282,798		5,161,987		196,053		1,161,729			(824,221	)		5,695,548
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Accounts payable and accrued liabilities		$	338,754		27,631		58,858			(302	)		424,941		293,523		9,810		67,706			(9,950	)		361,089
	Current portion of long-term debt			—		—		—			—			—		266,002		—		—			—			266,002
	Other current liabilities			88,064		1,165		7,241			—			96,470		103,288		1,012		6,991			—			111,291
		Total current liabilities		426,818		28,796		66,099			(302	)		521,411		662,813		10,822		74,697			(9,950	)		738,382
Long-term debt				2,641,246		—		94,415			—			2,735,661		1,373,909		—		129,126			—			1,503,035
Note payable to parent				—		—		93,052			(93,052	)		—		—		—		73,307			(73,307	)		—
Other liabilities				128,017		3,397		35,813			—			167,227		136,362		1,690		50,841			—			188,893
Deferred income taxes				45,113		61,383		79,091			—			185,587		577,092		62,509		213,826			—			853,427
		Total liabilities		3,241,194		93,576		368,470			(93,354	)		3,609,886		2,750,176		75,021		541,797			(83,257	)		3,283,737
Shareholders' equity				1,672,912		625,072		(47,667	)		(577,405	)		1,672,912		2,411,811		121,032		619,932			(740,964	)		2,411,811
			$	4,914,106		718,648		320,803			(670,759	)		5,282,798		5,161,987		196,053		1,161,729			(824,221	)		5,695,548

111

(16)    CONDENSED CONSOLIDATING FINANCIAL INFORMATION: (Continued)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(In Thousands)

				Year Ended December 31,
				2008															2007														2006
				Parent Company			Guarantor Subsidiary			Combined Non- Guarantor Subsidiaries			Eliminations			Consolidated			Parent Company			Guarantor Subsidiary		Combined Non- Guarantor Subsidiaries			Eliminations			Consolidated			Parent Company			Guarantor Subsidiary			Combined Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenues				$	1,128,098			109,094			409,971			—			1,647,163			649,502			73,588		363,506			(2,704	)		1,083,892			473,325			72,132			277,266			(2,731	)		819,992
Operating expenses:
	Lease operating expenses				108,680			14,422			44,619			109			167,830			79,745			15,853		71,891			(16	)		167,473			100,060			14,357			40,562			(105	)		154,874
	Other direct operating costs				75,493			8,180			17,946			—			101,619			50,651			5,475		19,338			—			75,464			38,219			6,315			16,383			—			60,917
	General and administrative (including stock-based compensation)				64,826			336			9,570			—			74,732			51,022			119		12,610			—			63,751			40,960			182			7,166			—			48,308
	Depreciation and depletion				361,443			25,780			145,125			(167	)		532,181			229,069			19,186		142,094			(11	)		390,338			140,442			19,253			107,186			—			266,881
	Impairment of oil and gas properties				1,881,808			34,015			453,232			—			2,369,055			—			—		—			—			—			—			—			3,668			—			3,668
	Gain on sale of assets				—			—			(21,063	)		—			(21,063	)		—			—		(7,176	)		—			(7,176	)		—			—			—			—			—
	Other operating expenses				6,098			180			1,324			—			7,602			3,844			192		2,028			—			6,064			10,975			127			1,410			—			12,512
			Total operating expenses		2,498,348			82,913			650,753			(58	)		3,231,956			414,331			40,825		240,785			(27	)		695,914			330,656			40,234			176,375			(105	)		547,160
Earnings (loss) from operations					(1,370,250	)		26,181			(240,782	)		58			(1,584,793	)		235,171			32,763		122,721			(2,677	)		387,978			142,669			31,898			100,891			(2,626	)		272,832
Equity earnings in subsidiaries					(112,817	)		—			—			112,817			—			2,119			—		—			(2,119	)		—			85,360			—			—			(85,360	)		—
Other income and expense:
	Interest expense				111,316			—			31,452			(17,089	)		125,679			74,727			9		54,727			(16,301	)		113,162			61,673			111			19,457			(9,454	)		71,787
	Realized and unrealized (gains) losses on derivative instruments, net				(75,236	)		(53,769	)		(36,524	)		—			(165,529	)		7,750			7,181		26,603			—			41,534			(48,696	)		(13,454	)		2,385			—			(59,765	)
	Realized and unrealized foreign currency exchange losses (gains), net				—			—			20,440			—			20,440			—			—		(15,415	)		—			(15,415	)		—			—			70			3,546			3,616
	Unrealized losses on other investments, net				34,042			—			—			—			34,042			4,948			—		—			—			4,948			—			—			—			—			—
	Other (income) expense, net				(13,334	)		(10	)		(3,130	)		18,050			1,576			(78,759	)		755		9,148			80,904			12,048			(9,820	)		696			(119	)		9,454			211
		Total other income and expense			56,788			(53,779	)		12,238			961			16,208			8,666			7,945		75,063			64,603			156,277			3,157			(12,647	)		21,793			3,546			15,849
Earnings (loss) before income taxes					(1,539,855	)		79,960			(253,020	)		111,914			(1,601,001	)		228,624			24,818		47,658			(69,399	)		231,701			224,872			44,545			79,098			(91,532	)		256,983
		Income tax			(513,532	)		28,586			(89,732	)		—			(574,678	)		59,318			9,242		(6,165	)		—			62,395			56,370			18,344			16,189			—			90,903
Earnings (loss) from continuing operations					(1,026,323	)		51,374			(163,288	)		111,914			(1,026,323	)		169,306			15,576		53,823			(69,399	)		169,306			168,502			26,201			62,909			(91,532	)		166,080
	Income from discontinued operations, net of tax				—			—			—			—			—			—			—		—			—			—			—			—			2,422			—			2,422
Net earnings (loss)				$	(1,026,323	)		51,374			(163,288	)		111,914			(1,026,323	)	$	169,306			15,576		53,823			(69,399	)		169,306		$	168,502			26,201			65,331			(91,532	)		168,502

112

(16)    CONDENSED CONSOLIDATING FINANCIAL INFORMATION:

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(In Thousands)

			Year Ended December 31,
			2008												2007												2006
			Parent Company			Guarantor Subsidiary			Combined Non- Guarantor Subsidiaries			Consolidated			Parent Company			Guarantor Subsidiary			Combined Non- Guarantor Subsidiaries			Consolidated			Parent Company			Guarantor Subsidiary			Combined Non- Guarantor Subsidiaries			Consolidated
Operating activities:
	Net earnings (loss)		$	(913,506	)		51,374			(164,191	)		(1,026,323	)		99,907			15,576			53,823			169,306			76,970			26,201			65,331			168,502
	Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
		Depreciation and depletion		361,443			25,780			144,958			532,181			229,069			19,186			142,083			390,338			140,442			19,253			107,186			266,881
		Unrealized (gains) losses on derivative instruments, net		(110,904	)		(69,091	)		(41,495	)		(221,490	)		69,053			11,318			37,128			117,499			(67,022	)		(20,241	)		3,634			(83,629	)
		Deferred income tax		(521,281	)		28,586			(93,122	)		(585,817	)		53,192			9,242			(6,038	)		56,396			54,384			18,344			17,276			90,004
		Impairment of oil and gas properties		1,881,808			34,015			453,232			2,369,055			—			—			—			—			—			—			3,668			3,668
		Other, net		53,485			180			1,019			54,684			14,154			192			(5,907	)		8,439			24,357			127			5,682			30,166
	Changes in operating assets and liabilities, net of effects of acquisitions and divestitures:
		Accounts receivable		20,872			3,709			18,273			42,854			6,825			449			(6,921	)		353			8,200			1,511			(10,351	)		(640	)
		Other current assets		(78,166	)		56			(2,104	)		(80,214	)		(3,250	)		2,107			2,700			1,557			(32,109	)		(2,105	)		(5,646	)		(39,860	)
		Accounts payable and accrued liabilities		(3,532	)		4,859			14,469			15,796			4,091			1,856			(15,539	)		(9,592	)		(5,791	)		(3,098	)		18,089			9,200
		Accrued interest and other current liabilities		(30,258	)		(549	)		121			(30,686	)		(3,226	)		(207	)		(22,618	)		(26,051	)		(18,791	)		1,650			(4,673	)		(21,814	)
Net cash provided by operating activities				659,961			78,919			331,160			1,070,040			469,815			59,719			178,711			708,245			180,640			41,642			200,196			422,478
Investing activities:
	Acquisition of Houston Exploration, net of cash acquired			—			—			—			—			(775,365	)		—			—			(775,365	)		—			—			—			—
	Capital expenditures for property and equipment			(1,828,225	)		(124,247	)		(452,021	)		(2,404,493	)		(423,526	)		(30,605	)		(365,773	)		(819,904	)		(573,602	)		(32,366	)		(310,430	)		(916,398	)
	Proceeds from sales of assets			284,677			—			25,263			309,940			405,857			26,161			70,030			502,048			1,074			357			5,076			6,507
	Other, net			933			(4	)		131			1,060			—			—			—			—			—			—			—			—
Net cash used by investing activities				(1,542,615	)		(124,251	)		(426,627	)		(2,093,493	)		(793,034	)		(4,444	)		(295,743	)		(1,093,221	)		(572,528	)		(32,009	)		(305,354	)		(909,891	)
Financing activities:
	Proceeds from bank borrowings			2,847,000			—			356,360			3,203,360			1,308,000			—			228,526			1,536,526			1,398,102			—			164,676			1,562,778
	Repayments of bank borrowings			(1,822,000	)		—			(373,101	)		(2,195,101	)		(1,166,000	)		—			(199,178	)		(1,365,178	)		(1,296,000	)		—			(136,574	)		(1,432,574	)
	Repayments of debt			—			—			—			—			(176,885	)		—			(375,000	)		(551,885	)		—			—			—			—
	Issuance of 71/4% senior notes, net of issuance costs			247,188			—			—			247,188			739,176			—			—			739,176			—			—			—			—
	Redemption of 8% senior notes			(265,000	)		—			—			(265,000	)		—			—			—			—			—			—			—			—
	Repurchase of 7% senior subordinated notes			(4,710	)		—			—			(4,710	)		—			—			—			—			—			—			—			—
	Proceeds from Alaska Credit Agreements, net of issuance costs			—			—			—			—			—			—			—			—			—			—			367,706			367,706
	Net activity in investments of subsidiaries			(147,079	)		42,755			104,324			—			(389,846	)		(55,578	)		445,424			—			264,058			(10,109	)		(253,949	)		—
	Other, net			27,292			2,265			964			30,521			9,192			563			(8,842	)		913			24,537			602			(9,217	)		15,922
Net cash provided (used) by financing activities				882,691			45,020			88,547			1,016,258			323,637			(55,015	)		90,930			359,552			390,697			(9,507	)		132,642			513,832
Effect of exchange rate changes on cash				—			—			(285	)		(285	)		—			—			1,945			1,945			—			—			(486	)		(486	)
Net increase (decrease) in cash and cash equivalents				37			(312	)		(7,205	)		(7,480	)		418			260			(24,157	)		(23,479	)		(1,191	)		126			26,998			25,933
Cash and cash equivalents at beginning of period				1,189			386			8,110			9,685			771			126			32,267			33,164			1,962			—			5,269			7,231
Cash and cash equivalents at end of period			$	1,226			74			905			2,205			1,189			386			8,110			9,685			771			126			32,267			33,164

113

(17)    SUPPLEMENTAL FINANCIAL DATA—OIL AND GAS PRODUCING ACTIVITIES (unaudited):

        The following information is presented in accordance with SFAS No. 69, Disclosures about Oil and Gas Producing Activities.

(A) Costs Incurred in Oil and Gas Acquisition, Exploration, and Development Activities. The following costs were incurred in oil and gas acquisition, exploration, and development activities during the years ended December 31, 2008, 2007, and 2006:

		United States		Canada		International		Total
		(In Thousands)
2008
Property acquisition costs:
	Proved properties	$	804,616		—		—		804,616
	Unproved properties		566,952		—		—		566,952
Exploration costs			290,066		51,628		6,507		348,201
Development costs			899,306		146,325		709		1,046,340
Total costs incurred(1)		$	2,560,940		197,953		7,216		2,766,109
2007
Property acquisition costs:
	Proved properties	$	1,744,087		6		—		1,744,093
	Unproved properties		449,346		—		—		449,346
Exploration costs			96,483		35,861		15,853		148,197
Development costs			518,020		137,351		—		655,371
Total costs incurred(1)		$	2,807,936		173,218		15,853		2,997,007
2006
Property acquisition costs:
	Proved properties	$	262,534		—		—		262,534
	Unproved properties		53,788		—		—		53,788
Exploration costs			155,824		99,657		6,984		262,465
Development costs			312,104		52,348		—		364,452
Total costs incurred(1)		$	784,250		152,005		6,984		943,239

⁽¹⁾

Includes amounts relating to estimated asset retirement obligations of $15.0 million, $37.8 million, and $2.4 million for assets placed in service in the years ended December 31, 2008, 2007, and 2006, respectively.

(B) Aggregate Capitalized Costs. The aggregate capitalized costs relating to oil and gas activities at the end of each of the years indicated were as follows:

	2008			2007			2006
	(In Thousands)
Costs related to proved properties	$	8,952,292			7,157,249			4,751,171
Costs related to unproved properties		964,027			568,510			261,259
		9,916,319			7,725,759			5,012,430
Less accumulated depletion		(5,502,782	)		(2,742,539	)		(2,265,018	)
	$	4,413,537		$	4,983,220			2,747,412

114

(17)    SUPPLEMENTAL FINANCIAL DATA—OIL AND GAS PRODUCING ACTIVITIES (unaudited): (Continued)

(C) Results of Operations from Producing Activities. Results of operations from producing activities for the years ended December 31, 2008, 2007, and 2006 are presented below.

			United States			Canada		Total
			(In Thousands)
2008
Oil and gas sales			$	1,396,669			250,502		1,647,171
Expenses:
	Production expense			220,110			49,339		269,449
	Depletion expense			437,952			85,859		523,811
	Impairment of oil and gas properties			2,369,055			—		2,369,055
	Accretion of asset retirement obligations			6,387			1,130		7,517
	Income tax			(591,388	)		33,721		(557,667	)
		Total expenses		2,442,116			170,049		2,612,165
Results of operations from producing activities			$	(1,045,447	)		80,453		(964,994	)
Depletion rate per Mcfe			$	2.74			2.87		2.76
2007
Oil and gas sales			$	892,818			190,263		1,083,081
Expenses:
	Production expense			197,534			45,403		242,937
	Depletion expense			301,048			84,181		385,229
	Accretion of asset retirement obligations			5,111			903		6,014
	Income tax expense			139,696			16,486		156,182
		Total expenses		643,389			146,973		790,362
Results of operations from producing activities			$	249,429			43,290		292,719
Depletion rate per Mcfe			$	2.42			2.68		2.47
2006
Oil and gas sales			$	636,897			177,572		814,469
Expenses:
	Production expense			174,648			41,143		215,791
	Depletion expense			188,073			75,366		263,439
	Accretion of asset retirement obligations			6,046			1,004		7,050
	Income tax expense			103,498			17,970		121,468
		Total expenses		472,265			135,483		607,748
Results of operations from producing activities			$	164,632			42,089		206,721
Depletion rate per Mcfe			$	2.09			2.42		2.17

(D) Estimated Proved Oil and Gas Reserves. The Company's estimates of its net proved and proved developed oil and gas reserves and changes for 2008, 2007, and 2006 follows. These estimates were made in accordance with guidelines established by the SEC. Proved oil and gas reserves are the estimated quantities of crude oil, natural gas, and natural gas liquids that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, that is, prices and costs as of the date the estimate is

115

(17)    SUPPLEMENTAL FINANCIAL DATA—OIL AND GAS PRODUCING ACTIVITIES (unaudited): (Continued)

made. For the years ended December 31, 2008, 2007, and 2006 we engaged DeGolyer and MacNaughton, an independent petroleum engineering firm, to perform reserve audit services.

        Prices include consideration of changes in existing prices provided only by contractual arrangement, but not on escalations based on future conditions. Prices do not include the effects of commodity hedges. Purchases of reserves in place represent volumes recorded on the closing dates of the acquisitions for financial accounting purposes.

        Proved developed oil and gas reserves are reserves that can be expected to be recovered through existing wells with existing equipment and operating methods. Additional oil and gas expected to be obtained through the application of fluid injection or other improved recovery techniques for supplementing the natural forces and mechanisms of primary recovery are included as "proved developed reserves" only after testing by a pilot project or after the operation of an installed program has confirmed through production response that increased recovery will be achieved.

        Proved undeveloped oil and gas reserves are reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion.

	Liquids											Gas
	(MBbls)											(MMcf)
	United States			Canada			Italy		Total			United States			Canada			Italy		Total			Total MMcfe
Balance at January 1, 2006		92,078			4,992			—		97,070			743,174			141,509			—		884,683			1,467,103
Revisions of previous estimates		26,286			735			—		27,021			(83,435	)		28,451			—		(54,984	)		107,142
Extensions and discoveries		4,850			1,107			—		5,957			102,173			52,333			—		154,506			190,248
Production		(6,887	)		(1,139	)		—		(8,026	)		(48,674	)		(24,350	)		—		(73,024	)		(121,180	)
Sales of reserves in place		(13,047	)		—			—		(13,047	)		(248,028	)		—			—		(248,028	)		(326,310	)
Purchases of reserves in place		3,889			—			—		3,889			114,886			—			—		114,886			138,220
Balance at December 31, 2006		107,169			5,695			—		112,864			580,096			197,943			—		778,039			1,455,223
Revisions of previous estimates		(836	)		(357	)		—		(1,193	)		(21,202	)		(12,837	)		—		(34,039	)		(41,197	)
Extensions and discoveries		10,981			3,041			—		14,022			202,349			48,171			56,308		306,828			390,960
Production		(6,885	)		(1,060	)		—		(7,945	)		(82,963	)		(25,079	)		—		(108,042	)		(155,712	)
Sales of reserves in place		(29,749	)		—			—		(29,749	)		(7,983	)		—			—		(7,983	)		(186,477	)
Purchases of reserves in place		6,477			—			—		6,477			617,573			—			—		617,573			656,435
Balance at December 31, 2007		87,157			7,319			—		94,476			1,287,870			208,198			56,308		1,552,376			2,119,232
Revisions of previous estimates		(12,655	)		(1,493	)		—		(14,148	)		(129,633	)		1,813			—		(127,820	)		(212,708	)
Extensions and discoveries		17,571			4,112			—		21,683			351,628			50,817			—		402,445			532,543
Production		(6,929	)		(1,102	)		—		(8,031	)		(118,120	)		(23,313	)		—		(141,433	)		(189,619	)
Sales of reserves in place		(3,884	)		—			—		(3,884	)		(69,554	)		—			—		(69,554	)		(92,858	)
Purchases of reserves in place		19,024			—			—		19,024			397,392			—			—		397,392			511,536
Balance at December 31, 2008		100,284			8,836			—		109,120			1,719,583			237,515			56,308		2,013,406			2,668,126
Proved developed reserves at:
December 31, 2006		73,239			5,041			—		78,280			407,965			158,174			—		566,139			1,035,819
December 31, 2007		61,650			4,947			—		66,597			900,483			163,438			28,154		1,092,075			1,491,657
December 31, 2008		64,014			5,827			—		69,841			1,039,586			192,338			28,154		1,260,078			1,679,124

(E) Standardized Measure of Discounted Future Net Cash Flows. Future oil and gas sales and production and development costs, which include costs related to plugging of wells, removal of facilities and equipment, and site restoration, have been estimated using prices and costs in effect at the end of

116

(17)    SUPPLEMENTAL FINANCIAL DATA—OIL AND GAS PRODUCING ACTIVITIES (unaudited): (Continued)

the years indicated, except in those instances where the sale of oil and natural gas is covered by contracts. Where the sale is covered by contracts, the applicable contract prices, including fixed and determinable escalations, were used for the duration of the contract. Thereafter, the current spot price was used. All cash flow amounts, including income taxes, are discounted at 10%.

        Future income tax expenses are computed by applying the appropriate year-end statutory tax rates to the estimated future pretax net cash flows relating to proved oil and natural gas reserves, less the tax bases of the properties involved. The future income tax expenses give effect to tax credits and allowances, but do not reflect the impact of general and administrative and interest expense.

        Changes in the demand for oil and natural gas, inflation, and other factors make such estimates inherently imprecise and subject to substantial revision. This table should not be construed to be an estimate of the current market value of the Company's proved reserves. Management does not rely upon the information that follows in making investment decisions.

	December 31, 2008
	United States			Canada			Italy			Total
	(In Thousands)
Future oil and gas sales	$	11,442,387			1,605,699			1,069,845			14,117,931
Future production costs		(3,193,613	)		(349,487	)		(72,891	)		(3,615,991	)
Future development costs		(1,895,124	)		(145,415	)		(37,067	)		(2,077,606	)
Future income taxes		(1,042,295	)		(229,487	)		(362,914	)		(1,634,696	)
Future net cash flows		5,311,355			881,310			596,973			6,789,638
10% annual discount for estimated timing of cash flows		(2,882,676	)		(360,635	)		(218,547	)		(3,461,858	)
Standardized measure of discounted future net cash flows	$	2,428,679			520,675			378,426			3,327,780

	December 31, 2007
	United States			Canada			Italy			Total
	(In Thousands)
Future oil and gas sales	$	14,248,411			1,850,767			957,010			17,056,188
Future production costs		(3,249,115	)		(410,650	)		(71,658	)		(3,731,423	)
Future development costs		(1,086,890	)		(141,838	)		(37,067	)		(1,265,795	)
Future income taxes		(2,504,853	)		(277,975	)		(348,467	)		(3,131,295	)
Future net cash flows		7,407,553			1,020,304			499,818			8,927,675
10% annual discount for estimated timing of cash flows		(3,790,817	)		(388,956	)		(208,767	)		(4,388,540	)
Standardized measure of discounted future net cash flows	$	3,616,736			631,348			291,051			4,539,135

117

(17)    SUPPLEMENTAL FINANCIAL DATA—OIL AND GAS PRODUCING ACTIVITIES (unaudited): (Continued)

	December 31, 2006
	United States			Canada			Italy		Total
	(In Thousands)
Future oil and gas sales	$	8,600,619			1,276,442			—		9,877,061
Future production costs		(2,349,072	)		(287,054	)		—		(2,636,126	)
Future development costs		(681,060	)		(87,555	)		—		(768,615	)
Future income taxes		(1,317,621	)		(214,804	)		—		(1,532,425	)
Future net cash flows		4,252,866			687,029			—		4,939,895
10% annual discount for estimated timing of cash flows		(2,109,005	)		(236,526	)		—		(2,345,531	)
Standardized measure of discounted future net cash flows	$	2,143,861			450,503			—		2,594,364

(F) Changes in the Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves. An analysis of the changes in the standardized measure of discounted future net cash flows during each of the last three years is as follows:

	December 31, 2008
	United States			Canada			Italy			Total
	(In Thousands)
Standardized measure of discounted future net cash flows relating to proved oil and gas reserves, at beginning of year	$	3,616,736			631,348			291,051			4,539,135
Changes resulting from:
Sales of oil and gas, net of production costs		(1,176,547	)		(201,163	)		—			(1,377,710	)
Net changes in prices and future production costs		(3,134,532	)		(330,774	)		77,416			(3,387,890	)
Net changes in future development costs		66,318			51,230			(416	)		117,132
Extensions, discoveries, and improved recovery		1,337,152			266,578			—			1,603,730
Development costs incurred during the period		234,938			51,413			709			287,060
Revisions of previous quantity estimates		(316,030	)		(15,250	)		—			(331,280	)
Changes in production rates, timing, and other		(109,990	)		(43,484	)		(44,457	)		(197,931	)
Sales of reserves in place		(214,872	)		—			—			(214,872	)
Purchases of reserves in place		904,289			—			—			904,289
Accretion of discount on reserves at beginning of year before income taxes		470,619			78,485			48,125			597,229
Net change in income taxes		750,598			32,292			5,998			788,888
Standardized measure of discounted future net cash flows relating to proved oil and gas reserves, at end of year	$	2,428,679			520,675			378,426			3,327,780

        The computation of the standardized measure of discounted future net cash flows relating to proved oil and gas reserves at December 31, 2008 was based on weighted average year-end spot natural gas prices of approximately $4.94 per Mcf in the United States, approximately $5.64 per Mcf in

118

(17)    SUPPLEMENTAL FINANCIAL DATA—OIL AND GAS PRODUCING ACTIVITIES (unaudited): (Continued)

Canada, and $19.00 per Mcf in Italy, and on weighted average year-end spot oil prices of approximately $29.42 per barrel in the United States and approximately $30.20 per barrel in Canada.

	December 31, 2007
	United States			Canada			Italy			Total
	(In Thousands)
Standardized measure of discounted future net cash flows relating to proved oil and gas reserves, at beginning of year	$	2,143,861			450,503			—			2,594,364
Changes resulting from:
Sales of oil and gas, net of production costs		(695,321	)		(144,860	)		—			(840,181	)
Net changes in prices and future production costs		1,258,999			171,640			—			1,430,639
Net changes in future development costs		(78,440	)		5,576			—			(72,864	)
Extensions, discoveries, and improved recovery		445,794			115,047			481,250			1,042,091
Development costs incurred during the period		399,218			54,296			—			453,514
Revisions of previous quantity estimates		(85,383	)		(48,806	)		—			(134,189	)
Changes in production rates, timing, and other		6,889			(2,197	)		—			4,692
Sales of reserves in place		(871,495	)		—			—			(871,495	)
Purchases of reserves in place		1,369,079			—			—			1,369,079
Accretion of discount on reserves at beginning of year before income taxes		268,804			57,650			—			326,454
Net change in income taxes		(545,269	)		(27,501	)		(190,199	)		(762,969	)
Standardized measure of discounted future net cash flows relating to proved oil and gas reserves, at end of year	$	3,616,736			631,348			291,051			4,539,135

        The computation of the standardized measure of discounted future net cash flows relating to proved oil and gas reserves at December 31, 2007 was based on weighted average year-end spot natural gas prices of approximately $6.20 per Mcf in the United States, approximately $6.12 per Mcf in

119

(17)    SUPPLEMENTAL FINANCIAL DATA—OIL AND GAS PRODUCING ACTIVITIES (unaudited): (Continued)

Canada, and $17.00 per Mcf in Italy, and on weighted average year-end spot oil prices of approximately $71.89 per barrel in the United States and approximately $78.71 per barrel in Canada.

	December 31, 2006
	United States			Canada			Italy		Total
	(In Thousands)
Standardized measure of discounted future net cash flows relating to proved oil and gas reserves, at beginning of year	$	3,339,202			513,423			—		3,852,625
Changes resulting from:
Sales of oil and gas, net of production costs		(507,337	)		(136,429	)		—		(643,766	)
Net changes in prices and future production costs		(1,245,361	)		(241,144	)		—		(1,486,505	)
Net changes in future development costs		(151,433	)		(9,971	)		—		(161,404	)
Extensions, discoveries, and improved recovery		286,598			136,881			—		423,479
Development costs incurred during the period		311,883			51,729			—		363,612
Revisions of previous quantity estimates		304,238			84,013			—		388,251
Changes in production rates, timing, and other		(454,458	)		(45,975	)		—		(500,433	)
Sales of reserves in place		(1,380,077	)		—			—		(1,380,077	)
Purchases of reserves in place		371,265			—			—		371,265
Accretion of discount on reserves at beginning of year before income taxes		468,429			67,036			—		535,465
Net change in income taxes		800,912			30,940			—		831,852
Standardized measure of discounted future net cash flows relating to proved oil and gas reserves, at end of year	$	2,143,861			450,503			—		2,594,364

        The computation of the standardized measure of discounted future net cash flows relating to proved oil and gas reserves at December 31, 2006 was based on weighted average year-end spot natural gas prices of approximately $5.28 per Mcf in the United States and approximately $5.05 per Mcf in Canada, and on weighted average year-end spot oil prices of approximately $51.69 per barrel in the United States and approximately $48.76 per barrel in Canada.

120

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

        None.

Item 9A.    Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.

        We have established disclosure controls and procedures to ensure that material information relating to Forest and its consolidated subsidiaries is made known to the Officers who certify Forest's financial reports and the Board of Directors.

        Our Chief Executive Officer, H. Craig Clark, and our Chief Financial Officer, David H. Keyte, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of the end of the period covered by this annual report on Form 10-K (the "Evaluation Date"). Based on this evaluation, they believe that as of the Evaluation Date our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934 (i) is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms; and (ii) is accumulated and communicated to Forest's management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Changes in Internal Controls over Financial Reporting.

        There has not been any change in our internal control over financial reporting that occurred during our quarterly period ended December 31, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management's Annual Report on Internal Control over Financial Reporting

        Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Exchange Act, Rules 13a-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control—Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2008. The effectiveness of our internal control over financial reporting as of December 31, 2008 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Item 9B.    Other Information.

        None.

121

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of Forest Oil Corporation

        We have audited Forest Oil Corporation's internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Forest Oil Corporation's management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company's internal control over financial reporting based on our audit.

        We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

        A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        In our opinion, Forest Oil Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on the COSO criteria.

        We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Forest Oil Corporation and subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2008 and our report dated February 26, 2009 expressed an unqualified opinion thereon.

Ernst & Young LLP                        

Denver, Colorado
February 26, 2009

122

PART III

Item 10.    Directors, Executive Officers and Corporate Governance.

        The names of the executive officers of Forest and their titles, ages, and biographies required by this Item are incorporated by reference to the information set forth under the caption "Executive Officers of Forest" included in Part I, Item 4A of this Form 10-K.

        The following information will be included in Forest's Notice of Annual Meeting of Shareholders and Proxy Statement (the "Proxy Statement") to be filed with the SEC within 120 days after Forest's fiscal year end of December 31, 2008 and is incorporated herein by reference:

•

Information concerning Forest's directors is incorporated by reference to the information under the caption "Proposal No. 1—Election of Directors"

•

Information concerning Forest's procedures for recommending nominees to the Board and Forest's Audit Committee and designated "audit committee financial expert" is set forth under the caption "Corporate Governance Principles and Information about the Board and its Committees"

•

Information about Forest's code of ethics for directors, officers, and employees is set forth under the caption "Corporate Governance Principles and Information about the Board and its Committees"

•

Information about compliance with Section 16(a) of the Securities Exchange Act of 1934, as amended, is set forth under the caption "Section 16(a) Beneficial Ownership Reporting Compliance"

Item 11.    Executive Compensation.

        Information regarding Forest's compensation of its named executive officers is set forth under the captions "Executive Compensation" in the Proxy Statement, which information is incorporated herein by reference. Information regarding Forest's compensation of its directors is set forth under the caption "Executive Compensation—Director Compensation" in the Proxy Statement, which information is incorporated herein by reference. See also "Executive Compensation—Compensation Committee Report, and Corporate Governance Principles and Information About the Board and Its Committees—Compensation Committee Interlocks and Insider Participation" for additional information, which information is incorporated herein by reference.

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

        Information regarding security ownership of certain beneficial owners, directors, and executive officers is set forth under the caption "Security Ownership of Certain Beneficial Owners and Management" in the Proxy Statement, which information is incorporated herein by reference.

        Information regarding Forest's equity compensation plans is set forth under the caption "Equity Compensation Plan Information" in the Proxy Statement, which information is incorporated herein by reference.

Item 13.    Certain Relationships and Related Transactions, and Director Independence.

        Information regarding certain relationships and related transactions is set forth under the caption "Transactions with Related Persons, Promoters and Certain Control Persons," and information regarding director independence is set forth under the caption "Corporate Governance Principles and

123

Information about the Board and its Committees—Board Independence" included in the Proxy Statement, which information is incorporated herein by reference.

Item 14.    Principal Accounting Fees and Services.

        Information regarding principal auditor fees and services is set forth under the captions "Principal Accountant Fees and Services" and "Report of the Audit Committee" in the Proxy Statement, which information is incorporated herein by reference.

PART IV

Item 15.    Exhibits and Financial Statement Schedules.

(a)

The following documents are filed as part of this report or are incorporated by reference:

(1)

Financial Statements:

1.

Report of Independent Registered Public Accounting Firm

2.

Consolidated Balance Sheets—December 31, 2008 and 2007

3.

Consolidated Statements of Operations—Years Ended December 31, 2008, 2007, and 2006

4.

Consolidated Statements of Shareholders' Equity—Years Ended December 31, 2008, 2007, and 2006

5.

Consolidated Statements of Cash Flows—Years Ended December 31, 2008, 2007, and 2006

6.

Notes to Consolidated Financial Statements—Years Ended December 31, 2008, 2007, and 2006

(2)

Financial Statement Schedules: All schedules have been omitted because the information is either not required or is set forth in the financial statements or the notes thereto.

(3)

Exhibits: See the Index of Exhibits listed in Item 15(b) hereof for a list of those exhibits filed as part of this Form 10-K.

124

(b)

Index of Exhibits:

Exhibit Number			Description
	3.1		Restated Certificate of Incorporation of Forest Oil Corporation dated October 14, 1993, incorporated herein by reference to Exhibit 3(i) to Form 10-Q for Forest Oil Corporation for the quarter ended September 30, 1993 (File No. 0-4597).
	3.2		Certificate of Amendment of the Restated Certificate of Incorporation, dated as of July 20, 1995, incorporated herein by reference to Exhibit 3(i)(a) to Form 10-Q for Forest Oil Corporation for the quarter ended June 30, 1995 (File No. 0-4597).
	3.3		Certificate of Amendment of the Certificate of Incorporation, dated as of July 26, 1995, incorporated herein by reference to Exhibit 3(i)(b) to Form 10-Q for Forest Oil Corporation for the quarter ended June 30, 1995 (File No. 0-4597).
	3.4		Certificate of Amendment of the Certificate of Incorporation dated as of January 5, 1996, incorporated herein by reference to Exhibit 3(i)(c) to Forest Oil Corporation Registration Statement on Form S-2 (File No. 33-64949).
	3.5		Certificate of Amendment of the Certificate of Incorporation dated as of December 7, 2000, incorporated herein by reference to Exhibit 3(i)(d) to Form 10-K for Forest Oil Corporation for the year ended December 31, 2000 (File No. 001-13515).
	3.6		Bylaws of Forest Oil Corporation Restated as of February 14, 2001, as amended by Amendments No. 1, No. 2, No. 3, and No. 4, incorporated herein by reference to Exhibit 3.1 to Form 10-Q for Forest Oil Corporation for the quarter ended June 30, 2008 (File No. 001-13515).
	4.1		Indenture dated December 7, 2001 between Forest Oil Corporation and State Street Bank and Trust Company, including the form of notes issued thereunder, incorporated herein by reference to Exhibit 4.5 to Forest Oil Corporation Registration Statement on Form S-4 dated February 6, 2002 (File No. 333-82254).
	4.2		Indenture dated as of April 25, 2002 between Forest Oil Corporation and State Street Bank and Trust Company, including the form of notes issued thereunder, incorporated herein by reference to Exhibit 4.6 to Forest Oil Corporation Registration Statement on Form S-4 dated June 11, 2002 (File No. 333-90220).
	4.3		Indenture dated as of June 6, 2007 between Forest Oil Corporation and U.S. Bank National Association, including the form of notes issued thereunder, incorporated herein by reference to Exhibit 4.1 to Form 10-Q for Forest Oil Corporation for the quarter ended June 30, 2007 (File No. 001-13515).
	4.4	†	Indenture dated as of February 17, 2009 between Forest Oil Corporation, Forest Oil Permian Corporation, and U.S. Bank National Association, including the form of notes issued thereunder.
	4.5		Registration Rights Agreement, dated as of July 10, 2000, by and between Forest Oil Corporation and the other signatories thereto, incorporated herein by reference to Exhibit 4.15 to Forest Oil Corporation Registration Statement on Form S-4, dated November 6, 2000 (File No. 333-49376).
	4.6		Registration Rights Agreement by and among Forest Oil Corporation, Forest Oil Permian Corporation and Banc of America Securities LLC, for itself and on behalf of the several Initial Purchasers dated as of May 22, 2008, incorporated herein by reference to Exhibit 4.1 to Form 10-Q for Forest Oil Corporation for the quarter ended June 30, 2008 (File No. 001-13515).

125

Exhibit Number			Description
	4.7	†	Registration Rights Agreement by and among Forest Oil Corporation, Forest Oil Permian Corporation and J.P.Morgan Securities Inc., Banc of America Securities LLC, BNP Paribas Securities Corp., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., TD Securities (USA) Inc., Scotia Capital (USA) Inc. and Wachovia Capital Markets, LLC dated February 17, 2009.
	4.8		First Amended and Restated Rights Agreement, dated as of October 17, 2003, between Forest Oil Corporation and Mellon Investor Services LLC, incorporated herein by reference to Exhibit 4.1 to Form 8-K for Forest Oil Corporation, dated October 17, 2003 (File No. 001-13515).
	4.9		Mortgage, Deed of Trust, Assignment, Security Agreement, Financing Statement and Fixture Filing from Forest Oil Corporation to Robert C. Mertensotto, trustee, and Gregory P. Williams, trustee (Utah), and The Chase Manhattan Bank, as Global Administrative Agent, dated as of December 7, 2000, incorporated herein by reference to Exhibit 4.13 to Form 10-K for Forest Oil Corporation for the year ended December 31, 2000 (File No. 001-13515).
	4.10		U.S. Credit Agreement—Second Amended and Restated Credit Agreement dated as of June 6, 2007 among Forest Oil Corporation, each of the lenders that is party thereto, Bank of America, N.A. and Citibank, N.A., as Co-Global Syndication Agents, BNP Paribas, BMO Capital Markets Financing, Inc., Credit Suisse, Cayman Islands Branch, and Deutsche Bank Securities, Inc., as Co-U.S. Documentation Agents, and JPMorgan Chase Bank, N.A., as Global Administrative Agent, incorporated herein by reference to Exhibit 4.4 to Form 10-Q for Forest Oil Corporation for the quarter ended June 30, 2007 (File No. 001-13515).
	4.11		Canadian Credit Agreement—Second Amended and Restated Credit Agreement dated as of June 6, 2007 among Canadian Forest Oil Ltd., each of the lenders party thereto, Bank of America, N.A. and Citibank, N.A., as Co-Global Syndication Agents, Bank of Montreal and The Toronto Dominion Bank, as Co-Canadian Documentation Agents, JPMorgan Chase Bank, N.A., Toronto Branch, as Canadian Administrative Agent, and JPMorgan Chase Bank, N.A. as Global Administrative Agent, incorporated herein by reference to Exhibit 4.5 to Form 10-Q for Forest Oil Corporation for the quarter ended June 30, 2007 (File No. 001-13515).
	4.12		First Amendment dated May 9, 2008 to Second Amended and Restated Combined Credit Agreements dated June 6, 2007, among Forest Oil Corporation, Canadian Forest Oil Ltd., each of the lenders party thereto, JPMorgan Chase Bank, N.A., as Global Administrative Agent, and JPMorgan Chase Bank N.A., Toronto Branch, as Canadian Administrative Agent, incorporated by reference to Exhibit 10.1 to Form 8-K for Forest Oil Corporation dated May 9, 2008 (File No. 001-13515).
	10.1	*	Forest Oil Corporation 1996 Stock Incentive Plan and Option Agreement, incorporated herein by reference to Exhibit 4.1 to Registration Statement on Form S-8 for Forest Oil Corporation dated June 7, 1996 (File No. 0-4597).
	10.2	*	First Amendment to Forest Oil Corporation 1996 Stock Incentive Plan, incorporated herein by reference to Exhibit 10.1 to Form 10-Q for Forest Oil Corporation for the quarter ended June 30, 2001 (File No. 001-13515).
	10.3	*	Second Amendment to Forest Oil Corporation 1996 Stock Incentive Plan, incorporated herein by reference to Exhibit 10.2 to Form 10-Q for Forest Oil Corporation for the quarter ended June 30, 2001 (File No. 001-13515).
	10.4	*	Amendment No. 3 to Forest Oil Corporation 1996 Stock Incentive Plan dated December 6, 2005, incorporated herein by reference to Exhibit 10.4 to Form 10-K for Forest Oil Corporation for the year ended December 31, 2005 (File No. 001-13515).

126

Exhibit Number			Description
	10.5	*	Forest Oil Corporation 2001 Stock Incentive Plan, incorporated herein by reference to Exhibit 4.1 to Registration Statement on Form S-8 for Forest Oil Corporation dated June 6, 2001 (File No. 333-62408).
	10.6	*	Amendment No. 1 to Forest Oil Corporation's 2001 Stock Incentive Plan, incorporated herein by reference to Exhibit 10.1 to Form 10-Q for Forest Oil Corporation for the quarter ended June 30, 2003 (File No. 001-13515).
	10.7	*	Amendment No. 2 to Forest Oil Corporation's 2001 Stock Incentive Plan, incorporated herein by reference to Exhibit 10.1 to Form 10-Q for Forest Oil Corporation for the quarter ended March 31, 2004 (File No. 001-13515).
	10.8	*	Amendment No. 3 to Forest Oil Corporation 2001 Stock Incentive Plan, dated January 10, 2006, incorporated herein by reference to Exhibit 10.8 to Form 10-K for Forest Oil Corporation for the year ended December 31, 2005 (File No. 001-13515).
	10.9	*	Amendment No. 4 to Forest Oil Corporation 2001 Stock Incentive Plan dated June 5, 2007, incorporated herein by reference to Exhibit 10.1 to Form 10-Q for Forest Oil Corporation for the quarter ended September 30, 2007 (File No. 001-13515).
	10.10	*	Form of employee Stock Option Agreement, incorporated herein by reference to Exhibit 4.2 to Registration Statement on Form S-8 for Forest Oil Corporation dated June 6, 2001 (File No. 333-62408).
	10.11	*	Form of Non-Employee Director Stock Option Agreement, incorporated herein by reference to Exhibit 4.3 to Registration Statement on Form S-8 for Forest Oil Corporation dated June 6, 2001 (File No. 333-62408).
	10.12	*	Form of Restricted Stock Agreement, incorporated herein by reference to Exhibit 10.6 to Form 10-Q for Forest Oil Corporation for the quarter ended September 30, 2004 (File No. 001-13515).
	10.13	*	Form of Restricted Stock Agreement, incorporated herein by reference to Exhibit 10.12 to Form 10-K for Forest Oil Corporation for the year ended December 31, 2005 (File No. 001-13515).
	10.14	*	Form of Restricted Stock Agreement pursuant to the Forest Oil Corporation 2001 Stock Incentive Plan, incorporated herein by reference to Exhibit 10.1 to Form 10-Q for Forest Oil Corporation for the quarter ended June 30, 2007 (File No. 001-13515).
	10.15	*	Form of Phantom Stock Unit Agreement pursuant to the Forest Oil Corporation 2001 Stock Incentive Plan, as amended, incorporated herein by reference to Exhibit 10.2 to Form 10-Q for Forest Oil Corporation for the quarter ended June 30, 2007 (File No. 001-13515).
	10.16	*	Forest Oil Corporation 2007 Stock Incentive Plan, incorporated by reference to Annex E to Forest Oil Corporation's Registration Statement on Form S-4, dated April 30, 2007 (File No. 333-140532).
	10.17	*	Amendment No. 1 to Forest Oil Corporation 2007 Stock Incentive Plan, incorporated by reference to Exhibit 10.1 to Form 10-Q for Forest Oil Corporation for the quarter ended June 30, 2008 (File No. 001-13515).
	10.18	*	Form of Restricted Stock Agreement pursuant to the Forest Oil Corporation 2007 Stock Incentive Plan, incorporated herein by reference to Exhibit 10.3 to Form 10-Q for Forest Oil Corporation for the quarter ended June 30, 2007 (File No. 001-13515).
	10.19	*	Form of Non-Employee Director Restricted Stock Agreement pursuant to the Forest Oil Corporation 2007 Stock Incentive Plan, incorporated herein by reference to Exhibit 10.1 to Form 10-Q for Forest Oil Corporation for the quarter ended March 31, 2008 (File No. 001-13515).
	10.20	*	Form of Phantom Stock Unit Agreement pursuant to the Forest Oil Corporation 2007 Stock Incentive Plan, incorporated herein by reference to Exhibit 10.4 to Form 10-Q for Forest Oil Corporation for the quarter ended June 30, 2007 (File No. 001-13515).

127

Exhibit Number			Description
	10.21	*	Form of Restricted Stock Agreement pursuant to the Forest Oil Corporation 2001 and 2007 Stock Incentive Plans, incorporated by reference to Exhibit 10.2 to Form 10-Q for Forest Oil Corporation for the quarter ended June 30, 2008 (File No. 001-13515).
	10.22	*	Form of Phantom Stock Unit Agreement pursuant to the Forest Oil Corporation 2001 and 2007 Stock Incentive Plans, incorporated by reference to Exhibit 10.3 to Form 10-Q for Forest Oil Corporation for the quarter ended June 30, 2008 (File No. 001-13515).
	10.23	*	Form of Non-Employee Director Phantom Stock Unit Agreement pursuant to the Forest Oil Corporation 2007 Stock Incentive Plan, incorporated by reference to Exhibit 10.4 to Form 10-Q for Forest Oil Corporation for the quarter ended June 30, 2008 (File No. 001-13515).
	10.24	*	Form of Severance Agreement for Grandfathered Executive Officer, incorporated herein by reference to Exhibit 10.1 to Form 8-K for Forest Oil Corporation dated December 17, 2007 (File No. 001-13515).
	10.25	*	Form of Severance Agreement for Senior Vice President, incorporated herein by reference to Exhibit 10.2 to Form 8-K for Forest Oil Corporation dated December 17, 2007 (File No. 001-13515).
	10.26	*	Form of Severance Agreement for Vice President, incorporated herein by reference to Exhibit 10.3 to Form 8-K for Forest Oil Corporation dated December 17, 2007 (File No. 001-13515).
	10.27	*	Form of Severance Agreement for Grandfathered Vice President, incorporated herein by reference to Exhibit 10.4 to Form 8-K for Forest Oil Corporation dated December 17, 2007 (File No. 001-13515).
	10.28	*	Form of Severance Agreement for Grandfathered Vice President, incorporated herein by reference to Exhibit 10.4 to Form 8-K for Forest Oil Corporation dated December 17, 2007 (File No. 001-13515).
	10.29	†	Form of Amendment to Form of Severance Agreement for Senior Vice President.
	10.30	†	Form of Amendment to Form of Severance Agreement for Grandfathered Executive Officer.
	10.31	*	Forest Oil Corporation Pension Trust Agreement dated as of January 1, 2002 by and between Forest Oil Corporation and the trustees named therein or their successors, incorporated herein by reference to Exhibit 10.1 to Form 10-Q for Forest Oil Corporation for the quarter ended September 30, 2002, dated November 14, 2002 (File No. 001-13515).
	10.32	*	First Amendment to Forest Oil Corporation Pension Trust Agreement as Amended and Restated January 1, 2002, effective as of May 10, 2005, incorporated herein by reference to Exhibit 10.1 to Form 10-Q for Forest Oil Corporation for the quarter ended June 30, 2005 (File No. 001-13515).
	10.33	*	Second Amendment to Forest Oil Corporation Pension Trust Agreement as Amended and Restated January 1, 2002, effective as of May 10, 2006, incorporated herein by reference to Exhibit 10.1 to Form 10-Q for Forest Oil Corporation dated August 9, 2006 (File No. 001-13515).
	10.34	*	Forest Oil Corporation Amended and Restated Salary Deferral Compensation Plan, incorporated herein by reference to Exhibit 10.3 to Form 10-Q for Forest Oil Corporation for the quarter ended September 30, 2003 (File No. 001-13515).
	10.35	*	First Amendment to the Forest Oil Corporation Amended and Restated Salary Deferral Compensation Plan, effective as of December 31, 2005, incorporated herein by reference to Exhibit 10.22 to Form 10-K for Forest Oil Corporation for the year ended December 31, 2005 (File No. 001-13515).

128

Exhibit Number			Description
	10.36	*	Amendment to Forest Oil Corporation Salary Deferral Deferred Compensation Plan dated August 30, 2007, incorporated herein by reference to Exhibit 10.2 to Form 10-Q for Forest Oil Corporation for the quarter ended September 30, 2007 (File No. 001-13515).
	10.37	*	Forest Oil Corporation 2005 Salary Deferred Compensation Plan, effective as of December 31, 2004, incorporated herein by reference to Exhibit 10.24 to Form 10-K for Forest Oil Corporation for the year ended December 31, 2004 (File No. 001-13515).
	10.38	*	Forest Oil Corporation Amended and Restated 2005 Salary Deferred Compensation Plan, effective as of December 31, 2004, incorporated herein by reference to Exhibit 10.21 to Form 10-K for Forest Oil Corporation for the year ended December 31, 2005 (File No. 001-13515).
	10.39	*	Amendment to Forest Oil Corporation Amended and Restated 2005 Salary Deferred Compensation Plan dated August 30, 2007, incorporated herein by reference to Exhibit 10.2 to Form 10-Q for Forest Oil Corporation for the quarter ended September 30, 2007 (File No. 001-13515).
	10.40	*	First Amendment to Forest Oil Corporation Executive Deferred Compensation Plan as Amended and Restated Effective as of January 1, 2005, incorporated herein by reference to Exhibit 10.2 to Form 10-Q for Forest Oil Corporation for the quarter ended September 30, 2007 (File No. 001-13515).
	10.41	†	Forest Oil Corporation Executive Deferred Compensation Plan as Amended and Restated, effective as of December 1, 2008.
	10.42		Agreement and Plan of Merger dated as of September 9, 2005 among Forest Oil Corporation, SML Wellhead Corporation, Mariner Energy, Inc. and MEI Sub, Inc., incorporated herein by reference to Exhibit 10.1 to Form 10-Q for Forest Oil Corporation for the quarter ended September 30, 2005 (No. 001-13515).
	10.43		Agreement and Plan of Merger by and among Forest Oil Corporation, MJCO Corporation and The Houston Exploration Company dated as of January 7, 2007, incorporated herein by reference to Exhibit 2.1 to Form 8-K for Forest Oil Corporation dated January 7, 2007 (File No. 001-13515).
	10.44		Membership Interest Purchase Agreement dated as of May 24, 2007, among Forest Alaska Operating LLC, Forest Oil Corporation, and Pacific Energy Resources Ltd., incorporated herein by reference to Exhibit 10.1 to Form 8-K for Forest Oil Corporation dated May 28, 2007 (File No. 001-13515).
	10.45		Asset Sales Agreement dated as of May 24, 2007, between Forest Oil Corporation and Pacific Energy Resources Ltd., incorporated herein by reference to Exhibit 10.2 to Form 8-K for Forest Oil Corporation dated May 28, 2007 (File No. 001-13515).
	10.46		Amendment No. 1 to Membership Interest Purchase Agreement dated July 31, 2007, among Forest Alaska Holding LLC, Forest Alaska Operating LLC, Forest Oil Corporation, and Pacific Energy Resources Ltd., incorporated herein by reference to Exhibit 10.1 to Form 8-K for Forest Oil Corporation dated July 31, 2007 (File No. 001-13515).
	10.47		Amendment No. 1 to Asset Sales Agreement dated July 31, 2007, between Forest Oil Corporation and Pacific Energy Resources Ltd., incorporated herein by reference to Exhibit 10.2 to Form 8-K for Forest Oil Corporation dated July 31, 2007 (File No. 001-13515).
	10.48		Asset Purchase and Sale Agreement dated August 15, 2008, between Forest Oil Corporation and Cordillera Texas, L.P., incorporated herein by reference to Exhibit 10.1 to Form 8-K for Forest Oil Corporation dated September 30, 2008 (File No. 001-13515).

129

Exhibit Number			Description
	10.49		Amendment No. 1 to Asset Purchase and Sale Agreement dated August 15, 2008, between Forest Oil Corporation and Cordillera Texas, L.P., incorporated herein by reference to Exhibit 10.2 to Form 8-K for Forest Oil Corporation dated September 30, 2008 (File No. 001-13515).
	10.50		Forest Oil Corporation 2008 Annual Incentive Plan, incorporated herein by reference to Exhibit 10.35 to Form 10-K for Forest Oil Corporation for the year ended December 31, 2007 (File No. 001-13515).
	14.1		Forest Oil Corporation Proper Business Practices Policy Revised as of January 21, 2005, incorporated by reference to Form 10-K for Forest Oil Corporation for the year ended December 31, 2007 (File No. 001-13515).
	21.1	†	List of Subsidiaries of Registrant.
	23.1	†	Consent of Ernst & Young LLP.
	23.2	†	Consent of DeGolyer and MacNaughton.
	24.1	†	Powers of Attorney (included on the signature pages hereof).
	31.1	†	Certification of Principal Executive Officer of Forest Oil Corporation as required by Rule 13a-14(a) of the Securities Act of 1934.
	31.2	†	Certification of Principal Financial Officer of Forest Oil Corporation as required by Rule 13a-14(a) of the Securities Act of 1934.
	32.1	**	Certification of Chief Executive Officer of Forest Oil Corporation pursuant to 18 U.S.C. §1350.
	32.2	**	Certification of Chief Financial Officer of Forest Oil Corporation pursuant to 18 U.S.C. §1350.

*

Contract or compensatory plan or arrangement in which directors and/or officers participate.

**

Not considered to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section.

†

Indicates Exhibits filed with this Form 10-K.

130

SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: March 2, 2009	FOREST OIL CORPORATION (Registrant)
	By:	/s/ H. CRAIG CLARK H. Craig Clark President and Chief Executive Officer

Power of Attorney

        The officers and directors of Forest Oil Corporation, whose signatures appear below, hereby constitute and appoint H. Craig Clark, David H. Keyte, Cyrus D. Marter IV, and Victor A. Wind and each of them (with full power to each of them to act alone), the true and lawful attorney-in-fact to sign and execute, on behalf of the undersigned, any amendment(s) to this Form 10-K Annual Report for the year ended December 31, 2008, and any instrument or document filed as part of, as an exhibit to or in connection with any amendment, and each of the undersigned does hereby ratify and confirm as his own act and deed all that said attorneys shall do or cause to be done by virtue thereof.

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.

Signatures	Title	Date
/s/ H. CRAIG CLARK H. Craig Clark	President and Chief Executive Officer and Director (Principal Executive Officer)	March 2, 2009
/s/ DAVID H. KEYTE David H. Keyte	Executive Vice President and Chief Financial Officer (Principal Financial Officer)	March 2, 2009
/s/ VICTOR A. WIND Victor A. Wind	Corporate Controller (Principal Accounting Officer)	March 2, 2009
/s/ JAMES D. LIGHTNER James D. Lightner	Chairman of the Board	March 2, 2009
/s/ WILLIAM L. BRITTON William L. Britton	Director	March 2, 2009
/s/ LOREN K. CARROLL Loren K. Carroll	Director	March 2, 2009
/s/ DOD. A. FRASER Dod. A. Fraser	Director	March 2, 2009
/s/ JAMES H. LEE James H. Lee	Director	March 2, 2009
/s/ PATRICK R. MCDONALD Patrick R. McDonald	Director	March 2, 2009

131

Index to Exhibits

Exhibit Number			Description
	4.4		Indenture dated as of February 17, 2009 between Forest Oil Corporation, Forest Oil Permian Corporation, and U.S. Bank National Association, including the form of notes issued thereunder.
	4.7		Registration Rights Agreement by and among Forest Oil Corporation, Forest Oil Permian Corporation and J.P.Morgan Securities Inc., Banc of America Securities LLC, BNP Paribas Securities Corp., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., TD Securities (USA) Inc., Scotia Capital (USA) Inc. and Wachovia Capital Markets, LLC dated February 17, 2009.
	10.29		Form of Amendment to Form of Severance Agreement for Senior Vice President.
	10.30		Form of Amendment to Form of Severance Agreement for Grandfathered Executive Officer.
	10.41		Forest Oil Corporation Executive Deferred Compensation Plan as Amended and Restated, effective as of December 1, 2008.
	21.1		List of Subsidiaries of Registrant.
	23.1		Consent of Ernst & Young LLP.
	23.2		Consent of DeGolyer and MacNaughton.
	31.1		Certification of Principal Executive Officer of Forest Oil Corporation as required by Rule 13a-14(a) of the Securities Act of 1934.
	31.2		Certification of Principal Financial Officer of Forest Oil Corporation as required by Rule 13a-14(a) of the Securities Act of 1934.
	32.1	*	Certification of Chief Executive Officer of Forest Oil Corporation pursuant to 18 U.S.C. §1350.
	32.2	*	Certification of Chief Financial Officer of Forest Oil Corporation pursuant to 18 U.S.C. §1350.

*

Furnished herewith.

132

EX-4.4

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Exhibit 4.4

EXECUTION COPY

FOREST OIL CORPORATION

8¹/2% Senior Notes due 2014

INDENTURE

Dated as of February 17, 2009

U.S. Bank National Association

Trustee

Table of Contents

			Page
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE				1
	SECTION 1.01.	DEFINITIONS		1
	SECTION 1.02.	OTHER DEFINITIONS		20
	SECTION 1.03.	INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT		20
	SECTION 1.04.	RULES OF CONSTRUCTION		21
ARTICLE II THE SECURITIES				21
	SECTION 2.01.	FORM, DATING AND TERMS		21
	SECTION 2.02.	EXECUTION AND AUTHENTICATION		26
	SECTION 2.03.	REGISTRAR AND PAYING AGENT		28
	SECTION 2.04.	PAYING AGENT TO HOLD MONEY IN TRUST		28
	SECTION 2.05.	SECURITYHOLDER LISTS		29
	SECTION 2.06.	TRANSFER AND EXCHANGE		29
	SECTION 2.07.	FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS TO INSTITUTIONAL ACCREDITED INVESTORS		31
	SECTION 2.08.	FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S		33
	SECTION 2.09.	REPLACEMENT SECURITIES		34
	SECTION 2.10.	OUTSTANDING SECURITIES		34
	SECTION 2.11.	TEMPORARY SECURITIES		35
	SECTION 2.12.	CANCELLATION		35
	SECTION 2.13.	DEFAULTED INTEREST		35
	SECTION 2.14.	COMPUTATION OF INTEREST		35
	SECTION 2.15.	CUSIP NUMBERS		35
ARTICLE III REDEMPTION				35
	SECTION 3.01.	NOTICES TO TRUSTEE		35
	SECTION 3.02.	SELECTION OF SECURITIES TO BE REDEEMED		36
	SECTION 3.03.	NOTICE OF REDEMPTION		36
	SECTION 3.04.	EFFECT OF NOTICE OF REDEMPTION		36
	SECTION 3.05.	DEPOSIT OF REDEMPTION PRICE		37
	SECTION 3.06.	SECURITIES REDEEMED IN PART		37
ARTICLE IV COVENANTS				37
	SECTION 4.01.	PAYMENT OF SECURITIES		37
	SECTION 4.02.	SEC REPORTS		37
	SECTION 4.03.	LIMITATION ON INDEBTEDNESS		37
	SECTION 4.04.	LIMITATION ON RESTRICTED PAYMENTS		37
	SECTION 4.05.	LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED SUBSIDIARIES		40
	SECTION 4.06.	LIMITATION ON ASSET SALES		40
	SECTION 4.07.	LIMITATION ON TRANSACTIONS WITH AFFILIATES		43
	SECTION 4.08.	LIMITATION ON THE ISSUANCE AND SALE OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES		44
	SECTION 4.09.	CHANGE OF CONTROL		44
	SECTION 4.10.	LIMITATION ON LIENS		45

i

			Page
	SECTION 4.11.	COMPLIANCE CERTIFICATE		46
	SECTION 4.12.	FURTHER INSTRUMENTS AND ACTS		46
	SECTION 4.13.	FUTURE SUBSIDIARY GUARANTORS		46
	SECTION 4.14.	RESTRICTED AND UNRESTRICTED SUBSIDIARIES		46
	SECTION 4.15.	TERMINATION OF CERTAIN COVENANTS		47
	SECTION 4.16.	REGISTRATION DEFAULT		47
ARTICLE V SUCCESSOR COMPANY				47
	SECTION 5.01.	WHEN COMPANY MAY MERGE OR TRANSFER ASSETS		47
ARTICLE VI DEFAULTS AND REMEDIES				48
	SECTION 6.01.	EVENTS OF DEFAULT		48
	SECTION 6.02.	ACCELERATION		50
	SECTION 6.03.	OTHER REMEDIES		50
	SECTION 6.04.	WAIVER OF PAST DEFAULTS		50
	SECTION 6.05.	CONTROL BY MAJORITY		50
	SECTION 6.06.	LIMITATION ON SUITS		51
	SECTION 6.07.	RIGHTS OF HOLDERS TO RECEIVE PAYMENT		51
	SECTION 6.08.	COLLECTION SUIT BY TRUSTEE		51
	SECTION 6.09.	TRUSTEE MAY FILE PROOFS OF CLAIM		51
	SECTION 6.10.	PRIORITIES		51
	SECTION 6.11.	UNDERTAKING FOR COSTS		52
	SECTION 6.12.	WAIVER OF STAY OR EXTENSION LAWS		52
ARTICLE VII TRUSTEE				52
	SECTION 7.01.	DUTIES OF TRUSTEE		52
	SECTION 7.02.	RIGHTS OF TRUSTEE		53
	SECTION 7.03.	INDIVIDUAL RIGHTS OF TRUSTEE		53
	SECTION 7.04.	TRUSTEE'S DISCLAIMER		53
	SECTION 7.05.	NOTICE OF DEFAULTS		53
	SECTION 7.06.	REPORTS BY TRUSTEE TO HOLDERS		54
	SECTION 7.07.	COMPENSATION AND INDEMNITY		54
	SECTION 7.08.	REPLACEMENT OF TRUSTEE		54
	SECTION 7.09.	SUCCESSOR TRUSTEE BY MERGER		55
	SECTION 7.10.	ELIGIBILITY; DISQUALIFICATION		55
	SECTION 7.11.	PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY		55
ARTICLE VIII DISCHARGE OF INDENTURE; DEFEASANCE				55
	SECTION 8.01.	DISCHARGE OF LIABILITY ON SECURITIES; DEFEASANCE		55
	SECTION 8.02.	CONDITIONS TO DEFEASANCE		56
	SECTION 8.03.	APPLICATION OF TRUST MONEY		57
	SECTION 8.04.	REPAYMENT TO THE COMPANY		57
	SECTION 8.05.	INDEMNITY FOR GOVERNMENT OBLIGATIONS		57
	SECTION 8.06.	REINSTATEMENT		57
ARTICLE IX AMENDMENTS				58
	SECTION 9.01.	WITHOUT CONSENT OF HOLDERS		58
	SECTION 9.02.	WITH CONSENT OF HOLDERS		58
	SECTION 9.03.	COMPLIANCE WITH TRUST INDENTURE ACT		59
	SECTION 9.04.	REVOCATION AND EFFECT OF CONSENTS AND WAIVERS		59

ii

			Page
	SECTION 9.05.	NOTATION ON OR EXCHANGE OF SECURITIES		59
	SECTION 9.06.	TRUSTEE TO SIGN AMENDMENTS		59
ARTICLE X SUBSIDIARY GUARANTEES				60
	SECTION 10.01.	SUBSIDIARY GUARANTEE		60
	SECTION 10.02.	CONTRIBUTION		61
	SECTION 10.03.	SUCCESSORS AND ASSIGNS		61
	SECTION 10.04.	NO WAIVER		62
	SECTION 10.05.	MODIFICATION		62
	SECTION 10.06.	EXECUTION OF SUPPLEMENTAL INDENTURE FOR FUTURE SUBSIDIARY GUARANTORS		62
ARTICLE XI MISCELLANEOUS				62
	SECTION 11.01.	TRUST INDENTURE ACT CONTROLS		62
	SECTION 11.02.	NOTICES		62
	SECTION 11.03.	COMMUNICATION BY HOLDERS WITH OTHER HOLDERS		63
	SECTION 11.04.	CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT		63
	SECTION 11.05.	STATEMENTS REQUIRED IN CERTIFICATE OR OPINION		63
	SECTION 11.06.	WHEN SECURITIES DISREGARDED		63
	SECTION 11.07.	RULES BY TRUSTEE, PAYING AGENT AND REGISTRAR		64
	SECTION 11.08.	LEGAL HOLIDAYS		64
	SECTION 11.09.	GOVERNING LAW		64
	SECTION 11.10.	NO RECOURSE AGAINST OTHERS		64
	SECTION 11.11.	SUCCESSORS		64
	SECTION 11.12.	MULTIPLE ORIGINALS		64
	SECTION 11.13.	TABLE OF CONTENTS; HEADINGS		64
	SECTION 11.14.	CONSENT TO JURISDICTION		64

EXHIBITS
EXHIBIT A	FORM OF INITIAL SECURITY AND ADDITIONAL SECURITY
EXHIBIT B	FORM OF EXCHANGE SECURITY
EXHIBIT C	FORM OF SUPPLEMENTAL INDENTURE

iii

CROSS-REFERENCE TABLE

TIA Section	Indenture Section
310(a)(1)	7.10
(a)(2)	7.10
(a)(3)	N.A.
(a)(4)	N.A.
(b)	7.08; 8.10
(c)	N.A.
311(a)	7.11
(b)	7.11
(c)	N.A.
312(a)	2.06
(b)	11.03
(c)	11.03
313(a)	7.06
(b)(1)	N.A.
(b)(2)	7.06
(c)	11.02
(d)	7.06
314(a)	4.02; 4.11
	11.02
(b)	N.A.
(c)(1)	11.04
(c)(2)	11.04
(c)(3)	N.A.
(d)	N.A.
(e)	11.05
(f)	4.11
315(a)	7.01
(b)	7.05; 11.02
(c)	7.01
(d)	7.01
(e)	6.11
316(a) (last sentence)	11.06
(a)(1)(A)	6.05
(a)(1)(B)	6.04
(a)(2)(A)	N.A.
(b)	6.07
317(a)(1)	6.08
(a)(2)	6.09
(b)	2.05

N. A. means Not Applicable.

Note: This Cross-Reference Table shall not, for any purposes, be deemed to be part of this Indenture.

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        INDENTURE dated as of February 17, 2009, among Forest Oil Corporation, a New York corporation (the "COMPANY"), Forest Oil Permian Corporation, a Delaware corporation, as Subsidiary Guarantor, and U.S. Bank National Association, as Trustee (the "TRUSTEE").

        Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of (i) the Company's 8¹/2% Senior Notes due 2014 (the "Initial Securities"), (ii) if and when issued, additional 8¹/2% Senior Notes due 2014 in unlimited principal amount that may be offered subsequent to the Issue Date (the "Additional Securities"), to be issued, from time to time, in one or more series as provided in this Indenture and (iii) if and when issued in exchange for Initial Securities or any Additional Securities as provided in the Registration Rights Agreement or a similar agreement relating to Initial Securities, the Company's 8¹/2% Senior Notes due 2014 (the "Exchange Securities").

ARTICLE I

DEFINITIONS AND INCORPORATION BY REFERENCE

        SECTION 1.01.    DEFINITIONS.    

        "ADDITIONAL ASSETS" means (a) any Property (other than cash, Permitted Short-Term Investments or securities) used in the Oil and Gas Business or any business ancillary thereto, (b) Investments in any other Person engaged in the Oil and Gas Business or any business ancillary thereto (including the acquisition from third parties of Capital Stock of such Person) as a result of which such other Person becomes a Restricted Subsidiary in compliance with Section 4.14, (c) the acquisition from third parties of Capital Stock of a Restricted Subsidiary or (d) Permitted Business Investments.

        "ADDITIONAL SECURITIES" has the meaning ascribed to it in the second introductory paragraph of this Indenture.

        "ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS" means (without duplication), as of the date of determination, the remainder of: (a) the sum of (i) discounted future net revenues from proved oil and gas reserves of the Company and its Restricted Subsidiaries calculated in accordance with Commission guidelines before any provincial, territorial, state, Federal or foreign income taxes, as estimated by the Company in a reserve report prepared as of the end of the Company's most recently completed fiscal year for which audited financial statements are available, as increased by, as of the date of determination, the estimated discounted future net revenues from (A) estimated proved oil and gas reserves acquired since such year-end, which reserves were not reflected in such year-end reserve report, and (B) estimated oil and gas reserves attributable to upward revisions of estimates of proved oil and gas reserves since such year-end due to exploration, development or exploitation activities, in each case calculated in accordance with Commission guidelines (utilizing the prices utilized in such year-end reserve report), and decreased by, as of the date of determination, the estimated discounted future net revenues from (C) estimated proved oil and gas reserves produced or disposed of since such year-end and (D) estimated oil and gas reserves attributable to downward revisions of estimates of proved oil and gas reserves since such year-end due to changes in geological conditions or other factors which would, in accordance with standard industry practice, cause such revisions, in each case calculated in accordance with Commission guidelines (utilizing the prices utilized in such year-end reserve report); PROVIDED that, in the case of each of the determinations made pursuant to clauses (A) through (D), such increases and decreases shall be as estimated by the Company's petroleum engineers, (ii) the capitalized costs that are attributable to oil and gas properties of the Company and its Restricted Subsidiaries to which no proved oil and gas reserves are attributable, based on the Company's books and records as of a date no earlier than the date of the Company's latest available annual or quarterly financial statements, (iii) the Net Working Capital on a date no earlier than the date of the Company's latest annual or quarterly financial statements and (iv) the greater of (A) the net book value on a date no earlier than the date of the Company's latest annual or quarterly financial statements and (B) the Fair Market Value, as estimated by the Company, of other tangible assets (including, without duplication, Investments in unconsolidated Restricted Subsidiaries) of the

Company and its Restricted Subsidiaries, as of the date no earlier than the date of the Company's latest audited financial statements, minus (b) the sum of (i) minority interests, (ii) any net gas balancing liabilities of the Company and its Restricted Subsidiaries reflected in the Company's latest audited financial statements, (iii) to the extent included in (a)(i) above, the discounted future net revenues, calculated in accordance with Commission guidelines (utilizing the prices utilized in the Company's year-end reserve report), attributable to reserves which are required to be delivered to third parties to fully satisfy the obligations of the Company and its Restricted Subsidiaries with respect to Volumetric Production Payments (determined, if applicable, using the schedules specified with respect thereto) and (iv) the discounted future net revenues, calculated in accordance with Commission guidelines, attributable to reserves subject to Dollar-Denominated Production Payments which, based on the estimates of production and price assumptions included in determining the discounted future net revenues specified in (a)(i) above, would be necessary to fully satisfy the payment obligations of the Company and its Restricted Subsidiaries with respect to Dollar-Denominated Production Payments (determined, if applicable, using the schedules specified with respect thereto). If the Company changes its method of accounting from the full cost method to the successful efforts method or a similar method of accounting, "Adjusted Consolidated Net Tangible Assets" will continue to be calculated as if the Company were still using the full cost method of accounting.

        "AFFILIATE" of any specified Person means any other Person (a) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with such specified Person. For the purposes of this definition, "control," when used with respect to any specified Person, means the power to direct the management and policies of such Person directly or indirectly, whether through the ownership of Voting Stock, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.

        "ASSET SALE" means, with respect to any Person, any transfer, conveyance, sale, lease (other than an operating lease entered into in the ordinary course of business) or other disposition (collectively, "dispositions," and including dispositions pursuant to any consolidation or merger) by such Person in any single transaction or series of transactions of (a) shares of Capital Stock of another Person (including Capital Stock of Restricted Subsidiaries and Unrestricted Subsidiaries) or (b) any other Property of such Person; PROVIDED, HOWEVER, that the term "Asset Sale" shall not include: (i) the disposition of Permitted Short-Term Investments, inventory, accounts receivable, surplus or obsolete equipment or other Property (excluding the disposition of oil and gas in place and other interests in real property unless made in connection with a Permitted Business Investment) in the ordinary course of business; (ii) the abandonment, assignment, lease, sublease or farm-out of oil and gas properties, or the forfeiture or other disposition of such properties pursuant to standard form operating agreements, in each case in the ordinary course of business in a manner that is customary in the Oil and Gas Business; (iii) the disposition of Property received in settlement of debts owing to such Person as a result of foreclosure, perfection or enforcement of any Lien or debt, which debts were owing to such Person in the ordinary course of its business; (iv) any disposition that constitutes a Restricted Payment made in compliance with Section 4.04; (v) when used with respect to the Company, any disposition of all or substantially all of the Property of such Person permitted pursuant to Article V; (vi) the disposition of any Property by such Person to the Company or a Restricted Subsidiary; (vii) the disposition of any asset with a Fair Market Value since the Issue Date of less than $10,000,000; (viii) any Production Payments and Reserve Sales; PROVIDED that any such Production Payments and Reserve Sales, other than incentive compensation programs on terms that are reasonably customary in the Oil and Gas Business for geologists, geophysicists and other providers of technical services to the Company or a Restricted Subsidiary, shall have been created, incurred, issued, assumed or Guaranteed in connection with the financing of, and within 60 days after the acquisition of, the Property that is subject thereto; (ix) the creation of a Permitted Lien and dispositions in connection with Permitted Liens; (x) dispositions of receivables in connection with the compromise, settlement or collection thereof in the ordinary course of business or in bankruptcy or similar proceedings and

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exclusive of factoring or similar arrangements; (xi) a surrender or waiver of contract rights or the settlement, release or surrender of contract, tort or other claims of any kind; or (xii) the licensing or sublicensing of intellectual property or other general intangibles and licenses, leases or subleases of other property in the ordinary course of business which do not materially interfere with the business of the Company and its Restricted Subsidiaries.

        "AVERAGE LIFE" means, with respect to any Indebtedness or Preferred Stock, at any date of determination, the quotient obtained by dividing (a) the sum of the products of (i) the number of years (and any portion thereof) from the date of determination to the date or dates of each successive scheduled principal payment (including any sinking fund or mandatory redemption payment requirements) of such Indebtedness or redemption or similar payment with respect to such Preferred Stock multiplied by (ii) the amount of each such principal payment by (b) the sum of all such payments.

        "BANK CREDIT FACILITIES" means, with respect to any Person, one or more debt facilities or commercial paper facilities with banks or other institutional lenders (including pursuant to (1) the Second Amended and Restated Credit Agreement dated as of June 6, 2007 among the Company, each of the lenders that is party thereto, Bank of America, N.A. and Citibank, N.A., as Co-Global Syndication Agents, BNP Paribas, BMO Capital Markets Financing, Inc., Credit Suisse, Cayman Islands Branch, and Deutsche Bank Securities Inc., as Co-U.S. Documentation Agents, and JPMorgan Chase Bank, N.A., as Global Administrative Agent (the "U.S. Credit Agreement"); (2) the Second Amended and Restated Credit Agreement dated as of June 6, 2007 among Canadian Forest Oil Ltd., each of the subsidiary borrowers from time to time party thereto, each of the lenders party thereto, Bank of America, N.A. and Citibank, N.A., as Co-Global Syndication Agents, Bank of Montreal and The Toronto Dominion Bank, as Co-Canadian Documentation Agents, JPMorgan Chase Bank, N.A., Toronto Branch, as Canadian Administrative Agent, and JPMorgan Chase Bank, N.A. as Global Administrative Agent (the "Canadian Credit Agreement"); and (3) in each case, as amended by the First Amendment to Second Amended and Restated Combined Credit Agreements dated as of May 9, 2008 among the Company, Canadian Forest Oil Ltd. and each other subsidiary of Canadian Forest Oil Ltd. which becomes a Borrower (as defined in the Canadian Credit Agreement) under the Canadian Credit Agreement, each of the lenders that is a signatory to, or which becomes a signatory to, the U.S. Credit Agreement, each of the lenders that is a signatory to, or which becomes a signatory to, the Canadian Credit Agreement, JPMorgan Chase Bank, N.A., Toronto Branch, as Canadian Administrative Agent and JPMorgan Chase Bank, N.A., as Global Administrative Agent, and the other Agents party thereto) providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or trade letters of credit, together with any extensions, revisions, restatements, refinancings or replacements thereof by a lender or syndicate of lenders.

        "BOARD OF DIRECTORS" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of such Board.

        "BUSINESS DAY" means each day which is not a Legal Holiday.

        "CANADIAN SUBSIDIARY" means a Subsidiary organized under the laws of Canada or any province thereof.

        "CAPITAL LEASE OBLIGATION" means any obligation which is required to be classified and accounted for as a capital lease obligation in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP, and the Stated Maturity thereof shall be the date of the last payment date of rent or any other amount due in respect of such obligation.

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        "CAPITAL STOCK" in any Person means any and all shares, interests, participations or other equivalents in the equity interest (however designated) in such Person and any rights (other than debt securities convertible into an equity interest), warrants or options to subscribe for or to acquire an equity interest in such Person.

        "CHANGE OF CONTROL" means the occurrence of any of the following events:

        (a)   any "person" or "group" (within the meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange Act or any successor provision to either of the foregoing, including any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act), becomes (other than as a result of a merger or consolidation) the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person will be deemed to have "beneficial ownership" of all shares that any such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time) of more than 50% of the total voting power of all classes of the Voting Stock of the Company or currently exercisable warrants or options to acquire such Voting Stock;

        (b)   the sale, lease, conveyance or transfer of all or substantially all the assets of the Company and the Restricted Subsidiaries taken as a whole (other than to any Wholly Owned Subsidiary) shall have occurred;

        (c)   the shareholders of the Company shall have approved any plan of liquidation or dissolution of the Company;

        (d)   the Company consolidates with or merges into another Person or any Person consolidates with or merges into the Company in any such event pursuant to a transaction in which the outstanding Voting Stock of the Company is reclassified into or exchanged for cash, securities or other property, other than any such transaction where the outstanding Voting Stock of the Company is reclassified into or exchanged for Voting Stock of the surviving corporation that is Capital Stock and the holders of the Voting Stock of the Company immediately prior to such transaction own, directly or indirectly, not less than a majority of the Voting Stock of the surviving corporation immediately after such transaction in substantially the same proportion as before the transaction (for purposes of this clause (d), the holders of the Voting Stock immediately prior to such transaction shall be deemed to beneficially own any Voting Stock of a specified corporation held by a parent corporation, if the holders of the Voting Stock immediately prior to such transaction are the beneficial owners (as defined in clause (a) above), directly or indirectly, of more than 50% of the voting power of the Voting Stock of such parent corporation); or

        (e)   during any period of two consecutive years, individuals who at the beginning of such period constituted the Company's Board of Directors (together with any new directors whose election or appointment by such Board or whose nomination for election by the shareholders of the Company was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Company's Board of Directors then in office.

        "CODE" means the Internal Revenue Code of 1986, as amended.

        "COMPANY" means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor.

        "CONSOLIDATED INTEREST COVERAGE RATIO" means, as of the date of the transaction giving rise to the need to calculate the Consolidated Interest Coverage Ratio (the "Transaction Date"), the ratio of (a) the aggregate amount of EBITDA of the Company and its consolidated Restricted Subsidiaries for the four full fiscal quarters immediately prior to the Transaction Date for which

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financial statements are available to (b) the aggregate Consolidated Interest Expense of the Company and its Restricted Subsidiaries that is anticipated to accrue during a period consisting of the fiscal quarter in which the Transaction Date occurs and the three fiscal quarters immediately subsequent thereto (based upon the pro forma amount and maturity of, and interest payments in respect of, Indebtedness of the Company and its Restricted Subsidiaries expected by the Company to be outstanding on the Transaction Date), assuming for the purposes of this measurement the continuation of market interest rates prevailing on the Transaction Date and base interest rates in respect of floating interest rate obligations equal to the base interest rates on such obligations in effect as of the Transaction Date; PROVIDED that if the Company or any of its Restricted Subsidiaries is a party to any Interest Rate Protection Agreement which would have the effect of changing the interest rate on any Indebtedness of the Company or any of its Restricted Subsidiaries for such four quarter period (or a portion thereof), the resulting rate shall be used for such four quarter period or portion thereof; PROVIDED FURTHER that any Consolidated Interest Expense with respect to Indebtedness Incurred or retired by the Company or any of its Restricted Subsidiaries during the fiscal quarter in which the Transaction Date occurs shall be calculated as if such Indebtedness was so Incurred or retired on the first day of the fiscal quarter in which the Transaction Date occurs. In addition, if since the beginning of the four full fiscal quarter period preceding the Transaction Date, (i) the Company or any of its Restricted Subsidiaries shall have engaged in any Asset Sale, EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive), or increased by an amount equal to the EBITDA (if negative), directly attributable to the assets which are the subject of such Asset Sale for such period calculated on a pro forma basis as if such Asset Sale and any related retirement of Indebtedness had occurred on the first day of such period or (ii) the Company or any of its Restricted Subsidiaries shall have acquired any material assets or made an Investment in any Restricted Subsidiary, EBITDA shall be calculated on a pro forma basis as if such asset acquisitions or Investment had occurred on the first day of such four fiscal quarter period.

        "CONSOLIDATED INTEREST EXPENSE" means with respect to any Person for any period, without duplication, (a) the sum of (i) the aggregate amount of cash and noncash interest expense (including capitalized interest) of such Person and its Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP in respect of Indebtedness (including (A) any amortization of debt discount, (B) net costs associated with Interest Rate Protection Agreements (including any amortization of discounts), (C) the interest portion of any deferred payment obligation, (D) all accrued interest and (E) all commissions, discounts, commitment fees, origination fees and other fees and charges owed with respect to any Bank Credit Facilities and other Indebtedness) paid, accrued or scheduled to be paid or accrued during such period; (ii) Redeemable Stock dividends of such Person (and of its Restricted Subsidiaries if paid to a Person other than such Person or its Restricted Subsidiaries) and Preferred Stock dividends of such Person's Restricted Subsidiaries if paid to a Person other than such Person or its other Restricted Subsidiaries; (iii) the portion of any rental obligation of such Person or its Restricted Subsidiaries in respect of any Capital Lease Obligation allocable to interest expense in accordance with GAAP; (iv) the portion of any rental obligation of such Person or its Restricted Subsidiaries in respect of any Sale and Leaseback Transaction (other than any Sale or Leaseback Transaction related to Lantern Drilling Company) that is Indebtedness allocable to interest expense (determined as if such obligation were treated as a Capital Lease Obligation) in accordance with GAAP; and (v) to the extent any Indebtedness of any other Person (other than Restricted Subsidiaries) is Guaranteed by such Person or any of its Restricted Subsidiaries, the aggregate amount of interest paid, accrued or scheduled to be paid or accrued by such other Person during such period attributable to any such Indebtedness; less (b) to the extent included in (a) above, amortization or write-off of deferred financing costs of such Person and its Restricted Subsidiaries during such period and amounts classified as other comprehensive income in the balance sheet of such Person; in the case of both (a) and (b) above, after elimination of intercompany accounts among such Person and its Restricted Subsidiaries and as determined in accordance with GAAP.

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        "CONSOLIDATED NET INCOME" of any Person means, for any period, the aggregate net income (or net loss, as the case may be) of such Person and its Restricted Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP; PROVIDED that there shall be excluded therefrom, without duplication, (a) items classified as extraordinary gains or losses net of taxes (less all fees and expenses relating thereto); (b) any gain or loss net of taxes (less all fees and expenses relating thereto), realized on the sale or other disposition of Property, including the Capital Stock of any other Person and pursuant to any Sale and Leaseback Transaction (but in no event shall this clause (b) apply to any gains or losses on the sale in the ordinary course of business of oil, gas or other hydrocarbons produced or manufactured); (c) the net income of any Restricted Subsidiary of such specified Person to the extent the transfer to that Person of that income is restricted by contract or otherwise, except for any cash dividends or cash distributions actually paid by such Restricted Subsidiary to such Person during such period; (d) the net income (or loss) of any other Person in which such Person or any of its Restricted Subsidiaries has an interest (which interest does not cause the net income of such other Person to be consolidated with the net income of such Person in accordance with GAAP or is an interest in a consolidated Unrestricted Subsidiary), except to the extent of the amount of cash dividends or other cash distributions actually paid to such Person or its consolidated Restricted Subsidiaries by such other Person during such period; (e) for the purposes of Section 4.04 only, the net income of any Person acquired by such Person or any of its Restricted Subsidiaries in a pooling-of-interests transaction for any period prior to the date of such acquisition; (f) any gain or loss, net of taxes, realized on the termination of any employee pension benefit plan; (g) any adjustments of a deferred tax liability or asset pursuant to Statement of Financial Accounting Standards No. 109 which result from changes in enacted tax laws or rates; (h) the cumulative effect of a change in accounting principles; (i) any write-downs of non-current assets; PROVIDED that any ceiling limitation write-downs under Commission guidelines shall be treated as capitalized costs, as if such write-downs had not occurred; (j) any non-cash gains or losses related to Exchange Rate Contracts and Oil and Gas Hedging Contracts, net of taxes; (k) any non-cash gains or losses related to foreign currency exchange, net of taxes; (l) any non-cash compensation charge arising from any grant of stock, stock options or other equity-based awards; and (m) any expenses relating to the Forcenergy Merger, net of taxes.

        "CORPORATE TRUST OFFICE" means an office of the Trustee at which any particular time its corporate trust business shall be administered, which office is, as of the date of this Indenture, located at 225 Asylum Street, Hartford, CT 06103.

        "DEFAULT" means any event, act or condition the occurrence of which is, or after notice or the passage of time or both would be, an Event of Default.

        "DEFINITIVE SECURITIES" means certificated Securities.

        "DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder of the Capital Stock), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the Capital Stock, in whole or in part, on or prior to the date that is 91 days after the date on which the Securities mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders of the Capital Stock have the right to require the Company to repurchase or redeem such Capital Stock upon the occurrence of a change of control or an asset sale will not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Sections 4.04, 4.06 and 4.09.

        "DOLLAR-DENOMINATED PRODUCTION PAYMENTS" means production payment obligations recorded as liabilities in accordance with GAAP, together with all undertakings and obligations in connection therewith.

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        "DOMESTIC RESTRICTED SUBSIDIARY" means a Restricted Subsidiary organized under the laws of the United States of America, any State thereof or the District of Columbia.

        "DOMESTIC SUBSIDIARY" means a Subsidiary organized under the laws of the United States of America, any State thereof or the District of Columbia.

        "DTC" means The Depository Trust Company, its nominees and their respective successors and assigns, or such other depository institution hereafter appointed by the Company.

        "EBITDA" means, with respect to any Person for any period, an amount equal to the Consolidated Net Income of such Person for such period, plus (a) the sum of, to the extent reflected in the consolidated income statement of such Person and its Restricted Subsidiaries for such period from which Consolidated Net Income is determined and deducted in the determination of such Consolidated Net Income, without duplication, (i) consolidated income tax expense, (ii) Consolidated Interest Expense, (iii) consolidated depreciation and depletion expense, (iv) consolidated amortization expense or impairment charges and (v) consolidated exploration expense (if applicable), and (vi) any other non-cash charges reducing Consolidated Net Income; less (b) the sum of, to the extent reflected in the consolidated income statement of such Person and its Restricted Subsidiaries for such period from which Consolidated Net Income is determined and added in the determination of such Consolidated Net Income, without duplication, income tax recovery (excluding, however, income tax recovery relating to sales or other dispositions of Property, including the Capital Stock of any other Person, the losses from which are excluded in the determination of such Consolidated Net Income) and other non-cash items increasing Consolidated Net Income.

        "EQUITY OFFERING" means any public or private sale of Capital Stock (other than Disqualified Stock) made for cash on a primary basis by the Company after the Issue Date, provided that at any time on or after Change of Control, any sale of Capital Stock to an Affiliate of the Company shall not be deemed an Equity Offering.

        "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC thereunder.

        "EXCHANGE SECURITIES" has the meaning ascribed to it in the second introductory paragraph of this Indenture.

        "EXCHANGED PROPERTIES" means properties used or useful in the Oil and Gas Business received by the Company or a Restricted Subsidiary in trade or as a portion of the total consideration for other such properties or assets.

        "EXCHANGE RATE CONTRACT" means, with respect to any Person, any currency swap agreements, forward exchange rate agreements, foreign currency futures or options, exchange rate collar agreements, exchange rate insurance and other agreements or arrangements, or any combination thereof, entered into by such Person in the ordinary course of its business for the purpose of limiting or managing exchange rate risks to which such Person is subject.

        "FAIR MARKET VALUE" means, with respect to any assets to be transferred pursuant to any Asset Sale or Sale and Leaseback Transaction or any non-cash consideration or property transferred or received by any Person, the fair market value of such consideration or other property as determined in good faith by (a) any officer of the Company if such fair market value is less than $25,000,000 and (b) the Board of Directors of the Company as evidenced by a certified resolution delivered to the Trustee if such fair market value is equal to or in excess of $25,000,000. Any such determinations shall be conclusive in the absence of manifest error.

        "FORCENERGY MERGER" means the transactions contemplated by the Agreement and Plan of Merger, dated as of July 10, 2000, among the Company, Forest Acquisition I Corporation, a Delaware corporation and Forcenergy Inc., a Delaware corporation.

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        "GAAP" means U.S. generally accepted accounting principles as in effect from time to time, unless stated otherwise.

        "GOVERNMENT OBLIGATIONS" means securities that are (a) direct obligations of the United States or Canada for the timely payment of which the full faith and credit of the United States or Canada is pledged or (b) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States or Canada, the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States or Canada which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian, with respect to any such Government Obligation or a specific payment of principal of or interest on any such Government Obligation held by such custodian for the account of the holder of such depository receipt; PROVIDED, HOWEVER, that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Obligation or the specific payment of principal of or interest on the Government Obligation evidenced by such depository receipt.

        "GUARANTEE" by any Person means any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness of any other Person (the "primary obligor") in any manner, whether directly or indirectly, and including any Lien on the assets of such Person securing obligations to pay Indebtedness of the primary obligor and any obligation of such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or to purchase (or to advance or supply funds for the purchase or payment of) any security for the payment of such Indebtedness, (b) to purchase Property, securities or services for the purpose of assuring the holder of such Indebtedness of the payment of such Indebtedness or (c) to maintain working capital, equity capital or other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness (and "GUARANTEED", "GUARANTEEING" and "GUARANTOR" shall have meanings correlative to the foregoing); PROVIDED, HOWEVER, that a Guarantee by any Person shall not include (i) endorsements by such Person for collection or deposit, in either case, in the ordinary course of business or (ii) a contractual commitment by one Person to invest in another Person for so long as such Investment is reasonably expected to constitute a Permitted Investment under clause (e) of the definition of Permitted Investments.

        "HOLDER" or "SECURITYHOLDER" means the Person in whose name a Security is registered on the Note Register.

        "INCUR" means, with respect to any Indebtedness or other obligation of any Person, to create, issue, incur (by conversion, exchange or otherwise), assume, Guarantee or become liable in respect of such Indebtedness or other obligation or the recording, as required pursuant to GAAP or otherwise, of any such Indebtedness or obligation on the balance sheet of such Person (and "INCURRENCE", "INCURRED" and "INCURRING" shall have meanings correlative to the foregoing); PROVIDED, HOWEVER, that (a) change in GAAP that results in an obligation of such Person that exists at such time, and is not theretofore classified as Indebtedness, becoming Indebtedness shall not be deemed an Incurrence of such Indebtedness. For purposes of this definition, Indebtedness of the Company held by a Restricted Subsidiary or Indebtedness of a Restricted Subsidiary held by another Restricted Subsidiary shall be deemed to be Incurred by the issuer of such Indebtedness in the event the Restricted Subsidiary holding such Indebtedness ceases to be a Restricted Subsidiary or in the event such Indebtedness is transferred to a Person other than the Company or a Restricted Subsidiary. For purposes of this definition, any non-interest bearing or other Indebtedness shall be deemed to have been Incurred (in an amount equal to its aggregate principal amount at its Stated Maturity) only on the date of original issue thereof.

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        "INDEBTEDNESS" means at any time (without duplication), with respect to any Person, whether recourse is to all or a portion of the assets of such Person, and whether or not contingent, (a) any obligation of such Person for borrowed money, (b) any obligation of such Person evidenced by bonds, debentures, notes, Guarantees or other similar instruments, including any such obligations Incurred in connection with the acquisition of Property, assets or businesses, (c) any reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person, (d) any obligation of such Person issued or assumed as the deferred purchase price of Property or services (other than Trade Accounts Payable), (e) any Capital Lease Obligation of such Person, (f) the maximum fixed redemption or repurchase price of Redeemable Stock of such Person at the time of determination, (g) any payment obligation of such Person under Exchange Rate Contracts, Interest Rate Protection Agreements, Oil and Gas Hedging Contracts or under any similar agreements or instruments, (h) any obligation to pay rent or other payment amounts of such Person with respect to any Sale and Leaseback Transaction to which such Person is a party and (i) any obligation of the type referred to in clauses (a) through (h) of this paragraph of another Person and all dividends of another Person the payment of which, in either case, such Person has Guaranteed or is responsible or liable, directly or indirectly, as obligor, Guarantor or otherwise; PROVIDED, HOWEVER, that Indebtedness shall not include Production Payments and Reserve Sales. For purposes of this definition, the maximum fixed repurchase price of any Redeemable Stock that does not have a fixed repurchase price shall be calculated in accordance with the terms of such Redeemable Stock as if such Redeemable Stock were repurchased on any date on which Indebtedness shall be required to be determined pursuant to this Indenture; PROVIDED, HOWEVER, that if such Redeemable Stock is not then permitted to be repurchased, the repurchase price shall be the book value of such Redeemable Stock. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability at such date in respect of any contingent obligations described above; PROVIDED, HOWEVER, that money borrowed and set aside at the time of the Incurrence of any Indebtedness in order to pre-fund the payment of interest on such Indebtedness shall not be deemed to be "Indebtedness" provided that such money is held to secure the payment of such interest. IN ADDITION, "Indebtedness" of any Person shall include Indebtedness described in the initial paragraph of this definition that would not appear as a liability on the balance sheet of such Person if: (a) such Indebtedness is the obligation of a partnership or joint venture that is not a Restricted Subsidiary (a "Joint Venture"); (b) such Person or a Restricted Subsidiary of such Person is a general partner of the Joint Venture (a "General Partner"); and (c) there is recourse, by contract or operation of law, with respect to the payment of such Indebtedness to Property of such Person or a Restricted Subsidiary of such Person; and then such Indebtedness shall be included in an amount not to exceed: (i) the lesser of (a) the net assets of the General Partner and (b) the amount of such obligations to the extent that there is recourse, by contract or operation of law, to the Property of such Person or a Restricted Subsidiary of such Person; or (ii) if less than the amount determined pursuant to clause (i) immediately above, the actual amount of such Indebtedness that is recourse to such Person or a Restricted Subsidiary of such Person, if the Indebtedness is evidenced by a writing and is for a determinable amount.

        "INDENTURE" means this Indenture as amended or supplemented from time to time.

        "INITIAL SECURITIES" has the meaning ascribed to it in the second introductory paragraph of this Indenture.

        "INTEREST RATE PROTECTION AGREEMENT" means, with respect to any Person, any interest rate swap agreement, forward rate agreement, interest rate cap or collar agreement or other financial agreement or arrangement entered into by such Person in the ordinary course of its business for the purpose of limiting or managing interest rate risks to which such Person is subject.

        "INVESTMENT" means, with respect to any Person (a) any amount paid by such Person, directly or indirectly, to any other Person for Capital Stock of, or as a capital contribution to, any other Person

9

or (b) any direct or indirect loan or advance to any other Person (other than accounts receivable of such Person arising in the ordinary course of business); PROVIDED, HOWEVER, that Investments shall not include (i) in the case of clause (a) as used in the definition of "Restricted Payments" only, any such amount paid through the issuance of Capital Stock of the Company; (ii) Permitted Hedging Agreement entered into in the ordinary course of business and in compliance with this Indenture; and (iii) in the case of clause (a) or (b), extensions of trade credit on commercially reasonable terms in accordance with normal trade practices and any increase in the equity ownership in any Person resulting from retained earnings of such Person.

        "INVESTMENT GRADE RATING" means BBB- or above, in the case of S&P (or its equivalent under any successor rating categories of S&P), Baa3 or above, in the case of Moody's (or its equivalent under any successor rating categories of Moody's) and the equivalent in respect of the rating categories of any Rating Agencies substituted for S&P or Moody's.

        "ISSUE DATE" means the date on which the Initial Securities will be first issued under this Indenture.

        "LIEN" means, with respect to any Property, any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, security interest, lien (statutory or other), charge, easement, encumbrance, preference, priority or other security or similar agreement or preferential arrangement of any kind or nature whatsoever on or with respect to such Property (including any conditional sale or other title retention agreement having substantially the same economic effect as any of the foregoing). For purposes of Section 4.10, a Capital Lease Obligation shall be deemed to be secured by a Lien on the Property being leased.

        "LIQUID SECURITIES" means securities (a) of an issuer that is not an Affiliate of the Company, (b) that are publicly traded on the New York Stock Exchange, the American Stock Exchange, the Toronto Stock Exchange or the Nasdaq National Market and (c) as to which the Company or the Restricted Subsidiary holding such securities is not subject to any restrictions on sale or transfer (including any volume restrictions under Rule 144 under the Securities Act or any other restrictions imposed by the Securities Act) or as to which a registration statement under the Securities Act covering the resale thereof is in effect for as long as the securities are held; PROVIDED that securities meeting the requirements of clauses (a), (b) and (c) above shall be treated as Liquid Securities from the date of receipt thereof until and only until the earlier of (i) the date on which such securities are sold or exchanged for cash or Permitted Short Term Investments and (ii) 180 days following the date of receipt of such securities. If such securities are not sold or exchanged for cash or Permitted Short-Term Investments within 180 days of receipt thereof, for purposes of determining whether the transaction pursuant to which the Company or a Restricted Subsidiary received the securities was in compliance with Section 4.06, such securities shall be deemed not to have been Liquid Securities at any time.

        "MOODY'S" means Moody's Investors Service, Inc.

        "NET AVAILABLE CASH" from an Asset Sale means cash proceeds received therefrom (including (a) any cash proceeds received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only as and when received and (b) the Fair Market Value of Liquid Securities and Permitted Short-Term Investments, and excluding (i) any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to the Property that is the subject of such Asset Sale or received in any other non-cash form and (ii) except to the extent subsequently converted to cash, Liquid Securities or Permitted Short-Term Investments within 240 days after such Asset Sale, consideration constituting Exchanged Properties or consideration other than as identified in the immediately preceding clauses (a) and (b)), in each case net of (A) all legal, title and recording expenses, commissions and other fees and expenses incurred, and all federal, state, foreign and local taxes required to be paid or accrued as a liability under GAAP

10

(after taking into account any available tax credits or deductions and any tax sharing agreements) as a consequence of such Asset Sale, (B) all payments made on any Indebtedness (but specifically excluding Indebtedness of the Company and its Restricted Subsidiaries assumed in connection with or in anticipation of such Asset Sale) which is secured by any assets subject to such Asset Sale, in accordance with the terms of any Lien upon such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Sale or by applicable law, be repaid out of the proceeds from such Asset Sale; PROVIDED that such payments are made in a manner that results in the permanent reduction in the balance of such Indebtedness and, if applicable, a permanent reduction in any outstanding commitment for future incurrences of Indebtedness thereunder, (C) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Sale and (D) the deduction of appropriate amounts to be provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the assets disposed of in such Asset Sale and retained by the Company or any Restricted Subsidiary after such Asset Sale; PROVIDED, HOWEVER, that if any consideration for an Asset Sale (which would otherwise constitute Net Available Cash) is required to be held in escrow pending determination of whether a purchase price adjustment will be made, such consideration (or any portion thereof) shall become Net Available Cash only at such time as it is released to the Company or any Restricted Subsidiary from escrow.

        "NET WORKING CAPITAL" means (a) all current assets of the Company and its Restricted Subsidiaries, less (b) all current liabilities of the Company and its Restricted Subsidiaries, except current liabilities included in Indebtedness, in each case as set forth in consolidated financial statements of the Company prepared in accordance with GAAP.

        "NON-RECOURSE PURCHASE MONEY INDEBTEDNESS" means Indebtedness (other than Capital Lease Obligations) of the Company or any Restricted Subsidiary Incurred in connection with the acquisition by the Company or such Restricted Subsidiary in the ordinary course of business of fixed assets used in the Oil and Gas Business (including office buildings and other real property used by the Company or such Restricted Subsidiary in conducting its operations) with respect to which (a) the holders of such Indebtedness agree that they will look solely to the fixed assets so acquired which secure such Indebtedness, and neither the Company nor any Restricted Subsidiary (i) is directly or indirectly liable for such Indebtedness or (ii) provides credit support, including any undertaking, Guarantee, indemnity agreement or instrument that would constitute Indebtedness (other than the grant of a Lien on such acquired fixed assets), and (b) no default or event of default with respect to such Indebtedness would cause, or permit (after notice or passage of time or otherwise), any holder of any other Indebtedness of the Company or a Restricted Subsidiary to declare a default or event of default on such other Indebtedness or cause the payment, repurchase, redemption, defeasance or other acquisition or retirement for value thereof to be accelerated or payable prior to any scheduled principal payment, scheduled sinking fund payment or maturity.

        "NOTE REGISTER" means the register of Securities, maintained by the Trustee, pursuant to Section 2.03.

        "OFFICER" means the Chairman, the President, the Chief Executive Officer, the Chief Financial Officer, the Chief Accounting Officer or the Treasurer or the Secretary of the Company.

        "OFFICERS' CERTIFICATE" means a certificate signed by (a) the President or the Chief Executive Officer and (b) the Chief Financial Officer, the Chief Accounting Officer or the Treasurer of the Company and delivered to the Trustee, which shall comply with this Indenture.

        "OIL AND GAS BUSINESS" means the business of exploiting, exploring for, developing, acquiring, operating, producing, processing, gathering, marketing, storing, selling, hedging, treating, swapping, refining and transporting hydrocarbons and other related energy businesses.

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        "OIL AND GAS HEDGING CONTRACT" means, with respect to any Person, any agreement or arrangement, or any combination thereof, relating to oil and gas or other hydrocarbon prices, transportation or basis costs or differentials or other similar financial factors, that is customary in the Oil and Gas Business and is entered into by such Person in the ordinary course of its business for the purpose of limiting or managing risks associated with fluctuations in such prices, costs, differentials or similar factors.

        "OPINION OF COUNSEL" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company.

        "PARI PASSU INDEBTEDNESS" means any Indebtedness of the Company or a Subsidiary Guarantor that is pari passu in right of payment to the Securities or a Subsidiary Guarantee, as applicable.

        "PARI PASSU OFFER" means an offer by the Company or a Subsidiary Guarantor to purchase all or a portion of Pari Passu Indebtedness to the extent required by the indenture or other agreement or instrument pursuant to which such Pari Passu Indebtedness was issued.

        "PERMITTED BUSINESS INVESTMENTS" means Investments and expenditures made in the ordinary course of, and of a nature that is or shall have become customary in, the Oil and Gas Business as a means of actively engaging therein through agreements, transactions, interests or arrangements which permit one to share risks or costs, comply with regulatory requirements regarding local ownership or satisfy other objectives customarily achieved through the conduct of Oil and Gas Business jointly with third parties, including (a) ownership interests in oil and gas properties or gathering, transportation, processing, storage or related systems and (b) Investments and expenditures in the form of or pursuant to operating agreements, processing agreements, farm-in agreements, farm-out agreements, development agreements, area of mutual interest agreements, unitization agreements, pooling arrangements, joint bidding agreements, service contracts, joint venture agreements, partnership agreements (whether general or limited), and other similar agreements (including for limited liability companies) with third parties, excluding however, Investments in corporations other than Restricted Subsidiaries.

        "PERMITTED HEDGING AGREEMENTS" means (a) Exchange Rate Contracts and Oil and Gas Hedging Contracts and (b) Interest Rate Protection Agreements but only to the extent that the stated aggregate notional amount thereunder does not exceed 100% of the aggregate principal amount of the Indebtedness of the Company or a Restricted Subsidiary covered by such Interest Rate Protection Agreements at the time such agreements were entered into.

        "PERMITTED INDEBTEDNESS" means any and all of the following: (i) Indebtedness arising under this Indenture with respect to the Initial Securities and any Subsidiary Guarantees relating thereto, and the related Exchange Securities and exchange guarantees issued in a registered exchange offer pursuant to a Registration Rights Agreement; (ii) Indebtedness under Bank Credit Facilities; PROVIDED that the aggregate principal amount of all Indebtedness under Bank Credit Facilities Incurred pursuant to this clause, together with all Indebtedness Incurred pursuant to clause (x) of this paragraph in respect of Indebtedness previously Incurred under Bank Credit Facilities, at any one time outstanding does not exceed the greater of (a) $1,200,000,000, which amount shall be permanently reduced by the amount of Net Available Cash from Asset Sales (1) used to permanently repay Indebtedness under Bank Credit Facilities and not subsequently reinvested in Additional Assets or (2) used to permanently reduce other Indebtedness to the extent permitted pursuant to Section 4.06 and (b) an amount equal to the sum of (1) $150,000,000 and (2) 25% of Adjusted Consolidated Net Tangible Assets determined as of the date of the Incurrence of such Indebtedness; (iii) Indebtedness to the Company or any Restricted Subsidiary by any of its Restricted Subsidiaries or Indebtedness of the Company to any of its Restricted Subsidiaries (but only so long as such Indebtedness is held by the Company or a Restricted Subsidiary); (iv) Indebtedness in respect of bid, performance, reimbursement

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or surety obligations issued by or for the account of the Company or any Restricted Subsidiary in the ordinary course of business, including Guarantees and letters of credit functioning as or supporting such bid, performance, reimbursement or surety obligations (in each case other than for an obligation for money borrowed); (v) Indebtedness under Permitted Hedging Agreements; (vi) in-kind obligations relating to oil or gas balancing positions arising in the ordinary course of business; (vii) Indebtedness outstanding on the Issue Date not otherwise permitted in clauses (i) through (vi) above; (viii) Non-recourse Purchase Money Indebtedness; (ix) Indebtedness not otherwise permitted to be Incurred pursuant to this paragraph (excluding any Indebtedness Incurred pursuant to clause (a) of Section 4.03); PROVIDED that the aggregate principal amount of all Indebtedness Incurred pursuant to this clause (ix), together with all Indebtedness Incurred pursuant to clause (x) of this paragraph in respect of Indebtedness previously Incurred pursuant to this clause (ix), at any one time outstanding does not exceed $100,000,000; (x) Indebtedness Incurred in exchange for, or the proceeds of which are used to refinance, (a) Indebtedness referred to in clauses (i), (ii), (vii), (viii) and (ix) of this paragraph (including Indebtedness previously Incurred pursuant to this clause (x)) and (b) Indebtedness Incurred pursuant to clause (a) of Section 4.03; PROVIDED that, in the case of each of the foregoing clauses (a) and (b), such Indebtedness is Permitted Refinancing Indebtedness; and (xi) Indebtedness consisting of obligations in respect of purchase price adjustments, indemnities or Guarantees of the same or similar matters in connection with the acquisition or disposition of Property. For purposes of determining compliance with Section 4.03. In the event that an item of Indebtedness (including Indebtedness Incurred by the Company to banks or other lenders) could be Incurred pursuant to more than one of the clauses in this paragraph or Section 4.03(a), the Company, in its sole discretion, may classify such item of Indebtedness on the date of its Incurrence, or later reclassify it, and will only be required to include the amount and type of such Indebtedness in (and to have Incurred such Indebtedness pursuant to) one of the clauses in this paragraph or Section 4.03(a); and an item of Indebtedness (including Indebtedness Incurred by the Company to banks or other lenders) may for this purpose be divided into more than one of the types of Indebtedness described in this paragraph or Section 4.03(a). For purposes of determining compliance with any U.S. dollar-denominated restriction on the Incurrence of Indebtedness, the U.S. dollar-equivalent principal amount of Indebtedness denominated in a foreign currency shall be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was Incurred, in the case of term Indebtedness, or first committed, in the case of revolving credit Indebtedness; PROVIDED that if such Indebtedness is Incurred to refinance other Indebtedness denominated in a foreign currency and such refinancing would cause the applicable U.S. dollar-dominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, such U.S. dollar-dominated restriction shall be deemed not to have been exceeded so long as the principal amount of such refinancing Indebtedness does not exceed the principal amount of such Indebtedness being refinanced. Notwithstanding any other provision of this definition or Section 4.03, the maximum amount of Indebtedness that the Company may Incur pursuant to Section 4.03 shall not be deemed to be exceeded solely as a result of fluctuations in the exchange rate of currencies. The principal amount of any Permitted Refinancing Indebtedness, if Incurred in a different currency from the Indebtedness being refinanced, shall be calculated based on the currency exchange rate applicable to the currencies in which such Permitted Refinancing Indebtedness is denominated that is in effect on the date of such refinancing.

        "PERMITTED INVESTMENTS" means any and all of the following: (a) Permitted Short-Term Investments; (b) Investments in property, plant and equipment used in the ordinary course of business and Permitted Business Investments; (c) Investments by any Restricted Subsidiary in the Company; (d) Investments by the Company or any Restricted Subsidiary in any Restricted Subsidiary; (e) Investments by the Company or any Restricted Subsidiary in (i) any Person that will, upon the making of such Investment, become a Restricted Subsidiary or (ii) any Person if as a result of such Investment such Person is merged or consolidated with or into, or transfers or conveys all or substantially all its Property to, the Company or a Restricted Subsidiary; (f) Investments in the form of

13

securities received from Asset Sales; PROVIDED that such Asset Sales are made in compliance with Section 4.06; (g) Investments in negotiable instruments held for collection; lease, utility and other similar deposits; and stock, obligations or other securities received in settlement of debts (including under any bankruptcy or other similar proceeding) owing to the Company or any of its Restricted Subsidiaries as a result of foreclosure, perfection or enforcement of any Liens or Indebtedness, in each of the foregoing cases in the ordinary course of business of the Company or such Restricted Subsidiary; (h) relocation allowances for, and advances and loans to, officers, directors and employees of the Company or any of its Restricted Subsidiaries; PROVIDED such items do not exceed in the aggregate $10,000,000 at any one time outstanding; (i) Investments intended to promote the Company's strategic objectives in the Oil and Gas Business in an aggregate amount not to exceed 10% of the Adjusted Consolidated Net Tangible Assets (determined as of the date of the making of any such Investment) at any one time outstanding (which Investments shall be deemed to be no longer outstanding only upon the return of capital thereof); (j) Investments made for the purpose of acquiring gas marketing contracts in an aggregate amount not to exceed $25,000,000 at any one time outstanding; and (k) Investments pursuant to any agreement or obligation of the Company or any of its Restricted Subsidiaries as in effect on the Issue Date (other than Investments described in clauses (a) through (j) above).

        "PERMITTED LIENS" means any and all of the following: (a) Liens securing Indebtedness incurred under Bank Credit Facilities pursuant to Section 4.03; PROVIDED, HOWEVER, that in the event all the conditions described under Section 4.15 shall have been satisfied and the Company and its Restricted Subsidiaries shall no longer be subject to the provisions of this Indenture terminated in accordance with such provision, Liens securing Indebtedness under the Bank Credit Facilities shall no longer be deemed to be Permitted Liens by reason of this clause (a); (b) Liens securing the Securities, any Subsidiary Guarantees and other obligations arising under this Indenture; (c) any Lien existing on any Property of a Person at the time such Person is merged or consolidated with or into the Company or a Restricted Subsidiary or becomes a Restricted Subsidiary (and not incurred in anticipation of or in connection with such transaction); PROVIDED that such Liens are not extended to other Property of the Company or its Restricted Subsidiaries; (d) any Lien existing on any Property at the time of the acquisition thereof (and not incurred in anticipation of or in connection with such transaction); PROVIDED that such Liens are not extended to other Property of the Company or its Restricted Subsidiaries; (e) Liens securing Permitted Hedging Agreements of the Company and its Restricted Subsidiaries; (f) Liens securing purchase money Indebtedness, Sale and Leaseback Transactions or Capital Lease Obligations; PROVIDED that such Liens attach only to the Property acquired with the proceeds of such purchase money Indebtedness or the Property which is the subject of such Sale and Leaseback Transactions or Capital Lease Obligations; (g) Liens securing Non-Recourse Purchase Money Indebtedness granted in connection with the acquisition by the Company or any Restricted Subsidiary in the ordinary course of business of fixed assets used in the Oil and Gas Business (including office buildings and other real property used by the Company or such Restricted Subsidiary in conducting its operations); PROVIDED that (i) such Liens attach only to the fixed assets acquired with the proceeds of such Non-Recourse Purchase Money Indebtedness and (ii) such Non-Recourse Purchase Money Indebtedness is not in excess of the purchase price of such fixed assets; (h) Liens resulting from the deposit of funds or evidences of Indebtedness in trust for the purpose of decreasing, satisfying and discharging, or legally defeasing Indebtedness of the Company or any Restricted Subsidiary so long as such deposit of funds is permitted under Section 4.04; (i) Liens resulting from a pledge of Capital Stock of a Person that is not a Restricted Subsidiary to secure obligations of such Person and any refinancings thereof; (j) Liens to secure any permitted extension, renewal, refinancing, refunding or exchange (or successive extensions, renewals, refinancings, refundings or exchanges) in whole or in part, of or for any Indebtedness secured by Liens referred to in clauses (a), (b), (c), (d), (f) and (g) above; PROVIDED, HOWEVER, that (i) such new Lien shall be limited to all or part of the same Property (including future improvements thereon and accessions thereto) subject to the original Lien and (ii) the Indebtedness secured by such Lien at such time is not increased to any amount

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greater than the sum of (A) the outstanding principal amount or, if greater, the committed amount of the Indebtedness secured by such original Lien immediately prior to such extension, renewal, refinancing, refunding or exchange and (B) an amount necessary to pay any fees and expenses, including premiums, related to such refinancing, refunding, extension, renewal or replacement; (k) Liens in favor of the Company or a Restricted Subsidiary; and (l) Liens not otherwise permitted by clauses (a) through (k) above securing Indebtedness having an aggregate principal amount not in excess of $25,000,000 at any one time outstanding.

        "PERMITTED REFINANCING INDEBTEDNESS" means Indebtedness ("new Indebtedness") Incurred in exchange for, or proceeds of which are used to refinance, other Indebtedness ("old Indebtedness"); PROVIDED, HOWEVER, that (a) such new Indebtedness is in an aggregate principal amount not in excess of the sum of (i) the aggregate principal amount then outstanding of the old Indebtedness (or, if such old Indebtedness provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination), and (ii) an amount necessary to pay any fees and expenses, including premiums, related to such exchange or refinancing, (b) such new Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the old Indebtedness, (c) such new Indebtedness has an Average Life at the time such new Indebtedness is Incurred that is equal to or greater than the Average Life of the old Indebtedness at such time, (d) such new Indebtedness is subordinated in right of payment to the Securities (or, if applicable, the relevant Subsidiary Guarantee) to at least the same extent, if any, as the old Indebtedness, (e) if such old Indebtedness is Non-Recourse Purchase Money Indebtedness or Indebtedness that refinanced Non-Recourse Purchase Money Indebtedness, such new Indebtedness satisfies clauses (a) and (b) of the definition of "Non-Recourse Purchase Money Indebtedness" and (f) such new Indebtedness is not incurred by a Restricted Subsidiary which thereafter will not be a Subsidiary Guarantor to refinance old Indebtedness of the Company or a Subsidiary Guarantor.

        "PERMITTED SHORT-TERM INVESTMENTS" means (a) Investments in Government Obligations maturing within one year of the date of acquisition thereof; (b) Investments in demand accounts, time deposit accounts, certificates of deposit, bankers' acceptances and money market deposits maturing within one year of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America or any State thereof or the District of Columbia or Canada or any Province thereof that is a member of the Federal Reserve System or comparable Canadian system and has capital, surplus and undivided profits aggregating in excess of $500,000,000 and whose long-term Indebtedness is rated "A" (or such similar equivalent rating), or higher, according to Moody's or Dominion Bond Rating Service Limited or Canadian Bond Rating Service, Inc.; (c) Investments in deposits available for withdrawal on demand with any commercial bank that is organized under the laws of any country in which the Company or any Restricted Subsidiary maintains an office or is engaged in the Oil and Gas Business; PROVIDED that (i) all such deposits have been made in such accounts in the ordinary course of business and (ii) such deposits do not at any one time exceed $20,000,000 in the aggregate, (d) repurchase and reverse repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (a) entered into with a bank meeting the qualifications described in clause (b), (e) Investments in commercial paper or notes, maturing not more than one year after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America or any State thereof or the District of Columbia, or Canada or any Province thereof, with a short-term rating at the time as of which any Investment therein is made of "P-2" (or higher) according to Moody's or "A-2" (or higher) according to S&P or "R-1" (or higher) by Dominion Bond Rating Service Limited or Canadian Bond Rating Service, Inc. (in the case of a Canadian issuer) or a long-term rating at the time as of which any Investment therein is made of "A3" (or higher) according to Moody's or "A-" (or higher) according to S&P or such similar equivalent rating (or higher) by Dominion Bond Rating Service Limited or Canadian Bond Rating Service, Inc. (in the case of a Canadian issuer), (f) Investments in any money market mutual fund having assets in excess of

15

$250,000,000 substantially all of whose assets consist of other obligations of the types described in clauses (a), (b) and (d) hereof and (g) Investments in asset-backed securities maturing within one year of the date of acquisition thereof with a long-term rating at the time as of which any Investment therein is made of "A3" (or higher) according to Moody's or "A-1" (or higher) according to S&P or such similar equivalent rating (or higher) by Dominion Bond Rating Service Limited or Canadian Bond Rating Service, Inc. (in the case of a Canadian issuer).

        "PERSON" means any individual, corporation, partnership, joint venture, limited liability company, unlimited liability company, trust, estate, unincorporated organization or government or any agency or political subdivision thereof.

        "PREFERRED STOCK" of any Person means Capital Stock of such Person of any class or classes (however designated) that ranks prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of such Person, to shares of Capital Stock of any other class of such Person; PROVIDED, HOWEVER, that "Preferred Stock" shall not include Redeemable Stock.

        "PRODUCTION PAYMENTS AND RESERVE SALES" means the grant or transfer by the Company or a Restricted Subsidiary to any Person of a royalty, overriding royalty, net profits interest, production payment (whether volumetric or dollar denominated), partnership or other interest in oil and gas properties, reserves or the right to receive all or a portion of the production or the proceeds from the sale of production attributable to such properties where the holder of such interest has recourse solely to such production or proceeds of production, subject to the obligation of the grantor or transferor to operate and maintain, or cause the subject interests to be operated and maintained, in a reasonably prudent manner or other customary standard or subject to the obligation of the grantor or transferor to indemnify for environmental, title or other matters customary in the Oil and Gas Business, including any such grants or transfers pursuant to incentive compensation programs on terms that are reasonably customary in the Oil and Gas Business for geologists, geophysicists or other providers of technical services to the Company or a Restricted Subsidiary.

        "PROPERTY" means, with respect to any Person, any interest of such Person in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, including Capital Stock and other securities issued by any other Person (but excluding Capital Stock or other securities issued by such first mentioned Person).

        "QIB" means any "qualified institutional buyer" (as defined in Rule 144A under the Securities Act).

        "RATING AGENCIES" means (a) S&P and Moody's or (b) if S&P or Moody's or both of them are not making ratings of the Securities publicly available, a nationally recognized U.S. rating agency or agencies, as the case may be, selected by the Company, which will be substituted for S&P or Moody's or both, as the case may be.

        "REDEEMABLE STOCK" of any Person means any Capital Stock of such Person that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or otherwise (including on the happening of an event), is or could become required to be redeemed for cash or other Property or is or could become redeemable for cash or other Property at the option of the holder thereof, in whole or in part, on or prior to the first anniversary of the Stated Maturity of the Securities; or is or could become exchangeable at the option of the holder thereof for Indebtedness of the Company or any of its Restricted Subsidiaries at any time in whole or in part, on or prior to the first anniversary of the Stated Maturity of the Securities; PROVIDED, HOWEVER, that Redeemable Stock shall not include any security by virtue of the fact that it may be exchanged or converted at the option of the holder for Capital Stock of the Company having no preference as to dividends or liquidation over any other Capital Stock of the Company.

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        "REFERENCE DATE" means September 30, 2000.

        "REGISTRATION RIGHTS AGREEMENT" means that certain registration rights agreement dated as of the Issue Date by and among the Company, the Subsidiary Guarantors and the initial purchasers set forth therein and, with respect to any Additional Securities, one or more substantially similar registration rights agreements among the Company and the other parties thereto, as such agreements may be amended from time to time.

        "RESTRICTED PAYMENT" means (a) a dividend or other distribution declared or paid on the Capital Stock of the Company or to the Company's shareholders (other than dividends, distributions or payments made solely in Capital Stock of the Company), or declared and paid to any Person other than the Company or any of its Restricted Subsidiaries (and, if such Restricted Subsidiary is not a Wholly Owned Subsidiary, to the other holders of the Capital Stock of such Restricted Subsidiary on a pro rata basis) on the Capital Stock of any Restricted Subsidiary, (b) a payment made by the Company or any of its Restricted Subsidiaries (other than to the Company or any Restricted Subsidiary) to purchase, redeem, acquire or retire any Capital Stock of the Company or of a Restricted Subsidiary, (c) a payment made by the Company or any of its Restricted Subsidiaries to redeem, repurchase, legally defease or otherwise acquire or retire for value (including pursuant to mandatory repurchase covenants), prior to any scheduled maturity, scheduled sinking fund or scheduled mandatory redemption, any Subordinated Indebtedness, PROVIDED that this clause (c) shall not include any such payment with respect to (i) any such Subordinated Indebtedness to the extent of Excess Proceeds remaining after compliance with Section 4.06 and to the extent required by the indenture or other agreement or instrument pursuant to which such Subordinated Indebtedness was issued or (ii) the purchase, repurchase or other acquisition of any such Subordinated Indebtedness acquired in anticipation of satisfying a scheduled maturity, scheduled sinking fund or scheduled mandatory redemption, in each case due within one year of the date of acquisition, or (d) an Investment (other than a Permitted Investment) by the Company or a Restricted Subsidiary in any Person.

        "RESTRICTED PERIOD" means the 40 consecutive days beginning on and including the later of (A) the day on which the Initial Securities are offered to Persons other than distributors (as defined in Regulation S under the Securities Act) and (B) the Issue Date.

        "RESTRICTED SECURITIES LEGEND" means the Private Placement Legend set forth in clause (i) of Section 2.01(c) or the Regulation S Legend set forth in clause (ii) of Section 2.01(c), as applicable.

        "RESTRICTED SUBSIDIARY" means any Subsidiary of the Company that is not an Unrestricted Subsidiary.

        "S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., and its successors.

        "SALE AND LEASEBACK TRANSACTION" means, with respect to any Person, any direct or indirect arrangement (excluding, however, any such arrangement between such Person and a Restricted Subsidiary of such Person or between one or more Restricted Subsidiaries of such Person) pursuant to which Property is sold or transferred by such Person or a Restricted Subsidiary of such Person and is thereafter leased back from the purchaser or transferee thereof by such Person or one of its Restricted Subsidiaries.

        "SEC" means the Securities and Exchange Commission.

        "SECURITIES" means the collective reference to the Initial Securities, Additional Securities and Exchange Securities.

        "SECURITIES ACT" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

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        "SECURITIES CUSTODIAN" means the custodian with respect to the Global Security (as appointed by DTC), or any successor Person thereto and shall initially be the Trustee.

        "SENIOR INDEBTEDNESS OF THE COMPANY" means the obligations of the Company with respect to Indebtedness of the Company, whether outstanding on the date hereof or thereafter Incurred, and any renewal, refunding, refinancing, replacement or extension thereof, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Securities; PROVIDED, HOWEVER, that Senior Indebtedness of the Company shall not include (a) Indebtedness of the Company to a Subsidiary of the Company, (b) amounts owed for goods, materials or services purchased in the ordinary course of business, (c) Indebtedness Incurred in violation of this Indenture, (d) amounts payable or any other Indebtedness to employees of the Company or any Subsidiary of the Company, (e) any liability for federal, state, local or other taxes owed or owing by the Company, (f) any Indebtedness of the Company that, when Incurred and without regard to any election under Section 1111(b) of the United States Bankruptcy Code, was without recourse to the Company, (g) Subordinated Indebtedness of the Company, (h) Indebtedness of the Company that is represented by Redeemable Stock and (i) in-kind obligations relating to net oil and gas balancing positions.

        "SENIOR INDEBTEDNESS OF ANY SUBSIDIARY GUARANTOR" has a correlative meaning; PROVIDED that clause (a) above shall be deemed to refer to Indebtedness of any Subsidiary Guarantor to the Company or any Subsidiary of the Company.

        "SIGNIFICANT SUBSIDIARY" means, at any date of determination, any Restricted Subsidiary that would be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the Commission.

        "STATED MATURITY", when used with respect to any security or any installment of principal thereof or interest thereon, means the date specified in such security as the fixed date on which the principal of such security or such installment of principal or interest is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase, redemption or repayment of such security upon the happening of any contingency unless such contingency has occurred).

        "SUBORDINATED INDEBTEDNESS" means Indebtedness of the Company or a Subsidiary Guarantor (whether outstanding on the Issue Date or thereafter Incurred) that is subordinated or junior in right of payment to the Securities or the relevant Subsidiary Guarantee, as applicable, pursuant to a written agreement to that effect.

        "SUBSIDIARY" of a Person means (a) another Person which is a corporation a majority of whose Voting Stock is at the time, directly or indirectly, owned or controlled by (i) the first Person, (ii) the first Person and one or more of its Subsidiaries or (iii) one or more of the first Person's Subsidiaries or (b) another Person which is not a corporation (x) at least 50% of the ownership interest of which and (y) the power to elect or direct the election of a majority of the directors or other governing body of which are controlled by Persons referred to in clause (i), (ii) or (iii) above.

        "SUBSIDIARY GUARANTEE" means an unconditional, unsecured senior Guarantee of the Securities (including any Exchange Securities issued in a registered exchange offer pursuant to a Registration Rights Agreement) given by any Restricted Subsidiary pursuant to the terms of this Indenture.

        "SUBSIDIARY GUARANTOR" means, unless released from its Guarantee as permitted by this Indenture, any Restricted Subsidiary that (i) executes this Indenture as Subsidiary Guarantor or (ii) thereafter becomes a Guarantor of the Securities in compliance with the provisions of this Indenture by executing a supplemental indenture agreeing to be bound by the terms of this Indenture,

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until a successor replaces such Restricted Subsidiary pursuant to the applicable provisions hereof and, thereafter, means the successor.

        "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of this Indenture except as required by Section 9.03 hereof; PROVIDED that in the event the Trust Indenture Act of 1939 is amended after such date, "TRUST INDENTURE ACT" means, to the extent required by any such amendment, the Trust Indenture Act of 1939, as so amended.

        "TRADE ACCOUNTS PAYABLE" means accounts payable or other obligations of the Company or any Restricted Subsidiary to trade creditors created or assumed by the Company or such Restricted Subsidiary in the ordinary course of business in connection with the obtaining of goods or services.

        "TRUSTEE" means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor.

        "TRUST OFFICER" means any officer in the Corporate Trust Division of the Trustee or any other officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters.

        "UNIFORM COMMERCIAL CODE" means the New York Uniform Commercial Code as in effect from time to time.

        "UNRESTRICTED SUBSIDIARY" means (a) Forest Alaska Holding LLC, Forest Alaska Operating LLC, Forest Texas Gathering Company, Forest Exploration International (South Africa) (Proprietary) Limited, and Forest CMI S.p.A.; (b) each Subsidiary of the Company that the Company has designated pursuant to Section 4.15 as an Unrestricted Subsidiary; and (c) any Subsidiary of an Unrestricted Subsidiary.

        "VOLUMETRIC PRODUCTION PAYMENTS" means production payment obligations recorded as deferred revenue in accordance with GAAP, together with all undertakings and obligations in connection therewith.

        "VOTING STOCK" of any Person means Capital Stock of such Person which ordinarily has voting power for the election of directors (or persons performing similar functions) of such Person whether at all times or only so long as no senior class of securities has such voting power by reason of any contingency.

        "WHOLLY OWNED SUBSIDIARY" means, at any time, a Restricted Subsidiary of the Company all the Voting Stock of which (other than directors' qualifying shares) is at such time owned, directly or indirectly, by the Company and its other Wholly Owned Subsidiaries.

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        SECTION 1.02.    OTHER DEFINITIONS.    

Term	Defined in Section
"Agent Members"		2.01	(d)
"Authenticating Agent"		2.02
"Bankruptcy Law"		6.01
"Change of Control Offer"		4.09
"Change of Control Payment"		4.09
"Change of Control Payment Date"		4.09
"Claiming Guarantor"		10.02
"Company Order"		2.02
"Contributing Party"		10.02
"covenant defeasance option"		8.01	(b)
"Custodian"		6.01
"Event of Default"		6.01
"Excess Proceeds"		4.06
"Exchange Global Note"		2.01	(a)
"Global Securities"		2.01	(a)
"IAI"		2.01	(a)
"Institutional Accredited Investor Global Note"		2.01	(a)
"Global Security"		2.01	(a)
"legal defeasance option"		8.01	(b)
"Legal Holiday"		11.08
"Non-U.S. Persons		2.01	(a)
"Obligations"		10.01
"Offer Amount"		4.06
"Offer Period"		4.06
"Paying Agent"		2.03
"Permitted Consideration"		4.06
"Prepayment Offer"		4.06
"Prepayment Offer Notice"		4.06
"Private Placement Legend"		2.01	(c)
"Purchase Date"		4.06
"Registrar"		2.03
"Registration Default"		Exhibit A
"Regulation S"		2.01	(a)
"Regulation S Global Note"		2.01	(a)
"Regulation S Legend"		2.01	(c)
"Resale Restriction Termination Date"		2.06
"Rule 144A"		2.01	(a)
"Rule 144A Global Note"		2.01	(a)
"Successor Company"		5.01

        SECTION 1.03.    INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.    

        This Indenture is subject to the mandatory provisions of the TIA which are incorporated by reference in and made a part of this Indenture. The following TIA terms have the following meanings:

        "Commission" means the SEC.

        "indenture securities" means the Securities.

        "indenture security holder" means a Securityholder.

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        "indenture to be qualified" means this Indenture.

        "indenture trustee" or "institutional trustee" means the Trustee.

        "obligor" on the indenture securities means the Company, each Subsidiary Guarantor and any other obligor on the indenture securities.

        All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions.

        SECTION 1.04.    RULES OF CONSTRUCTION.    Unless the context otherwise requires:

        (a)   a term has the meaning assigned to it;

        (b)   an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

        (c)   "or" is not exclusive;

        (d)   "including" means including without limitation;

        (e)   words in the singular include the plural and words in the plural include the singular;

        (f)    unsecured Indebtedness shall not be deemed to be subordinate or junior to secured Indebtedness merely by virtue of its nature as unsecured Indebtedness;

        (g)   the principal amount of any noninterest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with GAAP; and

        (h)   the principal amount of any Preferred Stock shall be the greater of (i) the maximum liquidation value of such Preferred Stock or (ii) the maximum mandatory redemption or mandatory repurchase price with respect to such Preferred Stock.

ARTICLE II

THE SECURITIES

        SECTION 2.01.    FORM, DATING AND TERMS.    (a) The Initial Securities and the Additional Securities shall be in substantially the form set forth in Exhibit A hereto, which is hereby incorporated by reference and made a part of this Indenture, and the Exchange Securities shall be in substantially the form set forth in Exhibit B hereto, which is hereby incorporated by reference and made a part of this Indenture. The Initial Securities will be resold initially only to (A) QIBs in reliance on Rule 144A under the Securities Act ("Rule 144A") and (B) Persons other than U.S. Persons (as defined in Regulation S under the Securities Act ("Regulation S")) in reliance on Regulation S. Such Initial Securities may thereafter be transferred to among others, QIBs, purchasers in reliance on Regulation S and "institutional accredited investors" (as defined in Rule 501(a)(1), (2), (3) and (7) under the Securities Act) who are not QIBs ("IAIs") in accordance with the procedure described herein.

        Initial Securities and Additional Securities offered and sold to QIBs in the United States of America in reliance on Rule 144A will be issued initially in the form of a permanent global Security, without interest coupons, made a part of this Indenture, including appropriate legends as set forth in Section 2.01(c) (a "Rule 144A Global Note"), deposited with the Trustee, as custodian for DTC, duly executed by the Company and authenticated by the Trustee as hereinafter provided. A Rule 144A Global Note may be represented by more than one certificate, if so required by DTC's rules regarding the maximum principal amount to be represented by a single certificate. The aggregate principal amount of a Rule 144A Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC, as hereinafter provided.

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        Initial Securities and Additional Securities offered, sold and resold outside the United States of America to Persons other than U.S. Persons ("Non-U.S. Persons") in reliance on Regulation S will be issued initially in the form of a permanent global Security, including appropriate legends as set forth in 2.01(c) below (a "Regulation S Global Note") deposited with the Trustee, as custodian for DTC, duly executed by the Company and authenticated by the Trustee as hereinafter provided. A Regulation S Global Note may be represented by more than one certificate, if so required by DTC's rules regarding the maximum principal amount to be represented by a single certificate. The aggregate principal amount of a Regulation S Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC, as hereinafter provided.

        Initial Securities or Additional Securities resold after an initial resale thereof to QIBs in reliance on Rule 144A or an initial resale thereof in reliance on Regulation S to IAIs in the United States of America in accordance with the procedure described herein will be initially issued in the form of a permanent global Security (an "Institutional Accredited Investor Global Note") deposited with the Trustee, as custodian for DTC, duly executed by the Company and authenticated by the Trustee as hereinafter provided. An Institutional Accredited Investor Global Note may be represented by more that one certificate, if so required by DTC's rules regarding the maximum principal amount to be represented by a single certificate. The aggregate principal amount of an Institutional Accredited Investor Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC or its nominee, as hereinafter provided.

        Exchange Securities exchanged for interests in a Rule 144A Global Note, a Regulation S Global Note or an Institutional Accredited Investor Global Note will be issued initially in the form of a permanent global Security, deposited with the Trustee as hereinafter provided, including the appropriate legend set forth in Section 2.01(c) (an "Exchange Global Note"). An Exchange Global Note may be represented by more than one certificate, if so required by DTC's rules regarding the maximum principal amount to be represented by a single certificate.

        The Rule 144A Global Notes, the Regulation S Global Notes, the Institutional Accredited Investor Global Notes and the Exchange Global Notes are sometimes collectively herein referred to as the "Global Securities."

        Except as described in the succeeding two sentences, the principal of (and premium, if any) and interest on the Securities shall be payable at the office or agency of the Company maintained for such purpose in The City of New York, or at such other office or agency of the Company as may be maintained for such purpose pursuant to Section 2.03; provided, however, that, at the option of the Company, each installment of interest may be paid by (i) check mailed to addresses of the Persons entitled thereto as such addresses shall appear on the Note Register or (ii) wire transfer to an account located in the United States maintained by the payee. Payments in respect of Securities represented by a Global Security (including principal, premium and interest) will be made by wire transfer of immediately available funds to the accounts specified by DTC. Payments in respect of Securities represented by Definitive Securities (including principal, premium, if any, and interest) held by a Holder of at least $1,000,000 aggregate principal amount of Securities represented by Definitive Securities will be made by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 15 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion).

        The Securities may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject, if any, or usage, in addition to those set forth on Exhibits A and B and in Section 2.01(c) provided that any such notation, legend or endorsement is in a form reasonably acceptable to the Company. The Company and the Trustee shall approve the forms of

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the Securities and any notation, endorsement or legend on them. Each Security shall be dated the date of its authentication. The terms of the Securities set forth in Exhibit A and Exhibit B are part of the terms of this Indenture and, to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to be bound by such terms.

        (b)    Denominations.    The Securities shall be issuable only in fully registered form, without coupons, and only in minimum denominations of $2,000 and any integral multiple of $1,000 in excess thereof.

        (c)    Restrictive Legends.    The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture:

        (i)    Each Rule 144A Global Note and Institutional Accredited Investor Global Note shall bear the following legend (the "Private Placement Legend") on the face thereof:

"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.

THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF, AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES, TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") THAT IS ONE YEAR AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, PROVIDED THAT PRIOR TO SUCH TRANSFER, THE TRANSFEROR FURNISHES TO THE COMPANY AND THE TRUSTEE A CERTIFICATE CONTAINING CERTAIN REPRESENTATIONS RELATING TO THE PROPOSED TRANSFER BEING EFFECTED PURSUANT TO AND IN ACCORDANCE WITH REGULATION S (THE FORM OF WHICH CERTIFICATE CAN BE OBTAINED FROM THE TRUSTEE), (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000 OF SECURITIES FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT AND THAT,

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PRIOR TO SUCH TRANSFER, FURNISHES TO THE COMPANY AND THE TRUSTEE A CERTIFICATE CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH CERTIFICATE CAN BE OBTAINED FROM THE TRUSTEE), OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUER'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) AND (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE."

        (ii)   Each Regulation S Global Note shall bear the following legend (the "Regulation S Legend") on the face thereof:

"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS NOT A U.S. PERSON NOR IS IT PURCHASING FOR THE ACCOUNT OF A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT ("REGULATION S"), (2) BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE 40-DAY PERIOD REFERRED TO BELOW, ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S, PROVIDED THAT PRIOR TO SUCH TRANSFER, THE TRANSFEROR FURNISHES TO THE COMPANY AND THE TRUSTEE A CERTIFICATE CONTAINING CERTAIN REPRESENTATIONS RELATING TO THE PROPOSED TRANSFER BEING EFFECTED PURSUANT TO AND IN ACCORDANCE WITH REGULATION S (THE FORM OF WHICH CERTIFICATE CAN BE OBTAINED FROM THE TRUSTEE), (E) TO AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A TRANSACTION INVOLVING A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, AND THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE COMPANY AND THE TRUSTEE A CERTIFICATE CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH CERTIFICATE CAN BE OBTAINED FROM THE TRUSTEE), OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,

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SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM AND IN THE CASE OF THE FOREGOING CLAUSE (E), A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE COMPANY AND THE TRUSTEE. THIS LEGEND WILL BE REMOVED AFTER 40 CONSECUTIVE DAYS BEGINNING ON AND INCLUDING THE LATER OF (A) THE DAY ON WHICH THE SECURITIES ARE OFFERED TO PERSONS OTHER THAN DISTRIBUTORS (AS DEFINED IN REGULATION S) AND (B) THE DATE OF THE CLOSING OF THE ORIGINAL OFFERING. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT."

        (iii)  The Global Securities shall bear the following legend on the face thereof:

"UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF."

        (d)    Book-Entry Provisions.

        (i)    This Section 2.01(d) shall apply only to Global Securities deposited with the Trustee, as custodian for DTC.

        (ii)   Each Global Security initially shall (x) be registered in the name of Cede & Co., as nominee of DTC, (y) be delivered to the Trustee as custodian for DTC and (z) bear legends as set forth in Section 2.01(c).

        (iii)  Members of, or participants in, DTC ("Agent Members") shall have no rights under this Indenture with respect to any Global Security held on their behalf by DTC or by the Trustee as the custodian of DTC or under such Global Security, and DTC may be treated by the Company, each Subsidiary Guarantor, the Trustee and any agent of the Company, any Subsidiary Guarantor, or the Trustee as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, any Subsidiary Guarantor, the Trustee or any agent of the Company, any Subsidiary Guarantor or the Trustee from giving effect to any written certification, proxy or other authorization furnished by DTC or impair, as between DTC and its Agent Members, the operation of customary practices of DTC governing the exercise of the rights of a Holder of a beneficial interest in any Global Security.

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        (iv)  In connection with any transfer of a portion of the beneficial interest in a Global Security pursuant to subsection (e) of this Section to beneficial owners who are required to hold Definitive Securities, the Securities Custodian shall reflect on its books and records the date and a decrease in the principal amount of such Global Security in an amount equal to the principal amount of the beneficial interest in the Global Security to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver, one or more Definitive Securities of like tenor and amount.

        (v)   In connection with the transfer of an entire Global Security to beneficial owners pursuant to subsection (e) of this Section, such Global Security shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, and the Trustee shall authenticate and deliver, to each beneficial owner identified by DTC in exchange for its beneficial interest in such Global Security, an equal aggregate principal amount of Definitive Securities of authorized denominations.

        (vi)  The registered Holder of a Global Security may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Securities.

        (e)    Definitive Securities.

        (i)    Except as provided below, owners of beneficial interests in Global Securities will not be entitled to receive Definitive Securities. If required to do so pursuant to any applicable law or regulation, beneficial owners may obtain Definitive Securities in exchange for their beneficial interests in a Global Security upon written request in accordance with DTC's and the Registrar's procedures. In addition, Definitive Securities shall be transferred to all beneficial owners in exchange for their beneficial interests in a Global Security if (a) DTC notifies the Company that it is unwilling or unable to continue as depositary for such Global Security or DTC ceases to be a clearing agency registered under the Exchange Act, at a time when DTC is required to be so registered in order to act as depositary, and in each case a successor depositary is not appointed by the Company within 90 days of such notice or (b) the Company executes and delivers to the Trustee and Registrar an Officers' Certificate stating that such Global Security shall be so exchangeable.

        (ii)   Any Definitive Security delivered in exchange for an interest in a Global Security pursuant to Section 2.01(d)(iv) or (v) shall, except as otherwise provided by Section 2.06(c), bear the applicable legend regarding transfer restrictions applicable to the Definitive Security set forth in Section 2.01(c).

        (iii)  In connection with the exchange of a portion of a Definitive Security for a beneficial interest in a Global Security, the Trustee shall cancel such Definitive Security, and the Company shall execute, and the Trustee shall authenticate and deliver, to the transferring Holder a new Definitive Security representing the principal amount not so transferred.

        SECTION 2.02.    EXECUTION AND AUTHENTICATION.    One Officer shall sign the Securities for the Company by manual or facsimile signature. If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless, after giving effect to any exchange of Initial Securities or Additional Securities for Exchange Securities.

        A Security shall not be valid until an authorized signatory of the Trustee manually authenticates the Security. The signature of the Trustee on a Security shall be conclusive evidence that such Security has been duly and validly authenticated and issued under this Indenture. A Security shall be dated the date of its authentication.

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        At any time and from time to time after the execution and delivery of this Indenture, the Trustee shall authenticate and make available for delivery: (1) Initial Securities for original issue on the Issue Date in an aggregate principal amount of $600 million, (2) if and when issued, the Additional Securities and (3) Exchange Securities for issue only in a registered exchange offer pursuant to a Registration Rights Agreement, and only in exchange for Initial Securities or Additional Securities of an equal principal amount, and in each case upon a written order of the Company signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of the Company (the "Company Order"). Such Company Order shall specify the amount of the Securities to be authenticated and whether the Securities are to be Initial Securities, Additional Securities or Exchange Securities. The Trustee shall authenticate and make available for delivery Initial Securities on the Issue Date in an amount limited to $600 million aggregate principal amount and, subsequent to the Issue Date, such additional principal amount of Additional Securities as may be authorized from time to time by resolution adopted by the Company's Board of Directors, except for Securities authenticated and delivered upon registration or transfer of, or in exchange for, or in lieu of, other Securities pursuant to this Section 2.02, Section 2.06, Section 2.09, Section 2.11, Section 3.06 or Section 9.05 and except for Exchange Securities. All Securities issued on the Issue Date and all Additional Securities and Exchange Securities shall be of the same series and shall be identical in all respects other than issue dates, the date from which interest accrues and any changes relating thereto. No Additional Securities may be issued hereunder unless they are fungible with the Initial Securities for U.S. federal income tax purposes so that such Additional Securities will trade as part of a single class with the Initial Securities.

        With respect to any Additional Securities, there shall be established in or pursuant to a resolution of the Board of Directors of the Company, prior to the issuance of such Additional Securities:

        (a)   the aggregate principal amount of such Additional Securities which may be authenticated and delivered under this Indenture;

        (b)   the issue price and issuance date of such Additional Securities, including the date from which interest on such Additional Securities shall accrue;

        (c)   if applicable, that such Additional Securities shall be issuable in whole or in part in the form of one or more Global Securities and, in such case, the respective depositories for such Global Securities, the form of any legend or legends which shall be borne by any such Global Security in addition to or in lieu of that set forth in this Article II; and

        (d)   if applicable, that such Additional Securities shall not be issued in the form of Initial Securities subject to Exhibit A, but shall be issued in the form of Exchange Securities as set forth in Exhibit B.

        If any of the terms of any Additional Securities are established by action taken pursuant to a resolution of the Board of Directors of the Company, a copy of an appropriate record of such action shall be certified by the Secretary or any Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Officers' Certificate setting forth the terms of the Additional Securities.

        Notwithstanding anything to the contrary contained in this Indenture, the Holders of all Securities issued under this Indenture shall vote and consent together on all matters as one class and the Holders of any Initial Securities, Additional Securities, or Exchange Securities will not have the right to vote or consent as a separate class on any matter.

        The Trustee may appoint an agent (the "Authenticating Agent") reasonably acceptable to the Company to authenticate the Securities. Unless limited by the terms of such appointment, any such Authenticating Agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by the Authenticating Agent.

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        In case the Company, pursuant to Article V, shall be consolidated or merged with or into any other Person or shall convey, transfer or lease all or substantially all of the Property of the Company and its Restricted Subsidiaries, taken as a whole, to any Person, and the Successor Company resulting from such consolidation, or surviving such merger, or into which the Company shall have been merged, or the Person which shall have received a conveyance, transfer or lease as aforesaid, shall have executed an indenture supplemental hereto with the Trustee pursuant to Article V, any of the Securities authenticated or delivered prior to such consolidation, merger, conveyance, transfer or lease may, from time to time, at the request of the Successor Company, be exchanged for other Securities executed in the name of the Successor Company with such changes in phraseology and form as may be appropriate, but otherwise in substance of like tenor as the Securities surrendered for such exchange and of like principal amount; and the Trustee, upon Company Order of the Successor Company, shall authenticate and deliver Securities as specified in such order for the purpose of such exchange. If Securities shall at any time be authenticated and delivered in any new name of a Successor Company pursuant to this Section 2.02 in exchange or substitution for or upon registration of transfer of any Securities, such Successor Company, at the option of the Holders but without expense to them, shall provide for the exchange of all Securities at the time outstanding for Securities authenticated and delivered in such new name.

        SECTION 2.03.    REGISTRAR AND PAYING AGENT.    The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange (the "Registrar") and an office or agency where Securities may be presented for payment (the "Paying Agent"). The Company shall cause each of the Registrar and the Paying Agent to maintain an office or agency in the Borough of Manhattan, The City of New York. The Registrar shall keep a register of the Securities and of their transfer and exchange (the "Note Register"). The Company may have one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent.

        The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent or co-registrar not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of each such agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07. The Company or any of its Restricted Subsidiaries may act as Paying Agent, Registrar, co-registrar or transfer agent.

        The Company initially appoints the Trustee as Registrar and Paying Agent for the Securities.

        SECTION 2.04.    PAYING AGENT TO HOLD MONEY IN TRUST.    By at least 10:00 a.m. (New York City time) on the date on which any principal of, premium, if any, or interest on any Security is due and payable, the Company shall deposit with the Paying Agent a sum sufficient to pay such principal, premium or interest when due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that such Paying Agent shall hold in trust for the benefit of Security holders or the Trustee all money held by such Paying Agent for the payment of principal of, premium, if any, or interest on the Securities and shall notify the Trustee in writing of any default by the Company or any Subsidiary Guarantor in making any such payment. If the Company or a Restricted Subsidiary acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent (other than the Trustee) to pay all money held by it to the Trustee and to account for any funds disbursed by such Paying Agent. Upon complying with this Section, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money delivered to the Trustee. Upon any bankruptcy, reorganization or similar proceeding with respect to the Company when acting as Paying Agent, the Trustee shall serve as Paying Agent for the Securities.

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        SECTION 2.05.    SECURITYHOLDER LISTS.    The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, or to the extent otherwise required under the TIA, the Company shall furnish to the Trustee, in writing at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders.

        SECTION 2.06.    TRANSFER AND EXCHANGE.    (a) The following provisions shall apply with respect to any proposed transfer of a beneficial interest in a Rule 144A Global Note or an Institutional Accredited Investor Global Note or any Definitive Security issued in exchange therefor prior to the date which is one year after the later of the date of its original issue and the last date on which the Company or any affiliate of the Company was the owner of such Securities (or any predecessor thereto) (the "Resale Restriction Termination Date"):

        (i)    a transfer thereof to a QIB shall be made upon the representation of the transferee in the form as set forth on the reverse of the Security, that it is purchasing for its own account or an account with respect to which it exercises sole investment discretion and that each of it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A;

        (ii)   a transfer thereof to an IAI shall be made upon receipt by the Trustee or its agent of a certificate substantially in the form set forth in Section 2.07 from the proposed transferee and, if requested by the Company or the Trustee, the delivery of an opinion of counsel, certification and/or other information satisfactory to each of them; and

        (iii)  a transfer thereof to a Non-U.S. Person shall be made upon receipt by the Trustee or its agent of a certificate substantially in the form set forth in Section 2.08 from the transferor and, if requested by the Company or the Trustee, the delivery of an opinion of counsel, certification and/or other information satisfactory to each of them.

        (b)   The following provisions shall apply with respect to any proposed transfer of a beneficial interest in a Regulation S Global Note or any Definitive Securities issued in exchange therefor prior to the expiration of the Restricted Period:

        (i)    a transfer thereof to a QIB shall be made upon the representation of the transferee, in the form of assignment on the reverse of the Securities, that it is purchasing the Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A;

        (ii)   a transfer thereof to an IAI shall be made upon receipt by the Trustee or its agent of a certificate substantially in the form set forth in Section 2.07 from the proposed transferee and, if requested by the Company or the Trustee, the delivery of an opinion of counsel, certification and/or other information satisfactory to each of them; and

        (iii)  a transfer thereof to a Non-U.S. Person shall be made upon receipt by the Trustee or its agent of a certificate substantially in the form set forth in Section 2.08 hereof from the transferor

29

and, if requested by the Company or the Trustee, delivery of an opinion of counsel, certification and/or other information satisfactory to each of them.

        After the expiration of the Restricted Period, beneficial interests in the Regulation S Global Note or Definitive Securities issued in exchange therefor may be transferred without requiring certification set forth in Section 2.07, Section 2.08 or any additional certification.

        (c)    Restricted Securities Legend.    Upon the transfer, exchange or replacement of Securities not bearing a Restricted Securities Legend, the Registrar shall deliver Securities that do not bear a Restricted Securities Legend. Upon the transfer, exchange or replacement of Securities bearing a Restricted Securities Legend, the Registrar shall deliver only Securities that bear a Restricted Securities Legend unless such Securities are Exchange Securities issued in a registered exchange offer or are otherwise sold under an effective registration statement under the Securities Act or there is delivered to the Registrar an opinion of counsel to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act.

        (d)   The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.01 or this Section 2.06. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable prior written notice to the Registrar.

        (e)    Obligations with Respect to Transfers and Exchanges of Securities.

        (i)    To permit registrations of transfers and exchanges, the Company shall, subject to the other terms and conditions of this Article II, execute and the Trustee shall authenticate Definitive Securities and Global Securities at the Registrar's or co-registrar's request.

        (ii)   No service charge shall be made to a Holder for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax, assessments, or similar governmental charge payable in connection therewith (other than any such transfer taxes, assessments or similar governmental charges payable upon exchange or transfer pursuant to Sections 4.06, 4.09 or 9.05).

        (iii)  The Registrar or co-registrar shall not be required to register the transfer of or exchange of any Security for a period of (1) 15 days before a selection of Securities to be redeemed or (2) 15 days before an interest payment date.

        (iv)  Prior to the due presentation for registration of transfer of any Security, the Company, each Subsidiary Guarantor, the Trustee, the Paying Agent, the Registrar or any co-registrar may deem and treat the Person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of, premium, if any, and interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Company, any Subsidiary Guarantor, the Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected by notice to the contrary.

        (v)   All Securities issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Securities surrendered upon such transfer or exchange.

        (f)    No Obligation of the Trustee.

        (i)    The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Security, a member of, or a participant in, DTC or other Person with respect to the accuracy of the records of DTC or its nominee or of any participant or member thereof, with respect to any ownership interest in the Securities or with respect to the delivery to any participant, member, beneficial owner or other Person (other than DTC) of any notice (including any notice of

30

redemption) or the payment of any amount or delivery of any Securities (or other security or property) under or with respect to such Securities. All notices and communications to be given to the Holders and all payments to be made to Holders in respect of the Securities shall be given or made only to or upon the order of the registered Holders (which shall be DTC or its nominee in the case of a Global Security). The rights of beneficial owners in any Global Security shall be exercised only through DTC subject to the applicable rules and procedures of DTC. The Trustee may rely and shall be fully protected in relying upon information furnished by DTC with respect to its members, participants and any beneficial owners.

        (ii)   The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among DTC participants, members or beneficial owners in any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

        SECTION 2.07.    FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS TO INSTITUTIONAL ACCREDITED INVESTORS.    

[Date]

Forest Oil Corporation
c/o U.S. Bank National Association
Corporate Trust Services
EP-MN-WS2N
60 Livingston Avenue
St. Paul, MN 55107

Ladies and Gentlemen:

        This certificate is delivered to request a transfer of $                   principal amount of the 8¹/2% Senior Notes due 2014 (the "Securities") of Forest Oil Corporation (the "Company").

        Upon transfer, the Securities would be registered in the name of the new beneficial owner as follows:

Name:

Address:

Taxpayer ID Number:

        The undersigned represents and warrants to you that:

        1.     We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the "Securities Act")) purchasing for our own account or for the account of such an institutional "accredited investor" at least $250,000 principal amount of the Securities, and we are acquiring the Securities not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act. We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risk of our investment in the Securities and we invest in or purchase securities similar to the Securities in the normal course of our business. We and any accounts for which we are acting are each able to bear the economic risk of our or its investment.

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        2.     We understand that the Securities have not been registered under the Securities Act and, unless so registered, may not be sold except as permitted in the following sentence. We agree on our own behalf and on behalf of any investor account for which we are purchasing Securities to offer, sell or otherwise transfer such Securities prior to the date that is one year after the later of the date of original issue and the last date on which the Company or any affiliate of the Company was the owner of such Securities (or any predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the Company, (b) pursuant to a registration statement which has been declared effective under the Securities Act, (c) in a transaction complying with the requirements of Rule 144A under the Securities Act, to a person we reasonably believe is a qualified institutional buyer under Rule 144A (a "QIB") that purchases for its own account or for the account of a QIB and to whom notice is given that the transfer is being made in reliance on Rule 144A, (d) pursuant to offers and sales that occur outside the United States within the meaning of Regulation S under the Securities Act, (e) to an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is purchasing for its own account or for the account of such an institutional "accredited investor," in each case in a minimum principal amount of Securities of $250,000 or (f) pursuant to any other available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to any requirement of law that the disposition of our property or the property of such investor account or accounts be at all times within our or their control and in compliance with any applicable state securities laws. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Securities is proposed to be made pursuant to clause (e) above prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Company and the Trustee, which shall provide, among other things, that the transferee is an institutional "accredited investor" (within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act) and that it is acquiring such Securities for investment purposes and not for distribution in violation of the Securities Act. Each purchaser acknowledges that the Company and the Trustee reserve the right prior to any offer, sale or other transfer prior to the Resale Termination Date of the Securities pursuant to clauses (d), (e) or (f) above to require the delivery of an opinion of counsel, certifications and/or other information satisfactory to the Company and the Trustee.

TRANSFEREE:

BY:

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        SECTION 2.08.    FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S.    

[Date]

Forest Oil Corporation
c/o U.S. Bank National Association
Corporate Trust Services
EP-MN-WS2N
60 Livingston Avenue
St. Paul, MN 55107

Re:

Forest Oil Corporation
8¹/2% Senior Notes due 2014 (the "Securities")

Ladies and Gentlemen:

        In connection with our proposed sale of $                  aggregate principal amount of the Securities, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent that:

        (a)   the offer of the Securities was not made to a person in the United States;

        (b)   either (i) at the time the buy order was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States or (ii) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been pre-arranged with a buyer in the United States;

        (c)   no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; and

        (d)   the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act.

        In addition, if the sale is made during a restricted period and the provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are applicable thereto, we confirm that such sale has been made in accordance with the applicable provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may be.

        You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S.

Very truly yours,
[Name of Transferor]
By:
	Authorized Signature

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        SECTION 2.09.    REPLACEMENT SECURITIES.    If a mutilated Security is surrendered to the Registrar or if the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security if the requirements of Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies any other reasonable requirements of the Trustee. If required by the Trustee or the Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee, the Paying Agent, the Registrar and any co-registrar from any loss which any of them may suffer if a Security is replaced, and, in the absence of notice to the Company, any Subsidiary Guarantor or the Trustee that such Security has been acquired by a protected purchaser, the Company shall execute and upon Company Order the Trustee shall authenticate and make available for delivery, in exchange for any such mutilated Security or in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount, bearing a number not contemporaneously outstanding.

        In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security.

        Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) in connection therewith.

        Every new Security issued pursuant to this Section in lieu of any mutilated, destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, any Subsidiary Guarantor (if applicable) and any other obligor upon the Securities, whether or not the mutilated, destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder.

        The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities.

        SECTION 2.10.    OUTSTANDING SECURITIES.    Securities outstanding at any time are all Securities authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation and those described in this Section as not outstanding. A Security ceases to be outstanding in the event the Company or a Subsidiary of the Company holds the Security, provided, however, that (i) for purposes of determining which are outstanding for consent or voting purposes hereunder, Securities shall cease to be outstanding in the event the Company or an Affiliate of the Company holds the Security and (ii) in determining whether the Trustee shall be protected in making a determination whether the Holders of the requisite principal amount of outstanding Securities are present at a meeting of Holders of Securities for quorum purposes or have consented to or voted in favor of any request, demand, authorization, direction, notice, consent, waiver, amendment or modification hereunder, or relying upon any such quorum, consent or vote, only Securities which a Trust Officer of the Trustee actually knows to be held by the Company or an Affiliate of the Company shall not be considered outstanding.

        If a Security is replaced pursuant to Section 2.09, it ceases to be outstanding unless the Trustee and the Company receive proof satisfactory to them that the replaced Security is held by a protected purchaser.

        If the Paying Agent segregates and holds in trust, in accordance with this Indenture, by 10:00 a.m. (New York City time) on a redemption date or Stated Maturity date money sufficient to pay all principal and interest payable on that date with respect to the Securities (or portions thereof) to be

34

redeemed or maturing, as the case may be, then on and after that date such Securities (or portions thereof) cease to be outstanding and interest on them ceases to accrue.

        SECTION 2.11.    TEMPORARY SECURITIES.    Until Definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of Definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate Definitive Securities. After the preparation of Definitive Securities, the temporary Securities shall be exchangeable for Definitive Securities upon surrender of the temporary Securities at any office or agency maintained by the Company for that purpose and such exchange shall be without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute, and the Trustee shall authenticate and make available for delivery in exchange therefor, one or more Definitive Securities representing an equal principal amount of Securities. Until so exchanged, the Holder of temporary Securities shall in all respects be entitled to the same benefits under this Indenture as a Holder of Definitive Securities.

        SECTION 2.12.    CANCELLATION.    The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Securities surrendered for registration of transfer, exchange, payment or cancellation and dispose of such Securities in accordance with its internal policies including delivery of a Certificate of Destruction describing such Securities. The Company may not issue new Securities to replace Securities it has paid or delivered to the Trustee for cancellation for any reason other than in connection with a transfer or exchange.

        SECTION 2.13.    DEFAULTED INTEREST.    If the Company defaults in a payment of interest on the Securities, the Company shall pay defaulted interest (plus interest on such defaulted interest to the extent lawful) in any lawful manner. The Company may pay the defaulted interest to the Persons who are Securityholders on a subsequent special record date. The Company shall fix or cause to be fixed any such special record date and payment date to the reasonable satisfaction of the Trustee and shall promptly mail to each Securityholder a notice that states the special record date, the payment date and the amount of defaulted interest to be paid.

        SECTION 2.14.    COMPUTATION OF INTEREST.    Interest on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months.

        SECTION 2.15.    CUSIP NUMBERS.    The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; PROVIDED, HOWEVER, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company shall promptly notify the Trustee of any change in the CUSIP numbers.

ARTICLE III

REDEMPTION

        SECTION 3.01.    NOTICES TO TRUSTEE.    If the Company elects to redeem Securities pursuant to paragraph 5 of the Securities, it shall notify the Trustee in writing of the redemption date, the principal amount of Securities to be redeemed and the paragraph of the Securities pursuant to which such redemption is being made. In connection with any such redemption pursuant to the second paragraph of paragraph 5 of the Securities, the Company shall deliver to the Trustee an Officers' Certificate setting forth the redemption price on all Securities to be redeemed, and the Trustee shall

35

rely solely upon, and shall be fully protected in relying upon such Officers' Certificate, in all matters concerning the redemption price.

        The Company shall give each notice to the Trustee provided for in this Section at least five Business Days before mailing any notice of redemption pursuant to Section 3.03, unless the Trustee consents to a shorter period. Such notice shall be accompanied by an Officers' Certificate and an Opinion of Counsel from the Company to the effect that such redemption will comply with the conditions herein.

        SECTION 3.02.    SELECTION OF SECURITIES TO BE REDEEMED.    If less than all the Securities are to be redeemed at any time, selection of Securities for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Securities are listed, or, if the Securities are not so listed, on a pro rata basis or by such other method that the Trustee shall deem fair and appropriate. The Trustee shall make the selection from outstanding Securities not previously called for redemption. The Trustee may select for redemption portions of the principal of Securities that have denominations larger than $2,000. Securities and portions of them the Trustee selects shall be in minimum amounts of $2,000 or a whole multiple of $1,000 in excess thereof. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Trustee shall notify the Company promptly of the Securities or portions of Securities to be redeemed.

        SECTION 3.03.    NOTICE OF REDEMPTION.    At least 30 days but not more than 60 days before a date for optional redemption of Securities, the Company shall mail a notice of redemption by first-class mail to each Holder of Securities to be redeemed.

        The notice shall identify the Securities to be redeemed and shall state:

        (a)   the redemption date;

        (b)   the redemption price (if then determinable or, if not, then the method for determination of the redemption price);

        (c)   the name and address of the Paying Agent;

        (d)   that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price;

        (e)   if fewer than all the outstanding Securities are to be redeemed, the identification and principal amounts of the particular Securities to be redeemed;

        (f)    that, unless the Company defaults in making such redemption payment, interest on Securities (or portion thereof) called for redemption ceases to accrue on and after the redemption date; and

        (g)   that no representation is made as to the correctness or accuracy of the CUSIP number and ISIN number, if any, listed in such notice or printed on the Securities.

        At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. In such event, the Company shall provide the Trustee with the information required by this Section.

        SECTION 3.04.    EFFECT OF NOTICE OF REDEMPTION.    Once notice of redemption is mailed, Securities called for redemption become due and payable on the redemption date and at the applicable redemption price. Upon surrender to the Paying Agent, such Securities shall be paid at the applicable redemption price, plus accrued and unpaid interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of redemption). Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder. The Company is

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not required to transfer or exchange any Security selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed). Also, the Company is not required to transfer or exchange any Security for a period of 15 days before a selection of Securities to be redeemed.

        SECTION 3.05.    DEPOSIT OF REDEMPTION PRICE.    By 10:00 a.m. (New York City time) on the redemption date, the Company shall deposit with the Paying Agent (or, if the Company or a Restricted Subsidiary is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption price of and accrued and unpaid interest (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of redemption) on all Securities to be redeemed on that date other than Securities or portions of Securities called for redemption which have been delivered by the Company to the Trustee for cancellation.

        SECTION 3.06.    SECURITIES REDEEMED IN PART.    Upon surrender of a Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate for the Holder (at the Company's expense) a new Security equal in principal amount to the unredeemed portion of the Security surrendered.

ARTICLE IV

COVENANTS

        SECTION 4.01.    PAYMENT OF SECURITIES.    The Company shall promptly pay the principal of and interest and premium, if any, on the Securities on the dates and in the manner provided in the Securities and in this Indenture. Principal, premium and interest shall be considered paid on the date due if by10:00 a.m. (New York City time) on such date the Trustee or the Paying Agent holds in accordance with this Indenture money sufficient to pay timely all principal, premium and interest then due.

        The Company shall pay interest on overdue principal at the rate specified therefor in the Securities, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful.

        SECTION 4.02.    SEC REPORTS.    Notwithstanding that the Company may not be required to remain subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company shall file with the SEC and provide the Trustee and Holders of Securities with copies of the quarterly and annual financial information required to be contained in a filing with the SEC on Forms 10-Q and 10-K, including a Management's Discussion and Analysis of Financial Condition and Results of Operations, and, with respect to the annual consolidated financial statements only, a report thereon by the Company's independent auditors; PROVIDED, HOWEVER, that the Company shall not be so obligated to file such information with the SEC if the SEC does not permit such filings. The Company shall comply with the other provisions of Section 314(a) of the Trust Indenture Act.

        SECTION 4.03.    LIMITATION ON INDEBTEDNESS.    The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, Incur any Indebtedness unless, after giving pro forma effect to the Incurrence of such Indebtedness and the receipt and application of the proceeds thereof, no Default would occur as a consequence of, and no Event of Default would be continuing following, such Incurrence and application and either (a) the Consolidated Interest Coverage Ratio would exceed 2.25 to 1.0 or (b) such Indebtedness is Permitted Indebtedness.

        SECTION 4.04.    LIMITATION ON RESTRICTED PAYMENTS.    (a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, make any Restricted Payment if, at the time of and after giving effect to the proposed Restricted Payment, (i) any Default or Event of Default would have occurred and be continuing, (ii) the Company could not Incur at least $1.00 of

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additional Indebtedness pursuant to clause (a) of Section 4.03 or (iii) the aggregate amount expended or declared for all Restricted Payments from the Reference Date would exceed the sum (without duplication) of the following:

        (A)  50% of the aggregate Consolidated Net Income of the Company accrued on a cumulative basis commencing on the last day of the fiscal quarter immediately preceding the fiscal quarter in which the Reference Date occurs, and ending on the last day of the fiscal quarter ending on or immediately preceding the date of such proposed Restricted Payment (or, if such aggregate Consolidated Net Income shall be a loss, minus 100% of such loss), plus

        (B)  the aggregate net cash proceeds, or the Fair Market Value of Property other than cash, received by the Company on or after the Reference Date from the issuance or sale (other than to a Subsidiary of the Company) of Capital Stock of the Company, plus

        (C)  the aggregate net cash proceeds, or the Fair Market Value of Property other than cash, received by the Company as capital contributions to the Company (other than from a Subsidiary of the Company) on or after the Reference Date, plus

        (D)  the aggregate net cash proceeds received by the Company from the issuance or sale (other than to any Subsidiary of the Company) on or after the Reference Date of convertible Indebtedness that has been converted into or exchanged for Capital Stock of the Company, together with the aggregate net cash proceeds received by the Company at the time of such conversion or exchange or received by the Company from any such conversion or exchange of convertible Indebtedness issued or sold (other than to any Subsidiary of the Company) prior to the Reference Date, plus

        (E)  to the extent not otherwise included in the Company's Consolidated Net Income, an amount equal to the net reduction in Investments made by the Company and its Restricted Subsidiaries subsequent to the Reference Date in any Person resulting from (1) payments of interest on debt, dividends, repayments of loans or advances or other transfers or distributions of Property, in each case to the Company or any Restricted Subsidiary from any Person other than the Company or a Restricted Subsidiary, and in an amount not to exceed the book value of such Investments previously made in such Person that were treated as Restricted Payments, or (2) the designation of any Unrestricted Subsidiary as a Restricted Subsidiary, and in an amount not to exceed the lesser of (x) the book value of all Investments previously made in such Unrestricted Subsidiary that were treated as Restricted Payments and (y) the Fair Market Value of such Unrestricted Subsidiary, plus

        (F)  $25,000,000.

        (b) The limitations set forth in paragraph (a) above will not prevent the following Restricted Payments so long as, at the time thereof, no Default or Event of Default shall have occurred and be continuing (except in the case of clause (i), under which the payment of a dividend is permitted):

          (i)  the payment of any dividend on Capital Stock of the Company or any Restricted Subsidiary within 60 days after the declaration thereof, if at such declaration date such dividend could have been paid in compliance with paragraph (a) above;

         (ii)  the repurchase, redemption or other acquisition or retirement for value of any Capital Stock of the Company or any of its Subsidiaries held by any current or former officers, directors or employees of the Company or any of its Subsidiaries pursuant to the terms of agreements (including employment agreements) or plans approved by the Company's Board of Directors, including any such repurchase, redemption, acquisition or retirement of shares of such Capital Stock that is deemed to occur upon the exercise of stock options or similar rights if such shares represent all or a portion of the exercise price or are surrendered in connection with satisfying United States or Canadian Federal income tax obligations; PROVIDED,

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HOWEVER, that the aggregate amount of such repurchases, redemptions, acquisitions and retirements shall not exceed the sum of (A) $10,000,000 in any 12-month period and (B) the aggregate net proceeds, if any, received by the Company during such 12-month period from any issuance of such Capital Stock pursuant to such agreements or plans;

        (iii)  the purchase, redemption or other acquisition or retirement for value of any Capital Stock of the Company or any Restricted Subsidiary, in exchange for, or out of the aggregate net cash proceeds of, a substantially concurrent issuance and sale (other than to a Subsidiary of the Company or an employee stock ownership plan or trust established by the Company or any of its Subsidiaries, for the benefit of their employees) of Capital Stock of the Company;

        (iv)  the making of any principal payment on or the repurchase, redemption, legal defeasance or other acquisition or retirement for value, prior to any scheduled principal payment, scheduled sinking fund payment or maturity, of any Subordinated Indebtedness in exchange for, or out of the aggregate net cash proceeds of, a substantially concurrent issuance and sale (other than to a Subsidiary of the Company or an employee stock ownership plan or trust established by the Company or any of its Subsidiaries, for the benefit of their employees) of Capital Stock of the Company;

         (v)  the making of any principal payment on or the repurchase, redemption, legal defeasance or other acquisition or retirement for value of Subordinated Indebtedness in exchange for, or out of the aggregate net cash proceeds of, a substantially concurrent Incurrence (other than a sale to a Subsidiary of the Company) of Subordinated Indebtedness so long as such new Indebtedness is Permitted Refinancing Indebtedness and (A) has an Average Life that is longer than the Average Life of the Securities and (B) has a Stated Maturity for its final scheduled principal payment that is more than one year after the Stated Maturity of the final scheduled principal payment of the Securities;

        (vi)  the making of any principal payment on or the repurchase, redemption, legal defeasance or other acquisition or retirement for value, prior to any scheduled principal payment, scheduled sinking fund payment or maturity, of any Subordinated Indebtedness that is either (A) existing on the Issue Date or (B) issued after the Issue Date in exchange for, or for aggregate net cash proceeds used to repurchase, redeem, legally defease or otherwise acquire or retire for value, Subordinated Indebtedness existing on the Issue Date; provided, however, that the aggregate principal amount of such Subordinated Indebtedness issued after the Issue Date shall not exceed the aggregate principal amount of the Subordinated Indebtedness existing on the Issue Date so exchanged, repurchased, redeemed, legally defeased or otherwise acquired or retired for value; and

       (vii)  loans made to officers, directors or employees of the Company or any Restricted Subsidiary approved by the Board of Directors (or a duly authorized officer), the net cash proceeds of which are used solely (A) to purchase common stock of the Company in connection with a restricted stock or employee stock purchase plan, or to exercise stock options received pursuant to an employee or director stock option plan or other incentive plan, in a principal amount not to exceed the exercise price of such stock options or (B) to refinance loans, together with accrued interest thereon, made pursuant to item (A) of this clause (vii).

        The actions described in clauses (i) and (ii) of this paragraph (b) shall be included in subsequent calculations of the amount of Restricted Payments. The actions described in clauses (iii), (iv), (v), (vi) and (vii) of this paragraph (b) shall be excluded in the subsequent calculations of the amount of Restricted Payments; PROVIDED that the net cash proceeds from any issuance or sale of Capital Stock of the Company pursuant to such clauses (iii), (iv) and (vii) shall be excluded from any calculations pursuant to clauses (B) or (C) under the immediately preceding paragraph (a).

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        The amount of all Restricted Payments (other than cash) shall be the Fair Market Value on the date of the Restricted Payment of the securities or other assets proposed to be issued or transferred by the Company or any of its Restricted Subsidiaries, as the case may be, pursuant to the Restricted Payment.

        SECTION 4.05.    LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED SUBSIDIARIES.    The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the legal right of any Restricted Subsidiary to (i) pay dividends, in cash or otherwise, or make any other distributions on or in respect of its Capital Stock, or pay any Indebtedness or other obligation owed, to the Company or any other Restricted Subsidiary, (ii) make loans or advances to the Company or any other Restricted Subsidiary or (iii) transfer any of its Property to the Company or any other Restricted Subsidiary. Such limitation will not apply (a) with respect to clauses (i), (ii) and (iii), to encumbrances and restrictions (1) in Bank Credit Facilities and other agreements and instruments, in each case as in effect on the Issue Date, (2) relating to Indebtedness of a Restricted Subsidiary and existing at the time it became a Restricted Subsidiary if such encumbrance or restriction was not created in anticipation of or in connection with the transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary PROVIDED, that any such encumbrance or restriction shall not extend to any assets or property of the Company or any other Restricted Subsidiary other than the assets and property so acquired and that, in the case of Indebtedness, was permitted to be Incurred pursuant to this Indenture; (3) which result from the renewal, refinancing, extension or amendment of an agreement that is the subject of clause (a) (1) or (2) above or clause (b) (1) or (2) below, or any agreement for the sale or other disposition of Property, including without limitation an agreement for the sale or other disposition of the Capital Stock or Property of a Restricted Subsidiary, that restricts distributions, advances or transfers by the applicable Restricted Subsidiary pending the sale of or other disposition; PROVIDED that such encumbrance or restriction is not materially less favorable to the Holders of Securities than those under or pursuant to the agreement so renewed, refinanced, extended or amended, and (b) with respect to clause (iii) only, to (1) any restriction on the sale, transfer or other disposition of Property relating to Indebtedness that is permitted to be Incurred and secured under Sections 4.03 and 4.10, (2) any encumbrance or restriction applicable to Property at the time it is acquired by the Company or a Restricted Subsidiary, so long as such encumbrance or restriction relates solely to the Property so acquired and was not created in anticipation of or in connection with such acquisition, (3) customary provisions restricting subletting or assignment of leases and customary provisions in other agreements that restrict assignment of such agreements or rights thereunder and (4) customary restrictions contained in asset sale agreements limiting the transfer of such assets pending the closing of such sale.

        SECTION 4.06.    LIMITATION ON ASSET SALES.    (a) The Company will not, and will not permit any Restricted Subsidiary to, consummate any Asset Sale unless (i) the Company or such Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the Property subject to such Asset Sale and (ii) all of the consideration paid to the Company or such Restricted Subsidiary in connection with such Asset Sale is in the form of cash, cash equivalents, Liquid Securities, Exchanged Properties or the assumption by the purchaser of liabilities of the Company (other than liabilities of the Company that are by their terms subordinated to the Securities) or liabilities of any Restricted Subsidiary that made such Asset Sale (other than liabilities of any Subsidiary Guarantor that are by their terms subordinated to such Subsidiary Guarantor's Subsidiary Guarantee), in each case as a result of which the Company and its remaining Restricted Subsidiaries are no longer liable for such liabilities ("PERMITTED CONSIDERATION"); PROVIDED, HOWEVER, that the Company and its Restricted Subsidiaries shall be permitted to receive Property other than Permitted Consideration, so long as the aggregate Fair Market Value of all such Property other than Permitted Consideration received from Asset Sales

40

and held by the Company and the Restricted Subsidiaries at any one time shall not exceed 10.0% of Adjusted Consolidated Net Tangible Assets.

        The Net Available Cash from Asset Sales by the Company or a Restricted Subsidiary may be applied by the Company, such Restricted Subsidiary or another Restricted Subsidiary, to the extent the Company elects (or is required by the terms of any Pari Passu Indebtedness of the Company or a Restricted Subsidiary), to (i) prepay, repay or purchase Pari Passu Indebtedness of the Company (including the Securities) or a Subsidiary Guarantor or any Indebtedness of a Restricted Subsidiary that is not a Subsidiary Guarantor (in each case excluding Indebtedness owed to the Company or an Affiliate of the Company); or (ii) to reinvest in Additional Assets (including by means of an Investment in Additional Assets by a Restricted Subsidiary with Net Available Cash received by the Company or another Restricted Subsidiary).

        (b) Any Net Available Cash from an Asset Sale not applied in accordance with the preceding paragraph within 365 days from the date of such Asset Sale will constitute "Excess Proceeds". When the aggregate amount of Excess Proceeds exceeds $50,000,000, an offer to purchase Securities having an aggregate principal amount equal to the aggregate amount of Excess Proceeds (the "PREPAYMENT OFFER") must be made by the Company at a purchase price equal to 100% of the principal amount of such Securities plus accrued and unpaid interest, if any, to the Purchase Date (as defined) in accordance with the procedures (including prorating in the event of oversubscription) set forth in this Indenture, but, if the terms of any Pari Passu Indebtedness require that a Pari Passu Offer be made contemporaneously with the Prepayment Offer, then the Excess Proceeds shall be prorated between the Prepayment Offer and such Pari Passu Offer in accordance with the aggregate outstanding principal amounts of the Securities and such Pari Passu Indebtedness, and the aggregate principal amount of Securities for which the Prepayment Offer is made shall be reduced accordingly. If the aggregate principal amount of Securities tendered by Holders thereof exceeds the amount of available Excess Proceeds, then such Excess Proceeds will be allocated pro rata according to the principal amount of the Securities tendered and the Trustee will select the Securities to be purchased in accordance with this Indenture. To the extent that any portion of the amount of Excess Proceeds remains after compliance with the second sentence of this paragraph and PROVIDED that all Holders of Securities have been given the opportunity to tender their Securities for purchase as described in the following paragraph in accordance with this Indenture, the Company and its Restricted Subsidiaries may use such remaining amount for purposes permitted by this Indenture and the amount of Excess Proceeds will be reset to zero.

        (c) (1) Within 30 days after the 365th day following the date of an Asset Sale, the Company shall, if it is obligated to make an offer to purchase the Securities pursuant to the preceding paragraph, send a written Prepayment Offer notice, by first-class mail, to the Holders of the Securities (the "PREPAYMENT OFFER NOTICE"), accompanied by such information regarding the Company and its Subsidiaries as the Company believes will enable such Holders of the Securities to make an informed decision with respect to the Prepayment Offer (which at a minimum shall include (i) the most recently filed Annual Report on Form 10-K (including audited consolidated financial statements) of the Company, the most recent subsequently filed Quarterly Report on Form 10-Q of the Company and any Current Report on Form 8-K of the Company filed subsequent to such Quarterly Report, other than Current Reports describing Assets Sales otherwise described in the offering materials, or corresponding successor reports (or, during any time that the Company is not subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, corresponding reports prepared pursuant to Section 4.02), (ii) a description of material developments in the Company's business subsequent to the date of the latest such reports and (iii) if material, appropriate pro forma financial information). The Prepayment Offer Notice shall state, among other things, (i) that the Company is offering to purchase Securities pursuant to the provisions of this Indenture, (ii) that any Security (or any portion thereof) accepted for payment (and duly paid on the Purchase Date) pursuant to the Prepayment Offer shall cease to accrue interest on the Purchase Date, (iii) that any Securities (or portions thereof) not properly tendered will

41

continue to accrue interest, (iv) the purchase price and purchase date, which shall be, subject to any contrary requirements of applicable law, no less than 30 days nor more than 60 days after the date the Prepayment Offer Notice is mailed (the "PURCHASE DATE"), (v) the aggregate principal amount of Securities to be purchased, (vi) a description of the procedures which Holders of Securities must follow in order to tender their Securities and the procedures that Holders of Securities must follow in order to withdraw an election to tender their Securities for payment and (vii) all other instructions and materials necessary to enable Holders to tender Securities pursuant to the Prepayment Offer.

        (2) Not later than the date upon which written notice of a Prepayment Offer is delivered to the Trustee as provided above, the Company shall deliver to the Trustee an Officers' Certificate as to (i) the amount of the Prepayment Offer (the "OFFER AMOUNT"), (ii) the allocation of the Net Available Cash from the Asset Sales pursuant to which such Prepayment Offer is being made and (iii) the compliance of such allocation with the provisions of Section 4.06(a). On such date, the Company shall also irrevocably deposit with the Trustee or with the Paying Agent (or, if the Company or a Restricted Subsidiary is the Paying Agent, shall segregate and hold in trust) in Permitted Short-Term Investments, maturing on the last day prior to the Purchase Date or on the Purchase Date if funds are immediately available by open of business, an amount equal to the Offer Amount to be held for payment in accordance with the provisions of this Section. Upon the expiration of the period for which the Prepayment Offer remains open (the "OFFER PERIOD"), the Company shall deliver to the Trustee for cancellation the Securities or portions thereof which have been properly tendered to and are to be accepted by the Company. The Trustee or Paying Agent, as applicable, shall, on or promptly after the Purchase Date, mail or deliver payment to each tendering Holder in the amount of the purchase price. In the event that the aggregate purchase price of the Securities delivered by the Company to the Trustee is less than the Offer Amount, the Trustee shall deliver the excess to the Company immediately after the expiration of the Offer Period for application in accordance with this Section.

        (3) Holders electing to have a Security purchased shall be required to surrender the Security, with an appropriate form duly completed, to the Company at the address specified in the notice at least three Business Days prior to the Purchase Date. Holders shall be entitled to withdraw their election if the Trustee or the Company receives not later than one Business Day prior to the Purchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security which was delivered for purchase by the Holder and a statement that such Holder is withdrawing his election to have such Security purchased. If at the expiration of the Offer Period the aggregate principal amount of Securities surrendered by Holders exceeds the Offer Amount, the Company shall select the Securities to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Securities in minimum denominations of $2,000, or integral multiples of $1,000 in excess thereof, shall be purchased). Holders whose Securities are purchased only in part shall be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered.

        (4) At the time the Company delivers Securities to the Trustee which are to be accepted for purchase, the Company shall also deliver an Officers' Certificate stating that such Securities are to be accepted by the Company pursuant to and in accordance with the terms of this Section 4.06. A Security shall be deemed to have been accepted for purchase at the time the Trustee, directly or through an agent, mails or delivers payment therefor to the surrendering Holder.

42

        (d)   The Company shall comply, to the extent applicable, with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws or regulations thereunder to the extent such laws and regulations are applicable in connection with the purchase of Securities as described above. To the extent that the provisions of any securities laws or regulations conflict with the provisions relating to the Prepayment Offer, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described above by virtue thereof.

        SECTION 4.07.    LIMITATION ON TRANSACTIONS WITH AFFILIATES.    The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, conduct any business or enter into any transaction or series of transactions (including the sale, transfer, disposition, purchase, exchange or lease of Property, the making of any Investment, the giving of any Guarantee or the rendering of any service) with or for the benefit of any Affiliate of the Company (other than the Company or a Restricted Subsidiary), unless (i) such transaction or series of transactions is on terms no less favorable to the Company or such Restricted Subsidiary than those that could be obtained in a comparable arm's-length transaction with a Person that is not an Affiliate of the Company or such Restricted Subsidiary, and (ii) with respect to a transaction or series of transactions involving aggregate payments by or to the Company or such Restricted Subsidiary having a Fair Market Value equal to or in excess of (a) $5,000,000 but less than $10,000,000, an Officer of the Company certifies that such transaction or series of transactions complies with clause (i) of this paragraph, as evidenced by an Officers' Certificate delivered to the Trustee, (b) $10,000,000 but less than $75,000,000, the Board of Directors of the Company (including a majority of the disinterested members of such Board of Directors) approves such transaction or series of transactions and certifies that such transaction or series of transactions complies with clause (i) of this paragraph, as evidenced by a certified resolution delivered to the Trustee or (c) $75,000,000, (1) the Company receives from an independent, nationally recognized investment banking firm or appraisal firm, in either case specializing or having a specialty in the type and subject matter of the transaction (or series of transactions) at issue, a written opinion that such transaction (or series of transactions) is fair, from a financial point of view, to the Company or such Restricted Subsidiary and (2) the Board of Directors of the Company (including a majority of the disinterested members of such Board of Directors) approves such transaction or series of transactions and certifies that such transaction or series of transactions complies with clause (i) of this paragraph, as evidenced by a certified resolution delivered to the Trustee.

        The limitations of the preceding paragraph do not apply to (i) the payment of reasonable and customary regular fees to directors of the Company or any of its Restricted Subsidiaries who are not employees of the Company or any of its Restricted Subsidiaries, (ii) indemnities of officers and directors of the Company or any Subsidiary consistent with such Person's charter, bylaws and applicable statutory provisions, (iii) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans approved by the Board of Directors of the Company, (iv) loans made (a) to officers, directors or employees of the Company or any Restricted Subsidiary approved by the Board of Directors (or by a duly authorized officer) of the Company, the proceeds of which are used solely to purchase common stock of the Company in connection with a restricted stock or employee stock purchase plan, or to exercise stock options received pursuant to an employee or director stock option plan or other incentive plan, in a principal amount not to exceed the exercise price of such stock options, or (b) to refinance loans, together with accrued interest thereon, made pursuant to this clause (iv), (v) advances and loans to officers, directors and employees of the Company or any Subsidiary in the ordinary course of business; PROVIDED such loans and advances (excluding loans or advances made pursuant to the preceding clause (iv)) do not exceed $10,000,000 at any one time outstanding, (vi) any Restricted Payment permitted to be paid pursuant to Section 4.04, (vii) any issuance of Capital Stock (other than Redeemable Stock) of the Company to, or receipt of a capital contribution from, Affiliates (or a Person who becomes an Affiliate) of the Company; or (viii) any

43

transaction or series of transactions pursuant to any agreement or obligation of the Company or any of its Restricted Subsidiaries in effect on the Issue Date.

        SECTION 4.08.    LIMITATION ON THE ISSUANCE AND SALE OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES.    The Company will not (a) permit any Restricted Subsidiary to issue any Capital Stock other than to the Company or one of its Wholly Owned Subsidiaries or (b) permit any Person other than the Company or a Wholly Owned Subsidiary to own any Capital Stock of any other Restricted Subsidiary (other than directors' qualifying shares), except, in each case, for (i) the sale of the Capital Stock of a Restricted Subsidiary owned by the Company or any other Restricted Subsidiary effected in accordance with Section 4.06; (ii) the issuance of Capital Stock by a Restricted Subsidiary to a Person other than the Company or a Restricted Subsidiary and (iii) the Capital Stock of a Restricted Subsidiary owned by a Person at the time such Restricted Subsidiary became a Restricted Subsidiary or acquired by such Person in connection with the formation of the Restricted Subsidiary, or transfers thereof; PROVIDED that any sale or issuance of Capital Stock of a Restricted Subsidiary shall be deemed to be an Asset Sale to the extent the percentage of the total outstanding Voting Stock of such Restricted Subsidiary owned directly and indirectly by the Company is reduced as a result of such sale or issuance; PROVIDED FURTHER that if a Person whose Capital Stock was issued or sold in a transaction described in this Section is, as a result of such transaction, no longer a Restricted Subsidiary, then the Fair Market Value of Capital Stock of such Person retained by the Company and the other Restricted Subsidiaries shall be treated as an Investment for purposes of Section 4.04. In the event of the consummation of a sale of all the Capital Stock of a Restricted Subsidiary pursuant to the foregoing clause (i) and the execution and delivery of a supplemental indenture in form satisfactory to the Trustee, any such Restricted Subsidiary that is also a Subsidiary Guarantor shall be released from all its obligations under its Subsidiary Guarantee.

        SECTION 4.09.    CHANGE OF CONTROL.    (a) Upon the occurrence of a Change of Control, each Holder of Securities shall have the right to require the Company to repurchase all or any part (equal to $2,000 in principal amount or an integral multiple of $1,000 in excess thereof) of such Holder's Securities pursuant to the offer described below (the "CHANGE OF CONTROL OFFER") at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase, subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date (the "CHANGE OF CONTROL PAYMENT").

        (b)   Within 30 days following any Change of Control, unless the Company has exercised its right to redeem all of the Securities in accordance with Article III, the Company shall mail a notice to each Holder stating, among other things: (i) that a Change of Control has occurred and a Change of Control Offer is being made pursuant to this Indenture and that all Securities (or portions thereof) properly tendered will be accepted for payment; (ii) the purchase price and the purchase date, which shall be, subject to any contrary requirements of applicable law, no fewer than 30 days nor more than 60 days from the date the Company mails such notice (the "CHANGE OF CONTROL PAYMENT DATE"); (iii) that any Security (or portion thereof) accepted for payment (and duly paid on the Change of Control Payment Date) pursuant to the Change of Control Offer shall cease to accrue interest on the Change of Control Payment Date; (iv) that any Securities (or portions thereof) not properly tendered will continue to accrue interest; (v) a description of the transaction or transactions constituting the Change of Control; (vi) the procedures that Holders of Securities must follow in order to tender their Securities (or portions thereof) for payment and the procedures that Holders of Securities must follow in order to withdraw an election to tender Securities (or portions thereof) for payment; and (vii) all other instructions and materials necessary to enable Holders to tender Securities pursuant to the Change of Control Offer. Prior to the mailing of the notice to Holders of Securities described above, but in any event within 30 days following any Change of Control, the Company covenants to (A) repay or cause to be repaid in full all Indebtedness of the Company and any Subsidiary Guarantor that would

44

prohibit the repurchase of the Securities pursuant to such Change of Control Offer or (B) obtain any requisite consents under instruments governing any such Indebtedness of the Company and any Subsidiary Guarantor to permit the repurchase of the Securities. The Company shall first comply with the covenant in the preceding sentence before it shall repurchase Securities pursuant to this Section.

        (c)   Holders electing to have a Security purchased shall be required to surrender the Security, with an appropriate form duly completed, to the Company at the address specified in the notice at least three Business Days prior to the Change of Control Payment Date. Holders shall be entitled to withdraw their election if the Trustee or the Company receives not later than one Business Day prior to the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security which was delivered for purchase by the Holder and a statement that such Holder is withdrawing his election to have such Security purchased.

        (d)   On or prior to the Change of Control Payment Date, the Company shall irrevocably deposit with the Trustee or with the Paying Agent (or, if the Company or any Restricted Subsidiary is acting as the Paying Agent, segregate and hold in trust) in cash an amount equal to the Change of Control Payment payable to the Holders entitled thereto, to be held for payment in accordance with the provisions of this Section.

        (e)   On the Change of Control Payment Date, the Company shall deliver to the Trustee the Securities or portions thereof which have been properly tendered to and are to be accepted by the Company for payment. The Trustee or Paying Agent, as applicable, shall, on or promptly after the Change of Control Payment Date, mail or deliver payment to each tendering Holder of the Change of Control Payment. In the event that the aggregate Change of Control Payment delivered by the Company to the Trustee is less than the amount deposited with the Trustee, the Trustee shall deliver the excess to the Company immediately after the Change of Control Payment Date.

        (f)    The Company shall not be required to make a Change of Control Offer upon a Change of Control if a third party (including a Subsidiary of the Company) makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Indenture applicable to a Change of Control Offer made by the Company and purchases all Securities validly tendered and not withdrawn under such Change of Control Offer.

        (g)   The Company will comply, to the extent applicable, with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the purchase of Securities in connection with a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the provisions relating to the Change of Control Offer, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations described above by virtue thereof.

        (h)   In the event that Holders of not less than 90% of the aggregate principal amount of the outstanding Securities accept a Change of Control Offer and the Company purchases all of the Securities held by such Holders, the Company will have the right, upon not less than 30 nor more than 60 days' prior notice, given in accordance with Article III not more than 30 days following the purchase pursuant to the Change of Control Offer described above, to redeem all of the Securities that remain outstanding following such purchase at a redemption price equal to the Change of Control Payment plus, to the extent not included in the Change of Control Payment, accrued and unpaid interest on the Securities that remain outstanding, to, but not including, the date of redemption (subject to the right of the Holders on the relevant record date to receive interest due on an interest payment date that is on or prior to the redemption date).

        SECTION 4.10.    LIMITATION ON LIENS.    The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into, create, incur, assume or suffer to exist any

45

Lien on or with respect to any Property of the Company or such Restricted Subsidiary securing Indebtedness, whether owned on the Issue Date or acquired thereafter, or any interest therein or any income or profits therefrom, unless the Securities or any Subsidiary Guarantee of such Restricted Subsidiary, as applicable, are secured equally and ratably with (or prior to) such Indebtedness for so long as such Indebtedness is secured, except that the Company and its Restricted Subsidiaries may enter into, create, incur, assume or suffer to exist Permitted Liens.

        SECTION 4.11.    COMPLIANCE CERTIFICATE.    The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company an Officers' Certificate stating that in the course of the performance by the signers of their duties as Officers of the Company they would normally have knowledge of any Default and whether or not the signers know of any Default that occurred during such period. If they do, the certificate shall describe the Default, its status and what action the Company is taking or proposes to take with respect thereto.

        SECTION 4.12.    FURTHER INSTRUMENTS AND ACTS.    Upon request of the Trustee, the Company shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture.

        SECTION 4.13.    FUTURE SUBSIDIARY GUARANTORS.    The Company shall cause each Domestic Restricted Subsidiary having an aggregate of $25,000,000 or more of Indebtedness and Preferred Stock outstanding at any time to promptly execute and deliver to the Trustee a supplemental indenture in accordance with Section 10.06. In addition, any Restricted Subsidiary that Guarantees Indebtedness of the Company will be required to execute and deliver to the Trustee a supplemental indenture in accordance with Section 10.06.

        SECTION 4.14.    RESTRICTED AND UNRESTRICTED SUBSIDIARIES.    Unless defined or designated as an Unrestricted Subsidiary, any Person that becomes a Domestic Subsidiary or a Canadian Subsidiary of the Company or any of its Restricted Subsidiaries shall be classified as a Restricted Subsidiary subject to the provisions of the next paragraph. The Company may designate a Subsidiary (including a newly formed or newly acquired Subsidiary) of the Company or any of its Restricted Subsidiaries as an Unrestricted Subsidiary only if: (a) such Subsidiary does not at such time own any Capital Stock or Indebtedness of, or own or hold any Lien on any Property of, the Company or any other Restricted Subsidiary; (b) such Subsidiary does not at such time have any Indebtedness or other obligations which, if in default, would result (with the passage of time or notice or otherwise) in a default on any Indebtedness of the Company or any Restricted Subsidiary; (c)(i) such designation is effective immediately upon such Subsidiary becoming a Subsidiary of the Company or of a Restricted Subsidiary, (ii) the Subsidiary to be so designated has total assets of $1,000 or less or (iii) if such Subsidiary has assets greater than $1,000, then such redesignation as an Unrestricted Subsidiary is deemed to constitute a Restricted Payment in an amount equal to the Fair Market Value of the Company's direct and indirect ownership interest in such Subsidiary and such Restricted Payment would be permitted to be made at the time of such designation under Section 4.04; (d) such Subsidiary, either alone or in the aggregate with all other Unrestricted Subsidiaries, does not operate, directly or indirectly, all or substantially all of the business of the Company and its Subsidiaries; (e) such Subsidiary is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation: (i) to subscribe for additional Capital Stock of such Person; or (ii) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; and (f) on the date such Subsidiary is designated an Unrestricted Subsidiary, such Subsidiary is not a party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary with terms substantially less favorable to the Company than those that might have been obtained from Persons who are not Affiliates of the Company. Except as provided in the next succeeding paragraph, no Unrestricted Subsidiary may be redesignated as a Restricted Subsidiary. The designation of an Unrestricted Subsidiary or removal of such designation shall be made by the Board of Directors of the Company or a committee thereof pursuant to a

46

certified resolution delivered to the Trustee and shall be effective as of the date specified in the applicable certified resolution, which shall not be prior to the date such certified resolution is delivered to the Trustee. If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of such Subsidiary shall be deemed to be Incurred as of such date.

        The Company will not redesignate an Unrestricted Subsidiary as a Restricted Subsidiary unless, after giving effect to such action, (i) the Company could Incur at least $1.00 of additional Indebtedness pursuant to clause (a) of Section 4.03 and (ii) no Default or Event of Default would occur or be continuing.

        SECTION 4.15.    TERMINATION OF CERTAIN COVENANTS.    In the event that any time (a) the rating assigned to the Securities by either S&P or Moody's is at least an Investment Grade Rating, (b) the obligations under the Bank Credit Facilities cease to be secured and (c) no Default or Event of Default shall have occurred and be continuing, the Company and its Restricted Subsidiaries shall have no further obligation to comply with the covenants set forth in Section 4.03 (Limitation On Indebtedness), Section 4.04 (Limitation On Restricted Payments), Section 4.08 (Limitation On Issuance And Sale of Capital Stock of Restricted Subsidiaries), Section 4.06 (Limitation On Asset Sales), Section 4.05 (Limitation on Restrictions On Distributions From Restricted Subsidiaries) and Section 4.13 (Future Subsidiary Guarantors). In addition, if the conditions set forth in clauses (a), (b) and (c) of the preceding sentence are satisfied, the Company will no longer be obligated to comply with the financial tests set forth in clause (f) of Section 5.01.

        SECTION 4.16.    REGISTRATION DEFAULT.    If a Registration Default occurs, the Company shall deliver to the Trustee a certificate to that effect stating (i) the amount of additional interest to be paid to each Holder of Registrable Securities (as defined in the applicable Registration Rights Agreement), and (ii) the date on which such additional interest is payable. Unless and until a Trust Officer receives such a certificate at its Corporate Trust Office, the Trustee shall assume without inquiry that no such additional interest is payable. If the Company has paid such additional interest directly to the Holders entitled to such interest, the Company shall deliver to the Trustee a certificate setting forth the particulars of such payment.

ARTICLE V

SUCCESSOR COMPANY

        SECTION 5.01.    WHEN COMPANY MAY MERGE OR TRANSFER ASSETS.    The Company shall not consolidate with or merge with or into any Person, or convey, transfer or lease, in one transaction or a series of transactions, all or substantially all the Property of the Company and its Restricted Subsidiaries, taken as a whole, unless:

        (a)   the resulting, surviving or transferee person (the "SUCCESSOR COMPANY") shall be a Person organized or existing under the laws of (i) the United States of America, any State thereof or the District of Columbia or (ii) Canada or any province thereof;

        (b)   if the Successor Company is not the Company, a supplemental indenture is executed and delivered to the Trustee, in form satisfactory to the Trustee, by the Successor Company expressly assuming the obligations of the Company to pay the principal of and interest on the Securities and to perform all the covenants of the Company under this Indenture (in which case the Successor Company shall be considered the issuer of the Securities) and the obligations of the Company under the Registration Rights Agreement;

        (c)   if the Successor Company is not the Company, each Subsidiary Guarantor shall execute and deliver to the Trustee a supplemental indenture, in form satisfactory to the Trustee, confirming

47

the obligation of such Subsidiary Guarantor to pay the principal of and interest on the Securities pursuant to such Subsidiary Guarantor's Subsidiary Guarantee and shall have by written agreement confirmed that its obligations under the Registration Rights Agreement shall continue to be in effect;

        (d)   in the case of a conveyance, transfer or lease of all or substantially all the Property of the Company and its Restricted Subsidiaries, taken as a whole, such Property shall have been so conveyed, transferred or leased as an entirety or virtually as an entirety to one Person;

        (e)   immediately after giving effect to such transaction (and treating, for purposes of this clause (e) and clauses (f) and (g) below, any Indebtedness which becomes or is anticipated to become an obligation of the Successor Company or any Restricted Subsidiary as a result of such transaction as having been Incurred by such Successor Company or such Restricted Subsidiary at the time of such transaction), no Default or Event of Default shall have occurred and be continuing;

        (f)    other than with respect to the consolidation of the Company with or merger of the Company with or into, or the conveyance, transfer or lease of all or substantially all the Property of the Company and its Restricted Subsidiaries, taken as a whole, to a Wholly Owned Subsidiary, immediately after giving effect to such transaction, the Successor Company would be able to Incur an additional $1.00 of Indebtedness pursuant to clause (a) of Section 4.03; and

        (g)   the Company shall have delivered to the Trustee an Officers' Certificate, stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with this Indenture.

        The Successor Company shall be the successor to the Company and shall succeed to, and be substituted for, and may exercise every right and power of the Company under this Indenture, and, except in the case of the lease of all or substantially all the Property of the Company and its Restricted Subsidiaries, taken as a whole, the Company shall be released from its obligations under this Indenture and the Registration Rights Agreement.

ARTICLE VI

DEFAULTS AND REMEDIES

        SECTION 6.01.    EVENTS OF DEFAULT.    The following events shall be "Events of Default":

        (a)   the Company defaults in any payment of interest on any Security when the same becomes due and payable and such default continues for a period of 30 days;

        (b)   the Company defaults in the payment of the principal (and premium, if any) of any Security when the same becomes due and payable at its Stated Maturity, upon optional redemption, upon required repurchase, upon declaration or otherwise;

        (c)   the Company fails to comply with Article V;

        (d)   default in the performance, or breach, of any covenant or warranty of the Company or any Subsidiary Guarantor in this Indenture (other than a covenant or warranty addressed in clauses (a), (b) or (c) above) and continuance of such default or breach for a period of 60 days after the notice specified below;

        (e)   default by the Company or any Restricted Subsidiary under any Indebtedness for borrowed money (other than Non-Recourse Purchase Money Indebtedness) of the Company or any Restricted Subsidiary which results in acceleration of the maturity of such Indebtedness, or the failure to pay such Indebtedness at maturity, in an amount greater than $25,000,000 or its foreign

48

currency equivalent at the time if such Indebtedness is not discharged or such acceleration is not rescinded or annulled within 10 days after the notice specified below;

        (f)    the Company or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law:

(i)

commences a voluntary case;



(ii)

consents to the entry of an order for relief against it in an involuntary case;



(iii)

consents to the appointment of a Custodian of it or for any substantial part of its property;



(iv)

makes a general assignment for the benefit of its creditors or files a proposal or other scheme of arrangement involving the rescheduling or composition of its indebtedness; or



(v)

files a petition in bankruptcy or an answer or consent seeking reorganization or relief or consents to the filing of such petition in bankruptcy or the appointment of or taking possession by a Custodian;

or takes any comparable action under any foreign laws relating to insolvency;

        (g)   a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

(i)

is for relief against the Company or any Significant Subsidiary in an involuntary case;



(ii)

appoints a Custodian of the Company or any Significant Subsidiary or for any substantial part of its property;



(iii)

orders the winding up or liquidation of the Company or any Significant Subsidiary; or



(iv)

any similar relief is granted under any foreign laws;

and in each such case the order or decree remains unstayed and in effect for 60 days;

        (h)   one or more final judgments or orders by a court of competent jurisdiction are entered against the Company or any Restricted Subsidiary in an uninsured or unindemnified aggregate amount outstanding at any time in excess of $25,000,000 and such judgments or orders are not discharged, waived, stayed, satisfied or bonded for a period of 60 consecutive days;

        (i)    a Subsidiary Guarantee of a Significant Subsidiary or group of Restricted Subsidiaries that taken together as of the latest audited consolidated financial statements for the Company and its Restricted Subsidiaries would constitute a Significant Subsidiary ceases to be in full force and effect (other than in accordance with the terms of this Indenture and such Subsidiary Guarantee) or a Subsidiary Guarantor denies or disaffirms its obligations under its Subsidiary Guarantee

        The foregoing shall constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body.

        The term "BANKRUPTCY LAW" means Title 11, UNITED STATES CODE, or any similar Federal or state law for the relief of debtors, or the Bankruptcy and Insolvency Act (Canada), the Companies' Creditors Arrangements Act (Canada) or any similar federal or provincial law in Canada for the relief of debtors. The term "CUSTODIAN" means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law.

49

        A Default under clause (d) or (e) is not an Event of Default until the Trustee or the Holders of at least 25% in aggregate principal amount of the outstanding Securities notify the Company in writing of such Default and the Company does not cure such Default within the time specified after receipt of such notice. Such notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default."

        The Company shall deliver to the Trustee, within 30 days after the occurrence thereof, written notice in the form of an Officers' Certificate of any Event of Default or Default, its status and what action the Company is taking or proposes to take with respect thereto.

        SECTION 6.02.    ACCELERATION.    If an Event of Default (other than an Event of Default specified in Section 6.01(f) or (g) with respect to the Company) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in aggregate principal amount of the Securities by notice to the Company and the Trustee, may declare the principal of the Securities to be due and payable. Upon such a declaration, such principal shall be due and payable immediately. If an Event of Default specified in Section 6.01(f) or (g) with respect to the Company occurs, the principal of the Securities shall automatically and without any action by the Trustee or any Holder, become immediately due and payable. The Holders of a majority in aggregate principal amount of the outstanding Securities by notice to the Trustee and the Company may rescind any declaration of acceleration if the rescission would not conflict with any judgment or decree, and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration. No such rescission shall affect any subsequent Default or impair any right consequent thereto.

        SECTION 6.03.    OTHER REMEDIES.    If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of, premium, if any, or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative.

        SECTION 6.04.    WAIVER OF PAST DEFAULTS.    The Holders of a majority in aggregate principal amount of the Securities by notice to the Trustee may waive an existing Default and its consequences except (a) a Default in the payment of the principal of, premium, if any, or interest on a Security or (b) a Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each Securityholder affected. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right.

        SECTION 6.05.    CONTROL BY MAJORITY.    The Holders of a majority in aggregate principal amount of the Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee with respect to the Securities. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, subject to Section 7.01, that the Trustee determines is unduly prejudicial to the rights of other Securityholders or would involve the Trustee in personal liability; PROVIDED, HOWEVER, that the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. Prior to taking any action hereunder, the Trustee shall be entitled to reasonable indemnity against all losses and expenses caused by taking or not taking such action.

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        SECTION 6.06.    LIMITATION ON SUITS.    A Securityholder will have no right to institute any proceeding with respect to this Indenture or for the appointment of a receiver or trustee, and it may not pursue any other remedy with respect to this Indenture or the Securities unless:

        (a)   such Holder shall have previously given to the Trustee written notice of a continuing Event of Default;

        (b)   the Holders of at least 25% in aggregate principal amount of the Securities then outstanding shall have made a written request, and such Holder of or Holders shall have offered reasonable indemnity, to the Trustee to pursue such proceeding as trustee; and

        (c)   the Trustee has failed to institute such proceeding and has not received from the Holders of at least a majority in aggregate principal amount of the Securities outstanding a direction inconsistent with such request, within 60 days after such notice, request and offer.

        A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over another Securityholder.

        SECTION 6.07.    RIGHTS OF HOLDERS TO RECEIVE PAYMENT.    Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of, premium, if any, and interest on the Securities held by such Holder, on or after the respective due dates expressed in this Securities, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.

        SECTION 6.08.    COLLECTION SUIT BY TRUSTEE.    If an Event of Default specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount then due and owing (together with interest on any unpaid interest to the extent lawful) and the amounts provided for in Section 7.07.

        SECTION 6.09.    TRUSTEE MAY FILE PROOFS OF CLAIM.    The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Securityholders allowed in any judicial proceedings relative to the Company or the Subsidiary Guarantors, their creditors or their property and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.07.

        SECTION 6.10.    PRIORITIES.    If the Trustee collects any money or property pursuant to this Article VI, it shall pay out the money or property in the following order:

        FIRST: to the Trustee for amounts due under Section 7.07;

        SECOND: to Securityholders for amounts due and unpaid on the Securities for principal, premium, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal, premium, if any, and interest, respectively; and

        THIRD: to the Company.

        The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section. At least 15 days before such record date, the Company shall mail to each Securityholder and the Trustee a notice that states the record date, the payment date and amount to be paid.

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        SECTION 6.11.    UNDERTAKING FOR COSTS.    In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in aggregate principal amount of the Securities.

        SECTION 6.12.    WAIVER OF STAY OR EXTENSION LAWS.    The Company (to the extent it may lawfully do so) shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted.

ARTICLE VII

TRUSTEE

        SECTION 7.01.    DUTIES OF TRUSTEE.    (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs.

        (b)   Except during the continuance of an Event of Default:

          (i)  the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

         (ii)  in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture.

        (c)   The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that:

          (i)  this paragraph does not limit the effect of paragraph (b) of this Section;

         (ii)  the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and

        (iii)  the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05.

        (d)   Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section.

        (e)   The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company.

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        (f)    Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

        (g)   No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

        (h)   Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section and to the provisions of the TIA.

        SECTION 7.02.    RIGHTS OF TRUSTEE.    (a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document.

        (b)   Before the Trustee acts or refrains from acting, it may require the Company to deliver an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officers' Certificate or Opinion of Counsel.

        (c)   The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care.

        (d)   The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; PROVIDED, HOWEVER, that the Trustee's conduct does not constitute willful misconduct or negligence.

        (e)   The Trustee may consult with counsel, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Securities shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel.

        SECTION 7.03.    INDIVIDUAL RIGHTS OF TRUSTEE.    The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar or co-registrar may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11.

        SECTION 7.04.    TRUSTEE'S DISCLAIMER.    The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement of the Company in this Indenture or in any document issued in connection with the sale of the Securities or in the Securities other than the Trustee's certificate of authentication.

        SECTION 7.05.    NOTICE OF DEFAULTS.    If a Default occurs and is continuing and if it is known to a Trust Officer, the Trustee shall mail to each Securityholder notice of the Default within 90 days after it is known to a Trust Officer or written notice of it is received by a Trust Officer. Except in the case of a Default in payment of principal of, premium, if any, or interest on any Security, the Trustee may withhold the notice if and so long as a committee of its trust officers in good faith determines that withholding the notice is in the interests of Securityholders. Where notice of the occurrence of any Default is given by the Trustee under this Section and the Default is thereafter cured, the Trustee, within 30 days after the curing of the Default is known to a Trust Officer, shall mail to all Securityholders notice that the Default is no longer continuing.

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        SECTION 7.06.    REPORTS BY TRUSTEE TO HOLDERS.    As promptly as practicable after each May 15 beginning with May 15, 2009, and in any event prior to July 15 in each year, the Trustee shall mail to each Securityholder a brief report dated as of May 15 each year that complies with TIA Section 313(a). The Trustee also shall comply with TIA Section 313(b).

        A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC and each stock exchange (if any) on which the Securities are listed. The Company agrees to notify promptly the Trustee whenever the Securities become listed on any stock exchange and of any delisting thereof.

        SECTION 7.07.    COMPENSATION AND INDEMNITY.    The Company shall pay to the Trustee from time to time reasonable compensation for its services. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee's agents, counsel, accountants and experts. The Company shall indemnify the Trustee against any and all loss, liability or expense (including attorneys' fees) incurred by it in connection with the acceptance and administration of this trust and the performance of its duties hereunder. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee may have separate counsel and the Company shall pay the fees and expenses of such counsel. The Company need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Trustee through the Trustee's own willful misconduct, negligence or bad faith. The Company need not pay for any settlement made by the Trustee without the Company's consent, such consent not to be unreasonably withheld.

        To secure the Company's payment obligations in this Section, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of and interest on particular Securities.

        The Company's payment obligations pursuant to this Section shall survive the discharge of this Indenture. When the Trustee incurs expenses after the occurrence of a Default specified in Section 6.01(f) or (g), the expenses are intended to constitute expenses of administration under the Bankruptcy Law.

        SECTION 7.08.    REPLACEMENT OF TRUSTEE.    The Trustee may resign at any time by so notifying the Company. The Holders of a majority in aggregate principal amount of the Securities may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee. The Company shall remove the Trustee if:

        (1)   the Trustee fails to comply with Section 7.10;

        (2)   the Trustee is adjudged bankrupt or insolvent;

        (3)   a receiver or other public officer takes charge of the Trustee or its property; or

        (4)   the Trustee otherwise becomes incapable of acting.

        If the Trustee resigns, is removed by the Company, or by the Holders of a majority in aggregate principal amount of the Securities and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee. No successor Trustee shall accept its appointment unless, at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article VII.

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        A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company.

        Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07.

        If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of 10% in aggregate principal amount of the Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee.

        If the Trustee fails to comply with Section 7.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

        Notwithstanding the replacement of the Trustee pursuant to this Section, the Company's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee.

        SECTION 7.09.    SUCCESSOR TRUSTEE BY MERGER.    If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation or banking association without any further act shall be the successor Trustee.

        In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have.

        SECTION 7.10.    ELIGIBILITY; DISQUALIFICATION.    The Trustee shall at all times satisfy the requirements of TIA Section 310(a). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA Section 310(b); PROVIDED, HOWEVER, that there shall be excluded from the operation of TIA Section 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company are outstanding if the requirements for such exclusion set forth in TIA Section 310(b)(1) are met. If at any time the Trustee shall cease to be eligible in accordance with this Section, it shall resign promptly in the manner and with the effect specified in this Article VII.

        SECTION 7.11.    PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.    The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated.

ARTICLE VIII

DISCHARGE OF INDENTURE; DEFEASANCE

        SECTION 8.01.    DISCHARGE OF LIABILITY ON SECURITIES; DEFEASANCE.    (a) When (i) the Company delivers to the Trustee all outstanding Securities (other than Securities replaced pursuant to Section 2.09) for cancellation, (ii) all outstanding Securities have become due and payable at their fixed maturity or (iii) all outstanding Securities are to become due and payable within one year

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or are to be called for redemption within one year pursuant to Article III, and the Company irrevocably deposits with the Trustee funds sufficient to pay at fixed maturity or upon redemption all outstanding Securities, including interest thereon to fixed maturity or such redemption date (other than Securities replaced pursuant to Section 2.09), and if in either case the Company pays all other sums payable hereunder, then this Indenture shall, subject to Section 8.01(c), cease to be of further effect. The Trustee shall acknowledge satisfaction and discharge of this Indenture on demand of the Company accompanied by an Officers' Certificate and an Opinion of Counsel and at the cost and expense of the Company, as the case may be.

        (b)   Subject to Sections 8.01(c) and 8.02, the Company at any time may terminate (i) all its obligations under the Securities and this Indenture ("LEGAL DEFEASANCE OPTION") or (ii) its obligations under Sections 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.13 and 4.14, the operation of Sections 6.01(d) (to the extent relating to such other Sections), 6.01(e), 6.01(f) (with respect to Significant Subsidiaries), 6.01(g) (with respect to Significant Subsidiaries), 6.01(h) and 6.01(i), the obligations under Section 5.01(f) and the related operation of Section 6.01(c) ("COVENANT DEFEASANCE OPTION"). The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option.

        If the Company exercises its legal defeasance option, payment of the Securities may not be accelerated because of an Event of Default. If the Company exercises its covenant defeasance option, payment of the Securities may not be accelerated because of an Event of Default specified in Sections 6.01(c) and 6.01(d) (with respect to the provisions of Articles IV and V referred to in the immediately preceding paragraph) and Sections 6.01(e), 6.01(f) (with respect to Significant Subsidiaries), 6.01(g) (with respect to Significant Subsidiaries), 6.01(h) and 6.01(i). If the Company exercises its legal defeasance option or its covenant defeasance option, each Subsidiary Guarantor, if any, shall be released from all its obligations under its Subsidiary Guarantee.

        Upon satisfaction of the conditions set forth herein and upon request of the Company, the Trustee shall acknowledge in writing the discharge of those obligations that the Company terminates.

        (c)   Notwithstanding clauses (a) and (b) above, the Company's obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 2.09, 7.07, 7.08, 8.05 and 8.06 shall survive until the Securities have been paid in full. Thereafter, the Company's obligations in Sections 7.07 and 8.05 shall survive.

        SECTION 8.02.    CONDITIONS TO DEFEASANCE.    The Company may exercise its legal defeasance option or its covenant defeasance option only if:

        (a)   the Company irrevocably deposits in trust with the Trustee money or Government Obligations, or a combination thereof, for the payment of principal of, premium, if any, and interest on the Securities to fixed maturity or redemption, as the case may be;

        (b)   the Company delivers to the Trustee a certificate from a nationally recognized firm of independent accountants expressing their opinion that the payments of principal and interest when due and without reinvestment on the deposited Government Obligations plus any deposited money without investment will provide cash at such times and in such amounts as will be sufficient to pay principal, premium, if any, and interest when due on all the Securities to fixed maturity or redemption, as the case may be;

        (c)   123 days pass after the deposit is made and during the 123-day period no Default specified in Section 6.01(f) or (g) with respect to the Company occurs which is continuing at the end of the period;

        (d)   the deposit does not constitute a default under any other agreement binding on the Company;

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        (e)   the Company delivers to the Trustee an Opinion of Counsel to the effect that the trust resulting from the deposit does not constitute, or is qualified as, a regulated investment company under the Investment Company Act of 1940;

        (f)    in the case of the legal defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel in the U.S. stating that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (B) since the date of this Indenture there has been a change in the applicable U.S. federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Securityholders will not recognize income, gain or loss for federal income tax purposes as a result of such defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred;

        (g)   in the case of the covenant defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel in the U.S. to the effect that the Securityholders will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such covenant defeasance and will be subject to U.S. federal income tax on the same amount, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; and

        (h)   the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance and discharge of the Securities as contemplated by this Article VIII have been complied with.

        Before or after a deposit, the Company may make arrangements satisfactory to the Trustee for the redemption of Securities at a future date in accordance with Article III.

        SECTION 8.03.    APPLICATION OF TRUST MONEY.    The Trustee shall hold in trust money or Government Obligations deposited with it pursuant to this Article VIII. It shall apply the deposited money and the money from Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal of, premium, if any, and interest on the Securities.

        SECTION 8.04.    REPAYMENT TO THE COMPANY.    The Trustee and the Paying Agent shall promptly turn over to the Company upon request any excess money or securities held by them at any time. Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal, premium or interest that remains unclaimed for two years, and, thereafter, Securityholders entitled to the money must look to the Company for payment as general creditors.

        SECTION 8.05.    INDEMNITY FOR GOVERNMENT OBLIGATIONS.    The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against deposited Government Obligations or the principal and interest received on such Government Obligations.

        SECTION 8.06.    REINSTATEMENT.    If the Trustee or Paying Agent is unable to apply any money or Government Obligations in accordance with this Article VIII by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Article VIII until such time as the Trustee or Paying Agent is permitted to apply all such money or Government Obligations in accordance with this Article VIII; PROVIDED, HOWEVER, that, if the Company has made any payment of interest or premium on or principal of any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or Government Obligations held by the Trustee or Paying Agent.

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ARTICLE IX

AMENDMENTS

        SECTION 9.01.    WITHOUT CONSENT OF HOLDERS.    The Company, the Subsidiary Guarantors and the Trustee may amend this Indenture or the Securities without notice to or consent of any Securityholder:

        (a)   to cure any ambiguity, omission, defect or inconsistency;

        (b)   to comply with Article V;

        (c)   to provide for uncertificated Securities in addition to or in place of certificated Securities;

        (d)   to add or to remove Subsidiary Guarantors when permitted by the terms hereof, or to secure the Securities;

        (e)   to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company;

        (f)    to comply with any requirements of the SEC in connection with qualifying, or maintaining the qualification of, this Indenture under the TIA; or

        (g)   to make any change that does not adversely affect the rights of any Securityholder in any material respect; PROVIDED, however, that any change to this Indenture to conform it to the "Description of notes" in the Company's offering memorandum relating to the Initial Securities shall not be deemed to adversely affect such rights.

        After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section.

        SECTION 9.02.    WITH CONSENT OF HOLDERS.    The Company, the Subsidiary Guarantors and the Trustee may amend this Indenture or the Securities with the written consent of the Holders of at least a majority in aggregate principal amount of the Securities, and such Holders may waive compliance by the Company with its covenants contained herein. However, without the consent of each Securityholder affected thereby an amendment or waiver may not:

        (a)   reduce the amount of Securities whose Holders must consent to an amendment or waiver;

        (b)   reduce the rate of or change the time for payment of interest on any Security;

        (c)   reduce the principal of or extend the Stated Maturity of any Security;

        (d)   reduce the premium payable upon the redemption or repurchase of any Security in accordance with Article III or Section 4.06 or 4.09;

        (e)   at any time after a Change of Control or an Asset Sale has occurred, change the time at which the Change of Control Offer or Prepayment Offer relating thereto must be made or at which the Securities must be repurchased pursuant to such Change of Control Offer or Prepayment Offer;

        (f)    make any Security payable in a currency other than that stated in the Security;

        (g)   make any change in any Subsidiary Guarantee that would adversely affect the Securityholders or reduce the relative ranking of the Securities;

        (h)   impair the right of any Holder to institute suit for enforcement of any payment on or with respect to such Holder's Securities or any Subsidiary Guarantee;

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        (i)    release any security that may have been granted to the Trustee in respect of the Securities, except as permitted by this Indenture;

        (j)    make any change in Section 6.04 or 6.07 or the second sentence of this Section; and

        (k)   cause the Company or any Subsidiary Guarantor to be required to make any deduction or withholding from payments made under or with respect to the Securities or any Subsidiary Guarantee.

        Any consent of the Holders under this Section may be evidenced by an electronic transmission that conforms to DTC's applicable procedures.

        It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof.

        After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section.

        SECTION 9.03.    COMPLIANCE WITH TRUST INDENTURE ACT.    Every amendment to this Indenture or the Securities shall comply with the TIA as then in effect.

        SECTION 9.04.    REVOCATION AND EFFECT OF CONSENTS AND WAIVERS.    A consent to an amendment or a waiver by a Holder of a Security shall bind the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent or waiver is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder's Security or portion of the Security if the Trustee receives the notice of revocation before the date the amendment or waiver becomes effective. After an amendment becomes effective, it shall bind every Securityholder. An amendment becomes effective upon the execution of such amendment by the Trustee.

        The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Securityholders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were Securityholders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date.

        SECTION 9.05.    NOTATION ON OR EXCHANGE OF SECURITIES.    If an amendment changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security regarding the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or to issue a new Security shall not affect the validity of such amendment.

        SECTION 9.06.    TRUSTEE TO SIGN AMENDMENTS.    The Trustee shall sign any amendment authorized pursuant to this Article IX if such amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive, and (subject to Section 7.01) shall be fully protected in relying upon, an Officers' Certificate

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and an Opinion of Counsel of the Company stating that such amendment is authorized or permitted by this Indenture.

ARTICLE X

SUBSIDIARY GUARANTEES

        SECTION 10.01.    SUBSIDIARY GUARANTEE.    Each Subsidiary Guarantor hereby unconditionally guarantees, jointly and severally, to each Holder and to the Trustee and its successors and assigns, (a) the full and punctual payment of principal of, premium, if any, and interest on the Securities when due, whether at Stated Maturity, by acceleration, by redemption or otherwise, and all other monetary obligations of the Company under this Indenture and the Securities and (b) the full and punctual performance within applicable grace periods of all other obligations of the Company under this Indenture and the Securities (all the foregoing being hereinafter collectively called the "Obligations"). Each Subsidiary Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, without notice or further assent from such Subsidiary Guarantor and that such Subsidiary Guarantor will remain bound under this Article X notwithstanding any extension or renewal of any Obligation.

        Each Subsidiary Guarantor waives presentation to, demand of, payment from and protest to the Company of any of the Obligations and also waives notice of protest for nonpayment. Each Subsidiary Guarantor waives notice of any default under the Securities or the Obligations. The obligations of each Subsidiary Guarantor hereunder shall not be affected by (i) the failure of any Holder or the Trustee to assert any claim or demand or to enforce any right or remedy against the Company or any other Person under this Indenture, the Securities or any other agreement or otherwise; (ii) any extension or renewal of any thereof; (iii) any rescission, waiver, amendment or modification of any of the terms or provisions of this Indenture, the Securities or any other agreement; (iv) the release of any security held by any Holder or the Trustee for the Obligations or any of them; (v) the failure of any Holder or the Trustee to exercise any right or remedy against any other guarantor of the Obligations; or (vi) any change in the ownership of such Subsidiary Guarantor, except as provided in the last paragraph of this Section.

        Each Subsidiary Guarantor further agrees that its Subsidiary Guarantee herein constitutes a guarantee of payment, performance and compliance when due (and not a guarantee of collection) and waives any right to require that any resort be had by any Holder or the Trustee to any security held for payment of the Obligations.

        Except as expressly set forth in Sections 4.08, 8.01(b), 10.03 and the last paragraph of this Section, the obligations of each Subsidiary Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Subsidiary Guarantor herein shall not be discharged or impaired or otherwise affected by the failure of any Holder or the Trustee to assert any claim or demand or to enforce any remedy under this Indenture, the Securities or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of such Subsidiary Guarantor or would otherwise operate as a discharge of such Subsidiary Guarantor as a matter of law or equity.

        Each Subsidiary Guarantor further agrees that its Subsidiary Guarantee herein shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal

60

of, premium, if any, or interest on any Obligation is rescinded or must otherwise be restored by any Holder or the Trustee upon the bankruptcy or reorganization of the Company or otherwise.

        In furtherance of the foregoing and not in limitation of any other right which any Holder or the Trustee has at law or in equity against any Subsidiary Guarantor by virtue hereof, upon the failure of the Company to pay the principal of, premium, if any, or interest on any Obligation when and as the same shall become due, whether at Stated Maturity, by acceleration, by redemption or otherwise, or to perform or comply with any other Obligation, each Subsidiary Guarantor hereby promises to and will, upon receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal to the sum of (A) the unpaid amount of such Obligations, (B) accrued and unpaid interest on such Obligations (but only to the extent not prohibited by law) and (C) all other monetary Obligations of the Company to the Holders and the Trustee.

        Each Subsidiary Guarantor agrees that it shall not be entitled to any right of subrogation in respect of any Obligations guaranteed hereby until payment in full in cash of all Obligations. Each Subsidiary Guarantor further agrees that, as between it, on the one hand, and the Holders and the Trustee, on the other hand, (1) the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article VI for the purposes of such Subsidiary Guarantor's Subsidiary Guarantee herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed hereby, and (2) in the event of any declaration of acceleration of such obligations as provided in Article VI, such Obligations (whether or not due and payable) shall forthwith become due and payable by such Subsidiary Guarantor for the purposes of this Section.

        Each Subsidiary Guarantor also agrees to pay any and all costs and expenses (including reasonable attorneys' fees) incurred by the Trustee or any Holder in enforcing any rights under this Section.

        The Subsidiary Guarantee of each Subsidiary Guarantor will be released: (a) in connection with any sale or other disposition of all or substantially all of the properties or assets of that Subsidiary Guarantor (including by way of merger or consolidation) to a Person that is not (either before or after giving effect to such transaction) a Restricted Subsidiary of the Company, if the sale or other disposition complies with Section 4.06; (b) in connection with any sale or other disposition of all of the Capital Stock of that Subsidiary Guarantor to a Person that is not (either before or after giving effect to such transaction) a Restricted Subsidiary of the Company, if the sale or other disposition complies with Section 4.06; (c) if the Company designates any Restricted Subsidiary that is a Subsidiary Guarantor as an Unrestricted Subsidiary in accordance with the applicable provisions of this Indenture; (d) if the Company exercises its legal defeasance option or its covenant defeasance option as provided in Section 8.01(b) or upon satisfaction and discharge of this Indenture as provided in Section 8.01(a); or (e) at such time as such Subsidiary Guarantor ceases to Guarantee any other Indebtedness of the Company, provided that at such time it does not have outstanding an aggregate of $25.0 million or more of Indebtedness and Preferred Stock.

        SECTION 10.02.    CONTRIBUTION.    Each of the Company and any Subsidiary Guarantor (each a "CONTRIBUTING PARTY") agrees that, in the event a payment shall be made by any Subsidiary Guarantor under its Subsidiary Guarantee (the "CLAIMING GUARANTOR"), each Contributing Party shall indemnify the Claiming Guarantor in an amount equal to the amount of such payment multiplied by a fraction, the numerator of which shall be the net worth of the Contributing Party on the date hereof and the denominator of which shall be the aggregate net worth of the Company and all the Subsidiary Guarantors on the date hereof (or, in the case of any Subsidiary Guarantor becoming a party hereto pursuant to Section 9.01, the date of the amendment hereto executed and delivered by such Subsidiary Guarantor).

        SECTION 10.03.    SUCCESSORS AND ASSIGNS.    This Article X shall be binding upon the Company and each Subsidiary Guarantor and each of their respective successors and assigns and shall enure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of

61

any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges conferred upon that party in this Indenture and in the Securities shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions of this Indenture.

        SECTION 10.04.    NO WAIVER.    Neither a failure nor a delay on the part of either the Trustee or the Holders in exercising any right, power or privilege under this Article X shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege. The rights, remedies and benefits of the Trustee and the Holders herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which either may have under this Article X at law, in equity, by statute or otherwise.

        SECTION 10.05.    MODIFICATION.    No modification, amendment or waiver of any provision of this Article X, nor the consent to any departure by the Company or any Subsidiary Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Trustee, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on the Company or any Subsidiary Guarantor in any case shall entitle the Company or such Subsidiary Guarantor to any other or further notice or demand in the same, similar or other circumstances.

        SECTION 10.06.    EXECUTION OF SUPPLEMENTAL INDENTURE FOR FUTURE SUBSIDIARY GUARANTORS.    Each Subsidiary which is required to become a Subsidiary Guarantor pursuant to Section 4.13 shall promptly execute and deliver to the Trustee a supplemental indenture in the form of Exhibit C hereto pursuant to which such Subsidiary shall become a Subsidiary Guarantor under this Article X and shall guarantee the Obligations. Concurrently with the execution and delivery of such supplemental indenture, the Company shall deliver to the Trustee an Opinion of Counsel to the effect that such supplemental indenture has been duly authorized, executed and delivered by such Subsidiary and that, subject to the application of bankruptcy, insolvency, moratorium, fraudulent conveyance or transfer and other similar laws relating to creditors' rights generally and to the principles of equity, whether considered in a proceeding at law or in equity, the Subsidiary Guarantee of such Subsidiary Guarantor is a legal, valid and binding obligation of such Subsidiary Guarantor, enforceable against such Subsidiary Guarantor in accordance with its terms.

ARTICLE XI

MISCELLANEOUS

        SECTION 11.01.    TRUST INDENTURE ACT CONTROLS.    If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control.

        SECTION 11.02.    NOTICES.    Any notice or communication shall be in English and in writing and delivered in person or mailed by first-class mail or sent by facsimile (with a hard copy delivered in person or by mail promptly thereafter) and addressed as follows:

        if to the Company or any Subsidiary Guarantor:

Forest Oil Corporation
707 17^th Street Suite 3600
Denver, CO 80202
Telecopy No: (303) 812-1445
Attention of Cyrus D. Marter, IV

62

        if to the Trustee:

U.S. Bank National Association
Corporate Trust Services
225 Asylum Street, 23^rd Floor
Hartford, CT 06103
Attention: Kathy L. Mitchell
Facsimile: (860) 241-6881

        The Company or any Subsidiary Guarantor, on the one hand, or the Trustee, on the other hand, by notice to the other may designate additional or different addresses for subsequent notices or communications.

        Any notice or communication mailed to a Securityholder shall be mailed to the Securityholder at the Securityholder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed.

        Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it.

        SECTION 11.03.    COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.    Securityholders may communicate pursuant to TIA Section 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c).

        SECTION 11.04.    CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.    Upon any request or application by the Company to the Trustee to take or refrain from taking any action under this Indenture, the Company shall furnish to the Trustee:

        (a)   an Officers' Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and

        (b)   an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with.

        SECTION 11.05.    STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.    Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include:

        (a)   a statement that the individual making such certificate or opinion has read such covenant or condition;

        (b)   a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

        (c)   a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and

        (d)   a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with.

        SECTION 11.06.    WHEN SECURITIES DISREGARDED.    In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company shall be disregarded and deemed not to be

63

outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which the Trustee knows are so owned shall be so disregarded. Also, subject to the foregoing, only Securities outstanding at the time shall be considered in any such determination.

        SECTION 11.07.    RULES BY TRUSTEE, PAYING AGENT AND REGISTRAR.    The Trustee may make reasonable rules for action by or a meeting of Securityholders. The Registrar, the Paying Agent and any co-registrar may make reasonable rules for their functions.

        SECTION 11.08.    LEGAL HOLIDAYS.    A "Legal Holiday" is a Saturday, a Sunday or a day on which banking institutions are not required to be open in the State of New York or Minnesota or the city in which the Trustee's office which administers this Indenture is located. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected.

        SECTION 11.09.    GOVERNING LAW.    THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

        SECTION 11.10.    NO RECOURSE AGAINST OTHERS.    A director, officer, employee or stockholder, as such, of the Company or any Subsidiary Guarantor shall not have any liability for any obligations of the Company or such Subsidiary Guarantor under the Securities, the Subsidiary Guarantees or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities.

        SECTION 11.11.    SUCCESSORS.    All agreements of the Company and each Subsidiary Guarantor in this Indenture and the Securities shall bind their respective successors. All agreements of the Trustee in this Indenture shall bind its successors.

        SECTION 11.12.    MULTIPLE ORIGINALS.    The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture.

        SECTION 11.13.    TABLE OF CONTENTS; HEADINGS.    The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof.

        SECTION 11.14.    CONSENT TO JURISDICTION.    (a) The Company irrevocably submits to the jurisdiction of any United States federal or state court located in the Borough of Manhattan in The City of New York, New York over any suit, action or proceeding arising out of or relating to this Indenture or any Security. The Company irrevocably waives, to the fullest extent permitted by law, any objection which it may have to the laying of the venue of any such suit, action or proceeding brought in such a court and any claim that any suit, action or proceeding brought in such a court has been brought in an inconvenient forum. The Company agrees that final judgment in any such suit, action or proceeding brought in such a court shall be conclusive and binding upon the Company and may be enforced in any courts to the jurisdiction of which the Company is subject by a suit upon such judgment.

        (b)   Nothing in this Section shall affect the right of the Trustee or any Holder to serve process in any manner permitted by law or limit the right of the Trustee to bring proceedings against the Company in the courts of any jurisdiction or jurisdictions.

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        IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above.

FOREST OIL CORPORATION
By:	/s/ J.C. Ridens J.C. Ridens Executive Vice President and Chief Operating Officer
FOREST OIL PERMIAN CORPORATION
By:	/s/ Cyrus D. Marter IV Cyrus D. Marter IV Vice President and Secretary
U.S. BANK NATIONAL ASSOCIATION, as Trustee
By:	/s/ Kathy L. Mitchell Kathy L. Mitchell Vice President

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EXHIBIT A

[FORM OF FACE OF INITIAL SECURITY AND ADDITIONAL SECURITY]

[Applicable Restricted Securities Legend]
[Depository Legend, if applicable]

No. [            ] Principal Amount $ [                                    ], as
revised by the Schedule of Increases or
Decreases in Global Security attached hereto

CUSIP NO.                       
ISIN:                        

8¹/2% Senior Note due 2014

        FOREST OIL CORPORATION, a New York corporation, promises to pay to [                    ], or registered assigns, the principal sum of [                                    ] Dollars, as revised by the Schedule of Increases or Decreases in Global Security attached hereto, on February 15, 2014.

Interest Payment Dates: February 15 and August 15.

Record Dates: February 1 and August 1.

Additional provisions of this Security are set forth on the other side of this Security.

Dated:                  , 20    

A-1

        IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal.

FOREST OIL CORPORATION

By:

Name:

Title:

[CORPORATE SEAL]

TRUSTEE'S CERTIFICATE OF
AUTHENTICATION

U.S. BANK NATIONAL
ASSOCIATION,
as Trustee, certifies
that this is one of the Securities
referred to in the Indenture.

By:
	Authorized Signatory

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[FORM OF REVERSE SIDE OF INITIAL SECURITY AND ADDITIONAL SECURITY]

8¹/2% Senior Note due 2014

1.     INTEREST

        Forest Oil Corporation, a New York corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above, which is subject to increase as provided in the next succeeding paragraph. The Company will pay interest semiannually on February 15 and August 15 of each year beginning on August 15, 2009. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from February 17, 2009. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal at the rate borne by the Securities plus 1% per annum, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful.

        If (i) the Shelf Registration Statement, if required, is not declared effective by the Commission (or does not automatically become effective) on or prior to February 12, 2010, (ii) the Exchange Offer is not completed on or prior to February 12, 2010, or (iii) the Shelf Registration Statement, if required, is filed and declared effective (or becomes automatically effective) by February 12, 2010 but thereafter either ceases to be effective, or the Prospectus contained therein ceases to be usable (at any time during the Shelf Effectiveness Period), and such failure to remain effective or usable exists for more than 30 days (whether or not consecutive) in any 12-month period, unless such failure to remain effective or usable relates or is directly attributable to an acquisition or disposition being undertaken by the Company (each such event referred to in clauses (i) through (iii), a "Registration Default"), the interest rate on the Registrable Securities will be increased by 1.00% per annum, during the period of one or more such Registration Defaults, until (i) the Shelf Registration Statement is declared effective (or becomes automatically effective), (ii) the Exchange Offer is completed or (iii) the Shelf Registration Statement has again been declared (or automatically becomes) effective or the Prospectus contained therein again becomes usable, as the case may be. Following the cure of all Registration Defaults, the accrual of additional interest will cease. Capitalized terms used in this paragraph, but not otherwise defined herein shall have the meanings ascribed to such terms in the Registration Rights Agreement, dated as of February 17, 2009 (the "Registration Rights Agreement"), among the Company, Forest Oil Permian Corporation, J.P. Morgan Securities Inc., Banc of America Securities LLC, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Wachovia Capital Markets LLC, BNP Paribas Securities Corp., Scotia Capital (USA) Inc. and TD Securities (USA) Inc. The Holder of this Security is entitled to the benefits of the Registration Rights Agreement. [for Additional Securities, replace with relevant description of Registration Rights Agreement]

2.     METHOD OF PAYMENT

        The Company will pay interest on the Securities (except defaulted interest) to the Persons who are registered holders of Securities at the close of business on the February 1 or August 1 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal, premium, if any, and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. Except as described in the succeeding two sentences, the principal of (and premium, if any) and interest on the Securities shall be payable at the office or agency of the Company maintained for such purpose in The City of New York, or at such other office or agency of the Company as may be maintained for such purpose pursuant to Section 2.03 of the Indenture; provided, however, that, at the option of the Company, each

A-3

installment of interest may be paid by (i) check mailed to addresses of the Persons entitled thereto as such addresses shall appear on the Note Register or (ii) wire transfer to an account located in the United States maintained by the payee. Payments in respect of Securities represented by a Global Security (including principal, premium and interest) will be made by wire transfer of immediately available funds to the accounts specified by DTC. Payments in respect of Securities represented by Definitive Securities (including principal, premium, if any, and interest) held by a Holder of at least $1,000,000 aggregate principal amount of Securities represented by Definitive Securities will be made by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 15 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion).

3.     PAYING AGENT AND REGISTRAR

        Initially, U.S. Bank National Association (the "Trustee") will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company or any of its Restricted Subsidiaries may act as Paying Agent, Registrar or co-registrar.

4.     INDENTURE

        The Company issued the Securities under an Indenture dated as of February 17, 2009 (the "Indenture"), among the Company, Forest Oil Permian Corporation and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Except as otherwise set forth in paragraph 1, terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the Act for a statement of those terms.

        The Securities are general unsecured obligations of the Company including (a) $600,000,000 aggregate principal amount of Securities being offered on the Issue Date (subject to Section 2.09 of the Indenture) and (b) any Additional Securities. The Initial Securities, Additional Securities, and Exchange Securities will be treated as a single class of securities under the Indenture. This Security is one of the [Initial] [Additional] Securities referred to in the Indenture. The Indenture contains certain covenants that, among other things, limit (i) the incurrence of additional indebtedness by the Company and its Restricted Subsidiaries (as defined), (ii) the payment of dividends and other restricted payments by the Company and its Restricted Subsidiaries, (iii) the creation of restrictions on distributions from Restricted Subsidiaries, (iv) asset sales, (v) transactions with affiliates, (vi) sales or issuances of Restricted Subsidiary capital stock, (vii) the incurrence of liens and (viii) mergers and consolidations. All such limitations and prohibitions, however, are subject to a number of important qualifications and exceptions.

        To guarantee the due and punctual payment of the principal and interest, if any, on the Securities and all other amounts payable by the Company under the Indenture and the Securities when and as the same shall be due and payable, whether at Stated Maturity, by acceleration or otherwise, according to the terms of the Securities and the Indenture, the Subsidiary Guarantors have guaranteed the Obligations on a senior basis pursuant to the terms of the Indenture.

5.     OPTIONAL REDEMPTION

        At any time prior to February 15, 2012, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Securities issued under the Indenture at a redemption price of 108.5% of the principal amount, plus accrued and unpaid interest, if any, to the redemption

A-4

date (subject to the right of Holders of record on the relevant record date to receive interest due on an interest payment date that is on or prior to the redemption date), with the net cash proceeds of one or more Equity Offerings by the Company, provided that:

        (1)   at least 65% of the aggregate principal amount of the Securities issued under the Indenture remains outstanding immediately after the occurrence of such redemption (excluding Securities held by the Company and its Subsidiaries); and

        (2)   the redemption occurs within 120 days of the date of closing of such Equity Offering.

        At any time the Securities will be redeemable, at the option of the Company, as a whole or in part, upon not less than 30 and not more than 60 days' prior notice mailed to each Holder of Securities to be so redeemed at such Holder's registered address, at a redemption price equal to the greater of

•

100% of the principal amount of the Securities to be redeemed; and

•

the sum of the present values of the remaining scheduled payments thereon consisting of principal and interest, exclusive of interest accrued to the date of redemption, at the rate in effect on the date of calculation of the redemption price, discounted to the date of redemption on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the applicable Treasury Yield (as defined below), plus 50 basis points;

plus, in either case, accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on an interest payment date that is on or prior to the redemption date).

        For purposes of determining such redemption price, the following definitions are applicable:

        "Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Securities to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such Securities.

        "Comparable Treasury Price" means, with respect to any redemption date,

(a)

the bid price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) at 4:00 p.m. on the third Business Day preceding that redemption date, as set forth on "Telerate Page 500" (or such other page as may replace Telerate Page 500); or



(b)

if Telerate Page 500 (or any successor page) is not displayed or does not contain bid prices for the Comparable Treasury Issue at that time (i) the average of the Reference Treasury Dealer Quotations obtained by the Company for that redemption date, after excluding the highest and lowest of all Reference Treasury Dealer Quotations obtained, or (ii) if the Company obtains fewer than four such Reference Treasury Dealer Quotations, the average of all Reference Treasury Dealer Quotations obtained by the Company.

        "Independent Investment Banker" means J.P. Morgan Securities Inc. (and its successors) or, if such firm is unwilling or unable to select the applicable Comparable Treasury Issue, an independent investment banking institution of national standing appointed by the Company.

        "Reference Treasury Dealer" means (i) J.P. Morgan Securities Inc., and its successors, unless it ceases to be a primary U.S. government securities dealer in New York City (a "Primary Treasury Dealer"), in which case the Company shall substitute therefor another Primary Treasury Dealer and (ii) any other Primary Treasury Dealer selected by the Company.

        "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date, an average, as determined by the Company, of the bid and asked prices for

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the Comparable Treasury Issue for the Securities, expressed in each case as a percentage of its principal amount, quoted in writing to the Company by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third business day preceding such Redemption Date.

        "Treasury Yield" means, with respect to any redemption date, the rate per annum equal to the semiannual equivalent yield to maturity, computed as of the third Business Day immediately preceding the redemption date, of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue, expressed as a percentage of its principal amount, equal to the applicable Comparable Treasury Price for such redemption date.

        The calculation of such optional redemption price shall be made by the Company in accordance with this paragraph 5. Upon such determination, the Company shall deliver to the Trustee, at its Corporate Trust Office, an Officers' Certificate setting forth the optional redemption price on all Securities to be redeemed, and the Trustee shall rely solely upon, and shall be fully protected in relying upon, such Officers' Certificate, in all matters concerning the optional redemption price.

        In the event that Holders of not less than 90% of the aggregate principal amount of the outstanding Securities accept a Change of Control Offer and the Company purchases all of the Securities held by such Holders, the Company will have the right, upon not less than 30 nor more than 60 days' prior notice, given in accordance with Article III of the Indenture not more than 30 days following the purchase pursuant to the Change of Control Offer described in paragraph 6 below, to redeem all of the Securities that remain outstanding following such purchase at a redemption price equal to the Change of Control Payment plus, to the extent not included in the Change of Control Payment, accrued and unpaid interest on the Securities that remain outstanding, to, but not including, the date of redemption (subject to the right of the Holders on the relevant record date to receive interest due on an interest payment date that is on or prior to the redemption date).

        In the case of any partial redemption, selection of the Securities for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Securities are listed or, if the Securities are not so listed, on a pro rata basis or by any other method the Trustee deems fair and appropriate, provided that (i) Securities and portions thereof that the Trustee selects shall be in minimum amounts of $2,000 or an integral multiple of $1,000 in excess thereof and (ii) no such partial redemption shall reduce the portion of the principal amount of a Security not redeemed to less than $2,000. If any Security is to be redeemed in part only, the notice of redemption relating to such Security shall state the portion of the principal amount thereof to be redeemed. A new Security in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Security. On and after the redemption date, interest will cease to accrue on Securities or portions thereof called for redemption as long as the Company has deposited with the Trustee or with a Paying Agent (or, if applicable, segregated and held in trust) money sufficient to pay the redemption price of, and accrued and unpaid interest on, all the Securities which are to be redeemed on such date.

6.     PUT PROVISIONS

        Upon a Change of Control, any Holder of Securities will have the right to cause the Company to repurchase all or any part of the Securities of such Holder at a repurchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued and unpaid interest, if any, to the date of repurchase (subject to the right of holders of record on the relevant record date to receive interest due on the related interest payment date) as provided in, and subject to the terms of, the Indenture.

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7.     DENOMINATIONS; TRANSFER; EXCHANGE

        The Securities are in registered form without coupons in minimum denominations of $2,000 and whole multiples of $1,000 in excess thereof. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or any Securities for a period of 15 days before a selection of Securities to be redeemed or 15 days before an interest payment date.

8.     PERSONS DEEMED OWNERS

        The registered Holder of this Security may be treated as the owner of it for all purposes.

9.     UNCLAIMED MONEY

        If money for the payment of principal, premium or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment.

10.   DISCHARGE AND DEFEASANCE

        Subject to certain conditions set forth in the Indenture, the Company at any time may terminate some or all of its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or Government Obligations for the payment of principal, premium, if any, and interest on the Securities to redemption or fixed maturity, as the case may be.

11.   AMENDMENT, WAIVER

        Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in principal amount outstanding of the Securities and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in principal amount outstanding of the Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company, the Subsidiary Guarantors and the Trustee may amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, or to comply with Article V of the Indenture, or to provide for uncertificated Securities in addition to or in place of certificated Securities, or to add guarantees with respect to the Securities or to secure the Securities, or to add additional covenants or surrender rights and powers conferred on the Company, or to comply with any requirement of the SEC in connection with qualifying the Indenture under the Act, or to make any change that does not adversely affect the rights of any Securityholder in any material respect.

12.   DEFAULTS AND REMEDIES

        The Securities shall be subject to the Events of Default set forth in Article VI of the Indenture.

        Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power.

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13.   TRUSTEE DEALINGS WITH THE COMPANY

        Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee.

14.   NO RECOURSE AGAINST OTHERS

        A director, officer, employee or stockholder, as such, of the Company or any Subsidiary Guarantor shall not have any liability for any obligations of the Company or such Subsidiary Guarantor under the Securities, the Subsidiary Guarantees or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities.

15.   AUTHENTICATION

        This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security.

16.   ABBREVIATIONS

        Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act).

17.   CUSIP NUMBERS

        Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.

18.   GOVERNING LAW.

THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST AND WITHOUT CHARGE TO THE SECURITYHOLDER A COPY OF THE INDENTURE WHICH HAS IN IT THE TEXT OF THIS SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE TO:

ATTENTION OF: Forest Oil Corporation
707 17^th Street, Suite 3600
Denver, CO 80202

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ASSIGNMENT FORM

        To assign this Security, fill in the form below:

        I or we assign and transfer this Security to

(Print or type assignee's name, address and zip code)

(Insert assignee's soc. sec. or tax I.D. No.)

and irrevocably appoint                                    agent to transfer this Security on the books of the Company. The agent may substitute another to act for him.

Date:
Your signature:

Signature Guarantee:	(Signature must be guaranteed)
Sign exactly as your name appears on the other side of this Security.

The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15.

        In connection with any transfer or exchange of any of the Securities evidenced by this certificate occurring prior to the date that is one year after the later of the date of original issuance of such Securities and the last date, if any, on which such Securities were owned by the Company or any Affiliate of the Company, the undersigned confirms that such Securities are being:

CHECK ONE BOX BELOW:

1 o	acquired for the undersigned's own account, without transfer; or
2 o	transferred to the Company; or
3 o	transferred pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"); or
4 o	transferred pursuant to an effective registration statement under the Securities Act; or
5 o	transferred pursuant to and in compliance with Regulation S under the Securities Act; or
6 o	transferred to an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act), that has furnished to the Trustee a signed letter containing certain representations and agreements (the form of which letter appears as Section 2.07 of the Indenture); or
7 o	transferred pursuant to another available exemption from the registration requirements of the Securities Act of 1933.

Unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any person other than the registered Holder thereof; provided,

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however, that if box (5), (6) or (7) is checked, the Trustee or the Company may require, prior to registering any such transfer of the Securities, in its sole discretion, such legal opinions, certifications and other information as the Trustee or the Company may reasonably request to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, such as the exemption provided by Rule 144 under such Act.

	Signature
Signature Guarantee:
(Signature must be guaranteed)	Signature

        The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15.

TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.

        The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, as amended, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A.

Dated:
	Signature

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[TO BE ATTACHED TO GLOBAL SECURITIES]

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY

        The following increases or decreases in this Global Security have been made:

Date of
increase or
decrease Amount of decrease in
Principal Amount of this
Global Security Amount of increase in
Principal Amount of this
Global Security Principal Amount of this
Global Security following such
decrease or increase Signature of authorized
signatory of Trustee or
Securities Custodian

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OPTION OF HOLDER TO ELECT PURCHASE

        If you want to elect to have this Security purchased by the Company pursuant to Section 4.06 or 4.09 of the Indenture, check either box:

o
4.06 o
4.09

        If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.06 or 4.09 of the Indenture, state the amount in principal amount (must be a minimum of $2,000 or an integral multiple of $1,000 in excess thereof): $                    

Date: Your Signature (Sign exactly as your name appears on the other side of the Security)

Signature Guarantee:
	(Signature must be guaranteed)

The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15.

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EXHIBIT B

[FORM OF FACE OF EXCHANGE SECURITY]
[Depository Legend, if applicable]

No. [            ] Principal Amount $ [                                    ], as
revised by the Schedule of Increases or
Decreases in Global Security attached hereto

CUSIP NO.
ISIN:

8¹/2% Senior Notes due 2014

        FOREST OIL CORPORATION, a New York corporation, promises to pay to [                                    ], or registered assigns, the principal sum of [                                    ] Dollars, as revised by the Schedule of Increases or Decreases in Global Security attached hereto, on February 15, 2014.

Interest Payment Dates: February 15 and August 15
Record Dates: February 1 and August 1

        Additional provisions of this Security are set forth on the other side of this Security.

Dated:                        , 20            

FOREST OIL CORPORATION
By:
	Name:
	Title:

[CORPORATE SEAL]

TRUSTEE'S CERTIFICATE OF
AUTHENTICATION

U.S. BANK NATIONAL ASSOCIATION
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.

By: Authorized Signatory

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[FORM OF REVERSE SIDE OF EXCHANGE SECURITY]

8¹/2% Senior Note due 2014

1.     INTEREST

        Forest Oil Corporation, a New York corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest semiannually on February 15 and August 15 of each year beginning on August 15, 2009. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from February 17, 2009. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal at the rate borne by the Securities plus 1% per annum, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful.

2.     METHOD OF PAYMENT

        The Company will pay interest on the Securities (except defaulted interest) to the Persons who are registered holders of Securities at the close of business on the June 1 or December 1 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal, premium, if any, and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. Except as described in the succeeding two sentences, the principal of (and premium, if any) and interest on the Securities shall be payable at the office or agency of the Company maintained for such purpose in The City of New York, or at such other office or agency of the Company as may be maintained for such purpose pursuant to Section 2.03 of the Indenture; provided, however, that, at the option of the Company, each installment of interest may be paid by (i) check mailed to addresses of the Persons entitled thereto as such addresses shall appear on the Note Register or (ii) wire transfer to an account located in the United States maintained by the payee. Payments in respect of Securities represented by a Global Security (including principal, premium and interest) will be made by wire transfer of immediately available funds to the accounts specified by DTC. Payments in respect of Securities represented by Definitive Securities (including principal, premium, if any, and interest) held by a Holder of at least $1,000,000 aggregate principal amount of Securities represented by Definitive Securities will be made by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 15 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion).

3.     PAYING AGENT AND REGISTRAR

        Initially, U.S. Bank National Association (the "Trustee") will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company or any of its Restricted Subsidiaries may act as Paying Agent, Registrar or co-registrar.

4.     INDENTURE

        The Company issued the Securities under an Indenture dated as of February 17, 2009 (the "Indenture"), among the Company, Forest Oil Permian Corporation and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms defined in the Indenture and not defined herein have the meanings

B-2

ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the Act for a statement of those terms.

        The Securities are general unsecured obligations of the Company including (a) $600,000,000 aggregate principal amount of Securities being offered on the Issue Date (subject to Section 2.09 of the Indenture) and (b) any Additional Securities. The Initial Securities, Additional Securities, and Exchange Securities will be treated as a single class of securities under the Indenture. This Security is one of the Exchange Securities referred to in the Indenture. The Indenture contains certain covenants that, among other things, limit (i) the incurrence of additional indebtedness by the Company and its Restricted Subsidiaries (as defined), (ii) the payment of dividends and other restricted payments by the Company and its Restricted Subsidiaries, (iii) the creation of restrictions on distributions from Restricted Subsidiaries, (iv) asset sales, (v) transactions with affiliates, (vi) sales or issuances of Restricted Subsidiary capital stock, (vii) the incurrence of liens and (viii) mergers and consolidations. All such limitations and prohibitions, however, are subject to a number of important qualifications and exceptions.

        To guarantee the due and punctual payment of the principal and interest, if any, on the Securities and all other amounts payable by the Company under the Indenture and the Securities when and as the same shall be due and payable, whether at Stated Maturity, by acceleration or otherwise, according to the terms of the Securities and the Indenture, the Subsidiary Guarantors have guaranteed the Obligations on a senior basis pursuant to the terms of the Indenture.

5.     OPTIONAL REDEMPTION

        At any time prior to February 15, 2012, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Securities issued under the Indenture at a redemption price of 108.5% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on an interest payment date that is on or prior to the redemption date), with the net cash proceeds of one or more Equity Offerings by the Company, provided that:

        (1)   at least 65% of the aggregate principal amount of the Securities issued under the Indenture remains outstanding immediately after the occurrence of such redemption (excluding Securities held by the Company and its Subsidiaries); and

        (2)   the redemption occurs within 120 days of the date of closing of such Equity Offering.

        At any time the Securities will be redeemable, at the option of the Company, as a whole or in part upon not less than 30 and not more than 60 days' prior notice mailed to each Holder of Securities to be so redeemed at such Holder's registered address, at a redemption price equal to the greater of

•

100% of the principal amount of the Securities to be redeemed; and

•

the sum of the present values of the remaining scheduled payments thereon consisting of principal and interest, exclusive of interest accrued to the date of redemption, at the rate in effect on the date of calculation of the redemption price, discounted to the date of redemption on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the applicable Treasury Yield (as defined below), plus 50 basis points;

plus, in either case, accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on an interest payment date that is on or prior to the redemption date).

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        For purposes of determining such redemption price, the following definitions are applicable:

        "Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Securities to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such Securities.

        "Comparable Treasury Price" means, with respect to any redemption date,

(a)

the bid price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) at 4:00 p.m. on the third Business Day preceding that redemption date, as set forth on "Telerate Page 500" (or such other page as may replace Telerate Page 500); or



(b)

if Telerate Page 500 (or any successor page) is not displayed or does not contain bid prices for the Comparable Treasury Issue at that time (i) the average of the Reference Treasury Dealer Quotations obtained by the Company for that redemption date, after excluding the highest and lowest of all Reference Treasury Dealer Quotations obtained, or (ii) if the Company obtains fewer than four such Reference Treasury Dealer Quotations, the average of all Reference Treasury Dealer Quotations obtained by the Company.

        "Independent Investment Banker" means J.P. Morgan Securities Inc. (and its successors) or, if such firm is unwilling or unable to select the applicable Comparable Treasury Issue, an independent investment banking institution of national standing appointed by the Company.

        "Reference Treasury Dealer" means (i) J.P. Morgan Securities Inc., and its successors, unless it ceases to be a primary U.S. government securities dealer in New York City (a "Primary Treasury Dealer"), in which case the Company shall substitute therefor another Primary Treasury Dealer and (ii) any other Primary Treasury Dealer selected by the Company.

        "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date, an average, as determined by the Company, of the bid and asked prices for the Comparable Treasury Issue for the Securities, expressed in each case as a percentage of its principal amount, quoted in writing to the Company by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third business day preceding such redemption date.

        "Treasury Yield" means, with respect to any redemption date, the rate per annum equal to the semiannual equivalent yield to maturity, computed as of the third Business Day immediately preceding the redemption date, of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue, expressed as a percentage of its principal amount, equal to the applicable Comparable Treasury Price for such redemption date.

        The calculation of such optional redemption price shall be made by the Company in accordance with this Section 6. Upon such determination, the Company shall deliver to the Trustee, at its Corporate Trust Office, an Officers' Certificate setting forth the optional redemption price on all Securities to be redeemed, and the Trustee shall rely solely upon, and shall be fully protected in relying upon, such Officers' Certificate, in all matters concerning the optional redemption price.

        In the case of any partial redemption, selection of the Securities for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Securities are listed or, if the Securities are not so listed, on a pro rata basis or by any other method the Trustee deems fair and appropriate, provided that (i) Securities and portions thereof that the Trustee selects shall be in minimum amounts of $2,000 or an integral multiple of $1,000 in excess thereof and (ii) no such partial redemption shall reduce the portion of the principal amount of a Security not redeemed to less than $2,000. If any Security is to be redeemed in part only, the notice of redemption relating to such Security shall state the portion of the principal amount thereof to be

B-4

redeemed. A new Security in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Security. On and after the redemption date, interest will cease to accrue on Securities or portions thereof called for redemption as long as the Company has deposited with the Trustee or with a Paying Agent (or, if applicable, segregated and held in trust) money sufficient to pay the redemption price of, and accrued and unpaid interest on, all the Securities which are to be redeemed on such date.

6.     PUT PROVISIONS

        Upon a Change of Control, any Holder of Securities will have the right to cause the Company to repurchase all or any part of the Securities of such Holder at a repurchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued and unpaid interest, if any, to the date of repurchase (subject to the right of holders of record on the relevant record date to receive interest due on the related interest payment date) as provided in, and subject to the terms of, the Indenture.

7.     DENOMINATIONS; TRANSFER; EXCHANGE

        The Securities are in registered form without coupons in minimum denominations of $2,000 and whole multiples of $1,000 in excess thereof. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or any Securities for a period of 15 days before a selection of Securities to be redeemed or 15 days before an interest payment date.

8.     PERSONS DEEMED OWNERS

        The registered Holder of this Security may be treated as the owner of it for all purposes.

9.     UNCLAIMED MONEY

        If money for the payment of principal, premium or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment.

10.   DISCHARGE AND DEFEASANCE

        Subject to certain conditions set forth in the Indenture, the Company at any time may terminate some or all of its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or Government Obligations for the payment of principal, premium, if any, and interest on the Securities to redemption or fixed maturity, as the case may be.

11.   AMENDMENT, WAIVER

        Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in principal amount outstanding of the Securities and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in principal amount outstanding of the Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company, the Subsidiary Guarantors and the Trustee may amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, or to comply with Article V of the Indenture, or

B-5

to provide for uncertificated Securities in addition to or in place of certificated Securities, or to add guarantees with respect to the Securities or to secure the Securities, or to add additional covenants or surrender rights and powers conferred on the Company, or to comply with any requirement of the SEC in connection with qualifying the Indenture under the Act, or to make any change that does not adversely affect the rights of any Securityholder in any material respect.

12.   DEFAULTS AND REMEDIES

        The Securities shall be subject to the Events of Default set forth in Article VI of the Indenture.

        Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power.

13.   TRUSTEE DEALINGS WITH THE COMPANY

        Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee.

14.   NO RECOURSE AGAINST OTHERS

        A director, officer, employee or stockholder, as such, of the Company or any Subsidiary Guarantor shall not have any liability for any obligations of the Company or such Subsidiary Guarantor under the Securities, the Subsidiary Guarantees or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities.

15.   AUTHENTICATION

        This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security.

16.   ABBREVIATIONS

        Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act).

17.   CUSIP NUMBERS

        Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.

B-6

18.   GOVERNING LAW.

THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST AND WITHOUT CHARGE TO THE SECURITYHOLDER A COPY OF THE INDENTURE WHICH HAS IN IT THE TEXT OF THIS SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE TO:

ATTENTION OF: Forest Oil Corporation
707 17^th Street, Suite 3600
Denver, CO 80202

B-7

ASSIGNMENT FORM

To assign this Security, fill in the form below:

I or we assign and transfer this Security to

(Print or type assignee's name, address and zip code)

(Insert assignee's soc. sec. or tax I.D. No.)

and irrevocably appoint                                    agent to transfer this Security on the books of the Company. The agent may substitute another to act for him.

Date:
Your signature:

Signature Guarantee:	(Signature must be guaranteed)
Sign exactly as your name appears on the other side of this Security.

The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15.

B-8

[TO BE ATTACHED TO GLOBAL SECURITIES]

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY

        The following increases or decreases in this Global Security have been made:

Date of
increase or
decrease Amount of decrease in
Principal Amount of this
Global Security Amount of increase in
Principal Amount of this
Global Security Principal Amount of this
Global Security following such
decrease or increase Signature of authorized
signatory of Trustee or
Securities Custodian

B-9

OPTION OF HOLDER TO ELECT PURCHASE

        If you want to elect to have this Security purchased by the Company pursuant to Section 4.06 or 4.09 of the Indenture, check either box:

o
4.06 o
4.09

        If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.06 or 4.09 of the Indenture, state the amount in principal amount (must be a minimum of $2,000 or an integral multiple of $1,000 in excess thereof): $            

Date: Your Signature (Sign exactly as your name appears on the other side of the Security)

Signature Guarantee: (Signature must be guaranteed)

The signature(s) should be guaranteed by an eligible guarantor institution (banks,
stockbrokers, savings and loan associations and credit unions with membership in an
approved signature guarantee medallion program), pursuant to S.E.C. Rule 17Ad

B-10

EXHIBIT C

FORM OF SUPPLEMENTAL INDENTURE

        SUPPLEMENTAL INDENTURE (this "Supplemental Indenture") dated as of                              , among [SUBSIDIARY GUARANTOR] (the "New Subsidiary Guarantor"), a subsidiary of Forest Oil Corporation (or its successor), a New York corporation (the "Company"), FOREST OIL CORPORATION, on behalf of itself and the Subsidiary Guarantors (the "Existing Subsidiary Guarantors") under the Indenture referred to below, and U.S. BANK NATIONAL ASSOCIATION, as trustee under the indenture referred to below (the "Trustee").

W I T N E S S E T H :

        WHEREAS the Company has heretofore executed and delivered to the Trustee an Indenture (the "Indenture") dated as of February 17, 2009, providing for the issuance of 8¹/2% Senior Notes due 2014 (the "Securities").

        WHEREAS Section 4.13 of the Indenture provides that under certain circumstances the Company is required to cause the New Subsidiary Guarantor to execute and deliver to the Trustee a supplemental indenture pursuant to which the New Subsidiary Guarantor shall unconditionally guarantee all the Company's obligations under the Securities on the terms and conditions set forth herein; and

        WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee, the Company and the Existing Subsidiary Guarantors are authorized to execute and deliver this Supplemental Indenture;

        NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the New Subsidiary Guarantor, the Company, the Existing Subsidiary Guarantors and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Securities as follows:

        1.    AGREEMENT TO GUARANTEE.    The New Subsidiary Guarantor hereby agrees, jointly and severally with all other Subsidiary Guarantors, to unconditionally guarantee the Company's obligations under the Securities on the terms and to be bound by all other applicable provisions of the Indenture.

        2.    RATIFICATION OF INDENTURE; SUPPLEMENTAL INDENTURES PART OF INDENTURE.    Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every holder of Securities heretofore or hereafter authenticated and delivered shall be bound hereby.

3.    GOVERNING LAW.THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

        4.    TRUSTEE MAKES NO REPRESENTATION.    The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture.

        5.    COUNTERPARTS.    The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.

        6.    EFFECT OF HEADINGS.    The Section headings herein are for convenience only and shall not effect the construction thereof.

C-1

        IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written.

[NEW SUBSIDIARY GUARANTOR],
By
	Name:
	Title:
FOREST OIL CORPORATION,
By
	Name:
	Title:
U.S. BANK NATIONAL ASSOCIATION, as Trustee,
By
	Name:
	Title:

C-2

QuickLinks

Exhibit 4.4

Table of Contents
CROSS-REFERENCE TABLE
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE
ARTICLE II THE SECURITIES
ARTICLE III REDEMPTION
ARTICLE IV COVENANTS
ARTICLE V SUCCESSOR COMPANY
ARTICLE VI DEFAULTS AND REMEDIES
ARTICLE VII TRUSTEE
ARTICLE VIII DISCHARGE OF INDENTURE; DEFEASANCE
ARTICLE IX AMENDMENTS
ARTICLE X SUBSIDIARY GUARANTEES
ARTICLE XI MISCELLANEOUS

EXHIBIT A

EXHIBIT B

EXHIBIT C

FORM OF SUPPLEMENTAL INDENTURE
W I T N E S S E T H

EX-4.7

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Exhibit 4.7

EXECUTION COPY

$600,000,000

FOREST OIL CORPORATION

8¹/2% Senior Notes due 2014

Registration Rights Agreement

        This REGISTRATION RIGHTS AGREEMENT dated February 17, 2009 (the "Agreement") is entered into by and among Forest Oil Corporation, a New York corporation (the "Company"), Forest Oil Permian Corporation, a Delaware corporation (the "Guarantor") and J.P. Morgan Securities Inc. ("JPMorgan"), Banc of America Securities LLC, BNP Paribas Securities Corp., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., TD Securities (USA) Inc., Scotia Capital (USA) Inc. and Wachovia Capital Markets, LLC (the "Initial Purchasers").

        The Company, the Guarantor and the Initial Purchasers are parties to the Purchase Agreement dated February 11, 2009 (the "Purchase Agreement"), which provides for the sale by the Company to the Initial Purchasers of $600,000,000 aggregate principal amount of the Company's 8¹/2% Senior Notes due 2014 (the "Securities") which will be guaranteed on an unsecured senior basis by the Guarantor. As an inducement to the Initial Purchasers to enter into the Purchase Agreement, the Company and the Guarantor have agreed to provide to the Initial Purchasers and their direct and indirect transferees the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the closing under the Purchase Agreement.

        In consideration of the foregoing, the parties hereto agree as follows:

        1.    Definitions.    As used in this Agreement, the following terms shall have the following meanings:

        "Additional Guarantor" shall mean any subsidiary of the Company that executes a Subsidiary Guarantee under the Indenture after the date of this Agreement.

        "Business Day" shall mean any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed.

        "Closing Date" shall mean the Closing Date as defined in the Purchase Agreement.

        "Company" shall have the meaning set forth in the preamble and shall also include the Company's successors.

        "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time.

        "Exchange Date" shall have the meaning set forth in Section 2(a)(ii) hereof.

        "Exchange Offer" shall mean the exchange offer by the Company and the Guarantor of Exchange Securities for Registrable Securities pursuant to Section 2(a) hereof.

        "Exchange Offer Registration" shall mean a registration under the Securities Act effected pursuant to Section 2(a) hereof.

        "Exchange Offer Registration Statement" shall mean an exchange offer registration statement on Form S-4 (or, if applicable, on another appropriate form) and all amendments and supplements to such registration statement, in each case including the Prospectus contained therein or deemed a part thereof, all exhibits thereto and any document incorporated by reference therein.

        "Exchange Securities" shall mean senior notes issued by the Company and guaranteed by the Guarantor under the Indenture containing terms identical to the Securities (except that the Exchange Securities will not be subject to restrictions on transfer or to any increase in annual interest rate for

failure to comply with this Agreement) and to be offered to Holders of Securities in exchange for Securities pursuant to the Exchange Offer.

        "Free Writing Prospectus" means each free writing prospectus (as defined in Rule 405 under the Securities Act) prepared by or on behalf of the Company or used or referred to by the Company in connection with the sale of the Securities or the Exchange Securities.

        "Guarantor" shall have the meaning set forth in the preamble and shall also include any Guarantor's successors and any Additional Guarantors.

        "Holders" shall mean the Initial Purchasers, for so long as they own any Registrable Securities, and each of their successors, assigns and direct and indirect transferees who become owners of Registrable Securities under the Indenture; provided that for purposes of Sections 4 and 5 of this Agreement, the term "Holders" shall include Participating Broker-Dealers.

        "Indemnified Person" shall have the meaning set forth in Section 5(c) hereof.

        "Indemnifying Person" shall have the meaning set forth in Section 5(c) hereof.

        "Indenture" shall mean the Indenture relating to the Securities dated as of February 17, 2009 among the Company, the Guarantor and U.S. Bank National Association, as trustee, and as the same may be amended from time to time in accordance with the terms thereof.

        "Initial Purchasers" shall have the meaning set forth in the preamble.

        "Inspector" shall have the meaning set forth in Section 3(a)(xiv) hereof.

        "Issuer Information" shall have the meaning set forth in Section 5(a) hereof.

        "JPMorgan" shall have the meaning set forth in the preamble.

        "Majority Holders" shall mean the Holders of a majority of the aggregate principal amount of the outstanding Registrable Securities; provided that whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, any Registrable Securities owned directly or indirectly by the Company or any of its affiliates shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage or amount; and provided, further, that if the Company shall issue any additional Securities under the Indenture prior to consummation of the Exchange Offer or, if applicable, the effectiveness of any Shelf Registration Statement, such additional Securities and the Registrable Securities to which this Agreement relates shall be treated together as one class for purposes of determining whether the consent or approval of Holders of a specified percentage of Registrable Securities has been obtained.

        "Participating Broker-Dealers" shall have the meaning set forth in Section 4(a) hereof.

        "Person" shall mean an individual, partnership, limited liability company, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof.

        "Prospectus" shall mean the prospectus included in, or, pursuant to the rules and regulations of the Securities Act, deemed a part of, a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including a prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by a Shelf Registration Statement, and by all other amendments and supplements to such prospectus, and in each case including any document incorporated by reference therein.

        "Purchase Agreement" shall have the meaning set forth in the preamble.

        "Registrable Securities" shall mean the Securities; provided that the Securities shall cease to be Registrable Securities (i) when a Registration Statement with respect to such Securities has been declared effective under the Securities Act and such Securities have been exchanged or disposed of pursuant to such Registration Statement or (ii) when such Securities cease to be outstanding.

        "Registration Expenses" shall mean any and all expenses incident to performance of or compliance by the Company and the Guarantor with this Agreement, including without limitation: (i) all SEC, stock exchange or Financial Industry Regulatory Authority, Inc. registration and filing fees, (ii) all fees and expenses incurred in connection with compliance with state securities or blue sky laws (including reasonable fees and disbursements of counsel for any Underwriters or Holders in connection with blue sky qualification of any Exchange Securities or Registrable Securities), (iii) all expenses of any Persons in preparing or assisting in preparing, word processing, printing and distributing any Registration Statement, any Prospectus, any Free Writing Prospectus and any amendments or supplements thereto, any underwriting agreements, securities sales agreements or other similar agreements and any other documents relating to the performance of and compliance with this Agreement, (iv) all rating agency fees, (v) all fees and disbursements relating to the qualification of the Indenture under applicable securities laws, (vi) the fees and disbursements of the Trustee and its counsel, (vii) the fees and disbursements of counsel for the Company and the Guarantor and, in the case of a Shelf Registration Statement, the fees and disbursements of one counsel for the Holders (which counsel shall be selected by the Majority Holders and which counsel may also be counsel for the Initial Purchasers) and (viii) the fees and disbursements of the independent public accountants and independent petroleum engineers of the Company and the Guarantor, including the expenses of any special audits, "comfort" letters or letters concerning oil and gas reserve estimates, as applicable, required by or incident to the performance of and compliance with this Agreement, but excluding fees and expenses of counsel to the Underwriters (other than fees and expenses set forth in clause (ii) above) or the Holders and underwriting discounts and commissions, brokerage commissions and transfer taxes, if any, relating to the sale or disposition of Registrable Securities by a Holder.

        "Registration Statement" shall mean any registration statement of the Company and the Guarantor that covers any of the Exchange Securities or Registrable Securities pursuant to the provisions of this Agreement and all amendments and supplements to any such registration statement, including post-effective amendments, in each case including the Prospectus contained therein or deemed a part thereof, all exhibits thereto and any document incorporated by reference therein.

        "SEC" shall mean the United States Securities and Exchange Commission.

        "Securities" shall have the meaning set forth in the preamble.

        "Securities Act" shall mean the Securities Act of 1933, as amended from time to time.

        "Shelf Effectiveness Period" shall have the meaning set forth in Section 2(b) hereof.

        "Shelf Registration" shall mean a registration effected pursuant to Section 2(b) hereof.

        "Shelf Registration Statement" shall mean a "shelf" registration statement of the Company and the Guarantor that covers all or a portion of the Registrable Securities (but no other securities unless approved by a majority of the Holders whose Registrable Securities are to be covered by such Shelf Registration Statement) on an appropriate form under Rule 415 under the Securities Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein or deemed a part thereof, all exhibits thereto and any document incorporated by reference therein.

        "Shelf Request" shall have the meaning set forth in Section 2(b) hereof.

        "Subsidiary Guarantees" shall mean the guarantees of the Securities and Exchange Securities by the Guarantor under the Indenture.

        "Staff" shall mean the staff of the SEC.

        "Trust Indenture Act" shall mean the Trust Indenture Act of 1939, as amended from time to time.

        "Trustee" shall mean the trustee with respect to the Securities under the Indenture.

        "Underwriter" shall have the meaning set forth in Section 3(e) hereof.

        "Underwritten Offering" shall mean an offering in which Registrable Securities are sold to an Underwriter for reoffering to the public.

        2.    Registration Under the Securities Act.    (a) To the extent not prohibited by any applicable law or applicable interpretations of the Staff, the Company and the Guarantor shall use commercially reasonable efforts to (i) cause to be filed an Exchange Offer Registration Statement covering an offer to the Holders to exchange all the Registrable Securities for Exchange Securities and (ii) have such Registration Statement remain effective until 180 days after the Exchange Date for use by one or more Participating Broker Dealers. The Company and the Guarantor shall commence the Exchange Offer promptly after the Exchange Offer Registration Statement is declared effective by the SEC and use commercially reasonable efforts to complete the Exchange Offer not later than 60 days after such effective date.

        The Company and the Guarantor shall commence the Exchange Offer by mailing or making available the related Prospectus, appropriate letters of transmittal and other accompanying documents to each Holder stating, in addition to such other disclosures as are required by applicable law, substantially the following:

(i)

that the Exchange Offer is being made pursuant to this Agreement and that all Registrable Securities validly tendered and not properly withdrawn will be accepted for exchange;



(ii)

the date of acceptance for exchange (which shall be a period of at least 20 Business Days from the date such notice is mailed or made available) (the "Exchange Date");



(iii)

that any Registrable Security not tendered will remain outstanding and continue to accrue interest but will not retain any rights under this Agreement, except as otherwise specified herein;



(iv)

that any Holder electing to have a Registrable Security exchanged pursuant to the Exchange Offer will be required to (A) surrender such Registrable Security, together with the appropriate letters of transmittal, to the institution and at the address and in the manner specified in the notice, or (B) effect such exchange otherwise in compliance with the applicable procedures of the depositary for such Registrable Security, in each case prior to the close of business on the last Exchange Date; and



(v)

that any Holder will be entitled to withdraw its election, not later than the close of business on the last Exchange Date, by (A) sending to the institution and at the address specified in the notice, a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Registrable Securities delivered for exchange and a statement that such Holder is withdrawing its election to have such Securities exchanged or (B) effecting such withdrawal in compliance with the applicable procedures of the depositary for the Registrable Securities.

        As a condition to participating in the Exchange Offer, a Holder will be required to represent to the Company and the Guarantor that (i) any Exchange Securities to be received by it will be acquired in the ordinary course of its business, (ii) at the time of the commencement of the Exchange Offer it has no arrangement or understanding with any Person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Securities in violation of the provisions of the Securities Act, (iii) it is not an "affiliate" (within the meaning of Rule 405 under the Securities Act) of the Company or the Guarantor and (iv) if such Holder is a broker-dealer that will receive Exchange Securities for its own account in exchange for Registrable Securities that were acquired as a result of market-making or other trading activities, then such Holder will deliver a Prospectus (or, to the extent permitted by law, make available a Prospectus to purchasers) in connection with any resale of such Exchange Securities.

        As soon as practicable after the last Exchange Date, the Company and the Guarantor shall:

(i)

accept for exchange Registrable Securities or portions thereof validly tendered and not properly withdrawn pursuant to the Exchange Offer; and

(ii)

deliver, or cause to be delivered, to the Trustee for cancellation all Registrable Securities or portions thereof so accepted for exchange by the Company and issue, and cause the Trustee to promptly authenticate and deliver to each Holder, Exchange Securities equal in principal amount to the principal amount of the Registrable Securities surrendered by such Holder.

        The Company and the Guarantor shall use commercially reasonable efforts to complete the Exchange Offer as provided above and shall comply with the applicable requirements of the Securities Act, the Exchange Act and other applicable laws and regulations in connection with the Exchange Offer. The Exchange Offer shall not be subject to any conditions, other than that the Exchange Offer does not violate any applicable law or applicable interpretations of the Staff.

        (b)   In the event that (i) the Company and the Guarantor determine that the Exchange Offer Registration provided for in Section 2(a) above is not available or may not be completed as soon as practicable after the Exchange Date because it would violate any applicable law or applicable interpretations of the Staff, (ii) the Exchange Offer is not for any other reason completed by February 12, 2010 or (iii) any Initial Purchaser shall so request in connection with any offer or sale of Registrable Securities (a "Shelf Request"), the Company and the Guarantor shall use commercially reasonable efforts to cause to be filed as soon as practicable after such determination, date or Shelf Request, as the case may be, a Shelf Registration Statement providing for the sale of all the Registrable Securities by the Holders thereof and to have such Shelf Registration Statement declared effective by the SEC.

        In the event that the Company and the Guarantor are required to file a Shelf Registration Statement pursuant to clause (iii) of the preceding sentence, the Company and the Guarantor shall use commercially reasonable efforts to file and have declared effective by the SEC (or file and become effective automatically, as the case may be) both an Exchange Offer Registration Statement pursuant to Section 2(a) with respect to all Registrable Securities and a Shelf Registration Statement (which may be a combined Registration Statement with the Exchange Offer Registration Statement) with respect to offers and sales of Registrable Securities held by the Initial Purchasers after completion of the Exchange Offer.

        The Company and the Guarantor agree to use commercially reasonable efforts to keep the Shelf Registration Statement continuously effective until the earlier of February 11, 2011 and such time as all the Registrable Securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement (the "Shelf Effectiveness Period"). The Company and the Guarantor further agree to supplement or amend the Shelf Registration Statement, the related Prospectus and any Free Writing Prospectus if required by the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration Statement or by the Securities Act or by any other rules and regulations thereunder or if reasonably requested by a Holder of Registrable Securities with respect to information relating to such Holder, and, to the extent necessary, to use commercially reasonable efforts to cause any such amendment to become effective and such Shelf Registration Statement, Prospectus or Free Writing Prospectus, as the case may be, to become usable as soon as thereafter practicable. The Company and the Guarantor agree to furnish to the Holders of Registrable Securities copies of any such supplement or amendment promptly after its being used or filed with the SEC.

        (c)   The Company and the Guarantor shall pay all Registration Expenses in connection with any registration pursuant to Section 2(a) or Section 2(b) hereof. Each Holder shall pay all underwriting discounts and commissions, brokerage commissions and transfer taxes, if any, relating to the sale or disposition of such Holder's Registrable Securities pursuant to the Shelf Registration Statement.

        (d)   An Exchange Offer Registration Statement pursuant to Section 2(a) hereof will not be deemed to have become effective unless it has been declared effective by the SEC. A Shelf Registration Statement pursuant to Section 2(b) hereof will not be deemed to have become effective unless it has been declared effective by the SEC or is automatically effective upon filing with the SEC as provided by Rule 462 under the Securities Act.

        In the event that either the Exchange Offer is not completed or the Shelf Registration Statement, if required hereby, is not declared effective (or does not automatically become effective) on or prior to February 12, 2010, the interest rate on the Registrable Securities will be increased by 1.00% per annum until the Exchange Offer is completed or the Shelf Registration Statement, if required hereby, is declared effective by the SEC (or becomes automatically effective).

        If the Shelf Registration Statement, if required hereby, has been declared effective or automatically becomes effective as the case may be and thereafter either ceases to be effective or the Prospectus contained therein ceases to be usable at any time during the Shelf Effectiveness Period, and such failure to remain effective or usable exists for more than 30 days (whether or not consecutive) in any 12-month period, unless such failure to remain effective or usable relates or is directly attributable to an acquisition or disposition being undertaken by the Company then the interest rate on the Registrable Securities will be increased by 1.00% per annum commencing on the 31^st day in such 12-month period and ending on such date that the Shelf Registration Statement has again been declared (or automatically becomes) effective or the Prospectus again becomes usable.

        (e)   Without limiting the remedies available to the Initial Purchasers and the Holders, the Company and the Guarantor acknowledge that any failure by the Company or the Guarantor to comply with their obligations under Section 2(a) and Section 2(b) hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Company's and the Guarantor's obligations under Section 2(a) and Section 2(b) hereof.

        3.    Registration Procedures.    (a) In connection with their obligations pursuant to Section 2(a) and Section 2(b) hereof, the Company and the Guarantor shall as expeditiously as possible:

(i)

prepare and file with the SEC a Registration Statement on the appropriate form under the Securities Act, which form (x) shall be selected by the Company and the Guarantor, (y) shall, in the case of a Shelf Registration, be available for the sale of the Registrable Securities by the Holders thereof and (z) shall comply as to form in all material respects with the requirements of the applicable form and include all financial statements and oil and gas reserve information required by the SEC to be filed therewith; and use commercially reasonable efforts to cause such Registration Statement to become effective and remain effective for the applicable period in accordance with Section 2 hereof;



(ii)

prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement effective for the applicable period in accordance with Section 2 hereof and cause each Prospectus to be supplemented by any required prospectus supplement and, as so supplemented, to be filed pursuant to Rule 424 under the Securities Act; and keep each Prospectus current during the period described in Section 4(3) of and Rule 174 under the Securities Act that is applicable to transactions by brokers or dealers with respect to the Registrable Securities or Exchange Securities;



(iii)

to the extent any Free Writing Prospectus is used, file with the SEC any Free Writing Prospectus that is required to be filed by the Company or the Guarantor with the SEC in accordance with the Securities Act and to retain any Free Writing Prospectus not required to be filed;

        (iv)  in the case of a Shelf Registration, furnish to each Holder of Registrable Securities, to counsel for the Initial Purchasers, to counsel for such Holders and to each Underwriter of an Underwritten Offering of Registrable Securities, if any, without charge, as many copies of each Prospectus, including each preliminary prospectus or Free Writing Prospectus, and any amendment or supplement thereto, in order to facilitate the sale or other disposition of the Registrable Securities thereunder; and the Company and the Guarantor's consent to the use of such Prospectus, preliminary prospectus or such Free Writing Prospectus and any amendment or

supplement thereto in accordance with applicable law by each of the Holders of Registrable Securities and any such Underwriters in connection with the offering and sale of the Registrable Securities covered by and in the manner described in such Prospectus, preliminary prospectus or such Free Writing Prospectus or any amendment or supplement thereto in accordance with applicable law;

        (v)   use commercially reasonable efforts to register or qualify the Registrable Securities under all applicable state securities or blue sky laws of such jurisdictions as any Holder of Registrable Securities covered by a Registration Statement shall reasonably request in writing by the time the applicable Registration Statement is declared effective by the SEC; cooperate with such Holders in connection with any filings required to be made with the Financial Industry Regulatory Authority, Inc., and do any and all other acts and things that may be reasonably necessary or advisable to enable each Holder to complete the disposition in each such jurisdiction of the Registrable Securities owned by such Holder; provided that neither the Company nor the Guarantor shall be required to (1) qualify as a foreign corporation or other entity or as a dealer in securities in any such jurisdiction where it would not otherwise be required to so qualify, (2) file any general consent to service of process in any such jurisdiction or (3) subject itself to taxation in any such jurisdiction if it is not so subject;

        (vi)  in the case of a Shelf Registration, notify each Holder of Registrable Securities, counsel for such Holders and counsel for the Initial Purchasers promptly and, if requested by any such Holder or counsel, confirm such advice in writing (1) when a Registration Statement has become effective, when any post-effective amendment thereto has been filed and becomes effective, when any Free Writing Prospectus has been filed or any amendment or supplement to the Prospectus or any Free Writing Prospectus has been filed, (2) of any request by the SEC or any state securities authority for amendments and supplements to a Registration Statement, Prospectus or any Free Writing Prospectus or for additional information after the Registration Statement has become effective, (3) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, including the receipt by the Company of any notice of objection of the SEC to the use of a Shelf Registration Statement or any post-effective amendment thereto pursuant to Rule 401(g)(2) under the Securities Act, (4) if, between the effective date of a Registration Statement and the closing of any sale of Registrable Securities covered thereby, the representations and warranties of the Company or the Guarantor contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to an offering of such Registrable Securities cease to be true and correct in all material respects or if the Company or the Guarantor receives any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation of any proceeding for such purpose, (5) of the happening of any event during the period a Registration Statement is effective that makes any statement made in such Registration Statement or the related Prospectus or any Free Writing Prospectus untrue in any material respect or that requires the making of any changes in such Registration Statement or Prospectus or any Free Writing Prospectus in order to make the statements therein, in the light of the circumstances in which they were made, not misleading and (6) of any determination by the Company or the Guarantor that a post-effective amendment to a Registration Statement or any amendment or supplement or supplement to the Prospectus or any Free Writing Prospectus would be appropriate;

        (vii) use commercially reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement or, in the case of a Shelf Registration, the resolution of any objection of the SEC pursuant to Rule 401(g)(2), including by filing an amendment to such Shelf Registration Statement on the proper form, at the earliest practicable moment and provide immediate notice to each Holder of the withdrawal of any such order or such resolution;

        (viii)  in the case of a Shelf Registration, furnish to each Holder of Registrable Securities, without charge, at least one conformed copy of each Registration Statement and any post-effective

amendment thereto (without any documents incorporated therein by reference or exhibits thereto, unless requested);

        (ix)  in the case of a Shelf Registration, cooperate with the Holders of Registrable Securities to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends and enable such Registrable Securities to be issued in such denominations and registered in such names (consistent with the provisions of the Indenture) as such Holders may reasonably request at least one Business Day prior to the closing of any sale of Registrable Securities;

        (x)   in the case of a Shelf Registration, upon the occurrence of any event contemplated by Section 3(a)(vi)(5) hereof, use commercially reasonable efforts to prepare and file with the SEC a supplement or post-effective amendment to such Shelf Registration Statement or the related Prospectus or any Free Writing Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered (or, to the extent permitted by law, made available) to purchasers of the Registrable Securities, such Prospectus or Free Writing Prospectus, as the case may be, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and the Company and the Guarantor shall notify the Holders of Registrable Securities to suspend use of the Prospectus or any Free Writing Prospectus as promptly as practicable after the occurrence of such an event, and such Holders hereby agree to suspend use of the Prospectus or any Free Writing Prospectus, as the case may be, until the Company and the Guarantor have amended or supplemented the Prospectus or the Free Writing Prospectus, as the case may be, to correct such misstatement or omission;

        (xi)  a reasonable time prior to the filing of any Registration Statement, any Prospectus, any Free Writing Prospectus, any amendment to a Registration Statement or amendment or supplement to a Prospectus or a Free Writing Prospectus, provide copies of such document to the Initial Purchasers and their counsel (and, in the case of a Shelf Registration Statement, to the Holders of Registrable Securities and their counsel) and make such of the representatives of the Company and the Guarantor as shall be reasonably requested by the Initial Purchasers or their counsel (and, in the case of a Shelf Registration Statement, the Holders of Registrable Securities or their counsel) available for discussion of such document; and the Company and the Guarantor shall not, at any time after initial filing of a Registration Statement, file any Prospectus, any Free Writing Prospectus, any amendment of or supplement to a Registration Statement, a Prospectus or a Free Writing Prospectus, of which the Initial Purchasers and their counsel (and, in the case of a Shelf Registration Statement, the Holders of Registrable Securities and their counsel) shall not have previously been advised and furnished a copy or to which the Initial Purchasers or their counsel (and, in the case of a Shelf Registration Statement, the Holders of Registrable Securities or their counsel) shall reasonably object;

        (xii) obtain a CUSIP number for all Exchange Securities or Registrable Securities, as the case may be, not later than the effective date of a Registration Statement;

        (xiii)  cause the Indenture to be qualified under the Trust Indenture Act in connection with the registration of the Exchange Securities or Registrable Securities, as the case may be; cooperate with the Trustee and the Holders to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the Trust Indenture Act; and execute, and use commercially reasonable efforts to cause the Trustee to execute, all documents as may be required to effect such changes and all other forms and documents required to be filed with the SEC to enable the Indenture to be so qualified in a timely manner;

        (xiv) in the case of a Shelf Registration, make available for inspection by a representative of the Holders of the Registrable Securities (an "Inspector"), any Underwriter participating in any disposition pursuant to such Shelf Registration Statement, any attorneys and accountants designated by a majority of the Holders of Registrable Securities to be included in such Shelf Registration and any attorneys and accountants designated by such Underwriter, at reasonable

times and in a reasonable manner, all pertinent financial and other records, documents and properties of the Company and its subsidiaries, and cause the respective officers, directors and employees of the Company and the Guarantor to supply all information reasonably requested by any such Inspector, Underwriter, attorney or accountant in connection with a Shelf Registration Statement; provided that if any such information is identified by the Company or the Guarantor as being confidential or proprietary, each Person receiving such information shall take such actions as are reasonably necessary to protect the confidentiality of such information to the extent such action is otherwise not inconsistent with, an impairment of or in derogation of the rights and interests of any Inspector, Holder or Underwriter;

        (xv) if reasonably requested by any Holder of Registrable Securities covered by a Shelf Registration Statement, promptly include in a Prospectus supplement or post-effective amendment such information with respect to such Holder as such Holder reasonably requests to be included therein and make all required filings of such Prospectus supplement or such post-effective amendment as soon as the Company has received notification of the matters to be so included in such filing; and

        (xvi) in the case of a Shelf Registration, enter into such customary agreements and take all such other commercially reasonable actions in connection therewith (including those requested by the Holders of a majority in principal amount of the Registrable Securities covered by the Shelf Registration Statement) in order to expedite or facilitate the disposition of such Registrable Securities including, but not limited to, an Underwritten Offering and in such connection, (1) to the extent possible, make such representations and warranties to the Holders and any Underwriters of such Registrable Securities with respect to the business of the Company and its subsidiaries and the Registration Statement, Prospectus, any Free Writing Prospectus and documents incorporated by reference or deemed incorporated by reference, if any, in each case, in form, substance and scope as are customarily made by issuers to underwriters in underwritten offerings and confirm the same if and when requested, (2) obtain opinions of counsel to the Company and the Guarantor (which counsel and opinions, in form, scope and substance, shall be reasonably satisfactory to the Holders and such Underwriters and their respective counsel) addressed to each selling Holder and Underwriter of Registrable Securities, covering the matters customarily covered in opinions requested in underwritten offerings, (3) obtain "comfort" letters from the independent certified public accountants of the Company and the Guarantor (and, if necessary, any other certified public accountant of any subsidiary of the Company or the Guarantor, or of any business acquired by the Company or the Guarantor for which financial statements and financial data are or are required to be included in the Registration Statement) addressed to each selling Holder (to the extent permitted by applicable professional standards) and Underwriter of Registrable Securities, such letters to be in customary form and covering matters of the type customarily covered in "comfort" letters in connection with underwritten offerings, including but not limited to financial information contained in any preliminary prospectus, Prospectus or Free Writing Prospectus, (4) obtain oil and gas reserve report letters from any independent petroleum engineering firms whose reports relating to the Company's reserves have, prior to the date of such Shelf Registration, been previously publicly disclosed in a filing by the Company and (5) deliver such documents and certificates as may be reasonably requested by the Holders of a majority in principal amount of the Registrable Securities being sold or the Underwriters, and which are customarily delivered in underwritten offerings, to evidence the continued validity of the representations and warranties of the Company and the Guarantor made pursuant to clause (1) above and to evidence compliance with any customary conditions contained in an underwriting agreement.

        (b)   In the case of a Shelf Registration Statement, the Company may require each Holder of Registrable Securities to furnish to the Company such information regarding such Holder and the proposed disposition by such Holder of such Registrable Securities as the Company and the Guarantor may from time to time reasonably request in writing.

        (c)   In the case of a Shelf Registration Statement, each Holder of Registrable Securities agrees that, upon receipt of any notice from the Company and the Guarantor of the happening of any event

of the kind described in Section 3(a)(vi)(3) or 3(a)(vi)(5) hereof, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to the Shelf Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus and any Free Writing Prospectus contemplated by Section 3(a)(x) hereof and, if so directed by the Company and the Guarantor, such Holder will deliver to the Company and the Guarantor all copies in its possession, other than permanent file copies then in such Holder's possession, of the Prospectus and any Free Writing Prospectus covering such Registrable Securities that is current at the time of receipt of such notice.

        (d)   If the Company and the Guarantor shall give any notice to suspend the disposition of Registrable Securities pursuant to a Registration Statement, the Company and the Guarantor shall extend the period during which such Registration Statement shall be maintained effective pursuant to this Agreement by the number of days during the period from and including the date of the giving of such notice to and including the date when the Holders of such Registrable Securities shall have received copies of the supplemented or amended Prospectus or any Free Writing Prospectus necessary to resume such dispositions. The Company and the Guarantor may give any such notice only twice during any 365-day period and any such suspensions shall not exceed 30 days for each suspension and there shall not be more than two suspensions in effect during any 365-day period.

        (e)   The Holders of Registrable Securities covered by a Shelf Registration Statement who desire to do so may sell such Registrable Securities in an Underwritten Offering. In any such Underwritten Offering, the investment bank or investment banks and manager or managers (each an "Underwriter") that will administer the offering will be selected by the Holders of a majority in principal amount of the Registrable Securities included in such offering.

        4.    Participation of Broker-Dealers in Exchange Offer.    (a) The Staff has taken the position that any broker-dealer that receives Exchange Securities for its own account in the Exchange Offer in exchange for Securities that were acquired by such broker-dealer as a result of market-making or other trading activities (a "Participating Broker-Dealer") may be deemed to be an "underwriter" within the meaning of the Securities Act and must deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Securities.

        The Company and the Guarantor understand that it is the Staff's position that if the Prospectus contained in the Exchange Offer Registration Statement includes a plan of distribution containing a statement to the above effect and the means by which Participating Broker-Dealers may resell the Exchange Securities, without naming the Participating Broker-Dealers or specifying the amount of Exchange Securities owned by them, such Prospectus may be delivered by Participating Broker-Dealers (or, to the extent permitted by law, made available to purchasers) to satisfy their prospectus delivery obligation under the Securities Act in connection with resales of Exchange Securities for their own accounts, so long as the Prospectus otherwise meets the requirements of the Securities Act.

        (b)   In light of the above, and notwithstanding the other provisions of this Agreement, the Company and the Guarantor agree to amend or supplement the Prospectus contained in the Exchange Offer Registration Statement for a period of up to 180 days after the Exchange Date (as such period may be extended pursuant to Section 3(d) of this Agreement), in order to expedite or facilitate the disposition of any Exchange Securities by Participating Broker-Dealers consistent with the positions of the Staff recited in Section 4(a) above. The Company and the Guarantor further agree that Participating Broker-Dealers shall be authorized to deliver such Prospectus (or, to the extent permitted by law, make available) during such period in connection with the resales contemplated by this Section 4.

        (c)   The Initial Purchasers shall have no liability to the Company, the Guarantor or any Holder with respect to any request that they may make pursuant to Section 4(b) above.

        5.    Indemnification and Contribution.    (a) The Company and the Guarantor, jointly and severally, agree to indemnify and hold harmless each Initial Purchaser and each Holder, their respective affiliates, directors and officers and each Person, if any, who controls any Initial Purchaser or any Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages and liabilities (including, without limitation, legal fees and other expenses incurred in connection with any suit, action or proceeding or any claim asserted, as such fees and expenses are incurred), that arise out of, or are based upon, (1) any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or any omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein not misleading, or (2) any untrue statement or alleged untrue statement of a material fact contained in any Prospectus, any Free Writing Prospectus or any "issuer information" ("Issuer Information") filed or required to be filed pursuant to Rule 433(d) under the Securities Act, or any omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, in each case except insofar as such losses, claims, damages or liabilities arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with any information relating to any Initial Purchaser or information relating to any Holder furnished to the Company through JPMorgan, or any selling Holder expressly for use therein. In connection with any Underwritten Offering permitted by Section 3, the Company and the Guarantor, jointly and severally will also indemnify the Underwriters, if any, selling brokers, dealers and similar securities industry professionals participating in the distribution, their respective affiliates and each Person who controls such Persons (within the meaning of the Securities Act and the Exchange Act) to the same extent as provided above with respect to the indemnification of the Holders, if requested in connection with any Registration Statement, any Prospectus, any Free Writing Prospectus or any Issuer Information.

        (b)   Each Holder agrees, severally and not jointly, to indemnify and hold harmless the Company, the Guarantor, the Initial Purchasers and the other selling Holders, the directors of the Company and the Guarantor, each officer of the Company and the Guarantor who signed the Registration Statement and each Person, if any, who controls the Company, the Guarantor, any Initial Purchaser and any other selling Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the indemnity set forth in paragraph (a) above, but only with respect to any losses, claims, damages or liabilities that arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with any information relating to such Holder furnished to the Company by such Holder expressly for use in any Registration Statement, Prospectus and any Free Writing Prospectus.

        (c)   If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any Person in respect of which indemnification may be sought pursuant to either paragraph (a) or (b) above, such Person (the "Indemnified Person") shall promptly notify the Person against whom such indemnification may be sought (the "Indemnifying Person") in writing; provided that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have under this Section 5 except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided, further, that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have to an Indemnified Person otherwise than under this Section 5. If any such proceeding shall be brought or asserted against an Indemnified Person and it shall have notified the Indemnifying Person thereof, the Indemnifying Person shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others entitled to indemnification pursuant to this Section 5 that the Indemnifying Person may designate in such proceeding and shall pay the fees and expenses of such counsel related to such proceeding, as incurred. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Indemnifying Person and the Indemnified Person shall have mutually agreed to the contrary; (ii) the Indemnifying Person has failed within a reasonable time to retain counsel reasonably satisfactory to the Indemnified Person; (iii) the

Indemnified Person shall have reasonably concluded that there may be legal defenses available to it that are different from or in addition to those available to the Indemnifying Person; or (iv) the named parties in any such proceeding (including any impleaded parties) include both the Indemnifying Person and the Indemnified Person and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood and agreed that the Indemnifying Person shall not, in connection with any proceeding or related proceeding in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Persons, and that all such fees and expenses shall be reimbursed as they are incurred. Any such separate firm (x) for any Initial Purchaser, its affiliates, directors and officers and any control Persons of such Initial Purchaser shall be designated in writing by JPMorgan, (y) for any Holder, its directors and officers and any control Persons of such Holder shall be designated in writing by the Majority Holders and (z) in all other cases shall be designated in writing by the Company. The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Indemnifying Person agrees to indemnify each Indemnified Person from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified Person shall have requested that an Indemnifying Person reimburse the Indemnified Person for fees and expenses of counsel as contemplated by this paragraph, the Indemnifying Person shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by the Indemnifying Person of such request and (ii) the Indemnifying Person shall not have reimbursed the Indemnified Person in accordance with such request prior to the date of such settlement. No Indemnifying Person shall, without the written consent of the Indemnified Person, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnification could have been sought hereunder by such Indemnified Person, unless such settlement (A) includes an unconditional release of such Indemnified Person, in form and substance reasonably satisfactory to such Indemnified Person, from all liability on claims that are the subject matter of such proceeding and (B) does not include any statement as to or any admission of fault, culpability or a failure to act by or on behalf of any Indemnified Person.

        (d)   If the indemnification provided for in paragraphs (a) and (b) above is unavailable to an Indemnified Person or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each Indemnifying Person under such paragraph, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantor from the offering of the Securities and the Exchange Securities, on the one hand, and by the Holders from receiving Securities or Exchange Securities registered under the Securities Act, on the other hand, or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) but also the relative fault of the Company and the Guarantor on the one hand and the Holders on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of the Company and the Guarantor on the one hand and the Holders on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Guarantor or by the Holders and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

        (e)   The Company, the Guarantor and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 5 were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above. The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages and liabilities referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any legal or

other expenses incurred by such Indemnified Person in connection with any such action or claim. Notwithstanding the provisions of this Section 5, in no event shall a Holder be required to contribute any amount in excess of the amount by which the total price at which the Securities or Exchange Securities sold by such Holder exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The Holders' obligations to contribute pursuant to this Section 5 are several and not joint.

        (f)    The remedies provided for in this Section 5 are not exclusive and shall not limit any rights or remedies that may otherwise be available to any Indemnified Person at law or in equity.

        (g)   The indemnity and contribution provisions contained in this Section 5 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of the Initial Purchasers or any Holder or any Person controlling any Initial Purchaser or any Holder, or by or on behalf of the Company or the Guarantor or the officers or directors of or any Person controlling the Company or the Guarantor, (iii) acceptance of any of the Exchange Securities and (iv) any sale of Registrable Securities pursuant to a Shelf Registration Statement.

        6.    General.

        (a)    No Inconsistent Agreements.    The Company and the Guarantor represent, warrant and agree that (i) the rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of any other outstanding securities issued or guaranteed by the Company or the Guarantor under any other agreement and (ii) neither the Company nor the Guarantor has entered into, or on or after the date of this Agreement will enter into, any agreement that is inconsistent with the rights granted to the Holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof.

        (b)    Amendments and Waivers.    The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Company and the Guarantor have obtained the written consent of Holders of at least a majority in aggregate principal amount of the outstanding Registrable Securities affected by such amendment, modification, supplement, waiver or consent; provided that no amendment, modification, supplement, waiver or consent to any departure from the provisions of Section 5 hereof shall be effective as against any Holder of Registrable Securities unless consented to in writing by such Holder. Any amendments, modifications, supplements, waivers or consents pursuant to this Section 6(b) shall be by a writing executed by each of the parties hereto.

        (c)    Notices.    All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery (i) if to a Holder, at the most current address given by such Holder to the Company by means of a notice given in accordance with the provisions of this Section 6(c), which address initially is, with respect to the Initial Purchasers, the address set forth in the Purchase Agreement; (ii) if to the Company and the Guarantor, initially at the Company's address set forth in the Purchase Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 6(c); and (iii) to such other persons at their respective addresses as provided in the Purchase Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 6(c). All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and on the next Business Day if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee, at the address specified in the Indenture.

        (d)    Successors and Assigns.    This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including, without limitation and without the need for an express assignment, subsequent Holders; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Securities in violation of the terms of the Purchase Agreement or the Indenture. If any transferee of any Holder shall acquire Registrable Securities in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all the terms of this Agreement, and by taking and holding such Registrable Securities such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement and such Person shall be entitled to receive the benefits hereof. The Initial Purchasers (in their capacity as Initial Purchasers) shall have no liability or obligation to the Company or the Guarantor with respect to any failure by a Holder to comply with, or any breach by any Holder of, any of the obligations of such Holder under this Agreement.

        (e)    Third Party Beneficiaries.    Each Holder shall be a third party beneficiary to the agreements made hereunder between the Company and the Guarantor, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights or the rights of other Holders hereunder.

        (f)    Counterparts.    This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

        (g)    Headings.    The headings in this Agreement are for convenience of reference only, are not a part of this Agreement and shall not limit or otherwise affect the meaning hereof.

        (h)    Governing Law.    This Agreement shall be governed by and construed in accordance with the laws of the State of New York.

        (j)    Miscellaneous.    This Agreement contains the entire agreement between the parties relating to the subject matter hereof and supersedes all oral statements and prior writings with respect thereto. If any term, provision, covenant or restriction contained in this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable or against public policy, the remainder of the terms, provisions, covenants and restrictions contained herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated. The Company, the Guarantor and the Initial Purchasers shall endeavor in good faith negotiations to replace the invalid, void or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, void or unenforceable provisions.

        IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

FOREST OIL CORPORATION
By:	/s/ J.C. Ridens
	J.C. Ridens
	Executive Vice President and Chief Operating Officer
FOREST OIL PERMIAN CORPORATION
By:	/s/ Cyrus D. Marter IV
	Cyrus D. Marter IV
	Vice President and Secretary

Confirmed and accepted as of the date first above written:

J.P. MORGAN SECURITIES INC.

For itself and on behalf of the several Initial Purchasers

By
	/s/ GEOFFREY S. BENSON Authorized Signatory

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Exhibit 4.7

EX-10.29

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Exhibit 10.29

AMENDMENT TO SEVERANCE AGREEMENT

THIS AMENDMENT TO SEVERANCE AGREEMENT ("Amendment") is made by and between Forest Oil Corporation, a New York corporation (the "Company"), and                                    ("Executive").

WHEREAS, the Company and Executive have heretofore entered into that certain Severance Agreement dated                                    ,                          (the "Severance Agreement"); and

WHEREAS, the Company and Executive desire to amend the Severance Agreement in certain respects;

NOW, THEREFORE, in consideration of the premises set forth above and the mutual agreements set forth herein, the Company and Executive hereby agree that the Severance Agreement shall be amended as hereafter provided:

        1.     Paragraph 3(a) of the Severance Agreement shall be deleted and the following shall be substituted therefor:

        "(a) Pay Executive a lump sum cash payment in an amount equal to the Severance Amount. Subject to the provisions of Paragraph 6(i) hereof, such payment shall be made on one of the dates provided below (as evidenced by the initials of Executive and an authorized representative of the Company):

(i)

On January 15 of the first calendar year following the calendar year in which Executive's Involuntary Termination occurs (Initials:             (Executive)            (authorized representative of the Company)); or



(ii)

On January 15 of the second calendar year following the calendar year in which Executive's Involuntary Termination occurs (Initials:             (Executive)            (authorized representative of the Company)); or



(iii)

On January 15 of the third calendar year following the calendar year in which Executive's Involuntary Termination occurs (Initials:             (Executive)            (authorized representative of the Company)); or



(iv)

On January 15 of the fourth calendar year following the calendar year in which Executive's Involuntary Termination occurs (Initials:             (Executive)            (authorized representative of the Company)); or



(v)

On January 15 of the fifth calendar year following the calendar year in which Executive's Involuntary Termination occurs (Initials:             (Executive)            (authorized representative of the Company)).

If the payment described in the first sentence of this Paragraph 3(a) will occur after the Interest Commencement Date (as defined below), then such payment shall, subject to Paragraph 4, accrue interest (compounded annually on January 15 of each year) from the Interest Commencement Date to the actual date of payment at the Interest Credit Rate (as defined below and subject to periodic adjustment as provided below) and such interest shall be paid in a lump sum on the actual date of payment of the Severance Amount. Further, if the payment described in the first sentence of this Paragraph 3(a) will occur after the date that is six months after the date of Executive's Involuntary Termination, then the Company shall, on or as soon as practicable after the date of Executive's Involuntary Termination, contribute cash in an amount equal to the Severance Amount plus the interest described in the preceding sentence to an irrevocable grantor ("rabbi") trust of which Executive is the sole beneficiary and the trustee of which is a nationally-recognized and solvent bank or trust company that is not affiliated with the Company (subject to the claims of the Company's creditors, as required pursuant to applicable Internal Revenue Service guidance to prevent the imputation of income to Executive prior to distribution from the trust), pursuant to

which such payment plus applicable interest shall be payable from the trust at the time provided herein, provided that (x) the Company shall remain liable to Executive for any deficiency in the payments from the trust and (y) in no event shall cash be transferred to the trust during any period in which such transfer would result in adverse tax consequences to Executive pursuant to Section 409A(b)(3) of the Code. As used herein, (A) the term "Interest Commencement Date" shall mean the fifth day after the effective date of the release described in Paragraph 6(i) hereof and (B) the term "Interest Credit Rate" shall mean the sum of 3% plus the "prime rate" of interest as reported in The Wall Street Journal as of the date of determination of the Interest Credit Rate as provided in the following sentence. The Interest Credit Rate shall initially be determined as of the Interest Commencement Date (or the first business day following such date if such date is not a business day) and shall be re-determined and adjusted as of each January 15 (or the first business day following such date if such date is not a business day) that occurs after the Interest Commencement Date and prior to the actual date of payment of the Severance Amount."

        2.     The following shall be added to the end of Paragraph 6(i)(2) of the Severance Agreement:

        "Notwithstanding the preceding provisions of this Paragraph 6(i)(2), if Executive is entitled to a payment that would otherwise accrue interest at the Interest Credit Rate pursuant to Paragraph 3(a) but for the application of the preceding provisions of this Paragraph 6(i)(2), then (i) any interest that is to accrue with respect to such payment (whether pursuant to Paragraph 3(a) or this Paragraph 6(i)(2), but subject to Paragraph 4) shall be based on the Interest Credit Rate and (ii) for any period during which interest is provided with respect to such payment under both Paragraph 3(a) and this Paragraph 6(i)(2), interest shall accrue during such period under only one of such paragraphs."

        3.     This Amendment shall be effective as of December 31, 2008; provided, however, that this Amendment shall be void and of no effect if Executive's employment shall be subject to an "Involuntary Termination" (as such term is defined in the Severance Agreement) on or before such date. As amended hereby, the Severance Agreement is specifically ratified and reaffirmed.

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Amendment as of the            day of December, 2008, effective as herein provided.

FOREST OIL CORPORATION
By:
	Name:
	Title:
EXECUTIVE

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Exhibit 10.29

AMENDMENT TO SEVERANCE AGREEMENT

EX-10.30

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Exhibit 10.30

AMENDMENT TO SEVERANCE AGREEMENT

THIS AMENDMENT TO SEVERANCE AGREEMENT ("Amendment") is made by and between Forest Oil Corporation, a New York corporation (the "Company"), and                                    ("Executive").

WHEREAS, the Company and Executive have heretofore entered into that certain Severance Agreement dated                        ,         (the "Severance Agreement"); and

WHEREAS, the Company and Executive desire to amend the Severance Agreement in certain respects;

NOW, THEREFORE, in consideration of the premises set forth above and the mutual agreements set forth herein, the Company and Executive hereby agree that the Severance Agreement shall be amended as hereafter provided:

        1.     Paragraph 4(a) of the Severance Agreement shall be deleted and the following shall be substituted therefor:

        "(a) Pay Executive a lump sum cash payment in an amount equal to the Severance Amount. Subject to the provisions of Paragraph 7(i) hereof, such payment shall be made on one of the dates provided below (as evidenced by the initials of Executive and an authorized representative of the Company):

(i)

On January 15 of the first calendar year following the calendar year in which Executive's Involuntary Termination occurs (Initials:     (Executive)    (authorized representative of the Company)); or



(ii)

On January 15 of the second calendar year following the calendar year in which Executive's Involuntary Termination occurs (Initials:     (Executive)    (authorized representative of the Company)); or



(iii)

On January 15 of the third calendar year following the calendar year in which Executive's Involuntary Termination occurs (Initials:     (Executive)    (authorized representative of the Company)); or



(iv)

On January 15 of the fourth calendar year following the calendar year in which Executive's Involuntary Termination occurs (Initials:     (Executive)    (authorized representative of the Company)); or



(v)

On January 15 of the fifth calendar year following the calendar year in which Executive's Involuntary Termination occurs (Initials:     (Executive)    (authorized representative of the Company)).

If the payment described in the first sentence of this Paragraph 4(a) will occur after the Interest Commencement Date (as defined below), then such payment shall, subject to Paragraph 5, accrue interest (compounded annually on January 15 of each year) from the Interest Commencement Date to the actual date of payment at the Interest Credit Rate (as defined below and subject to periodic adjustment as provided below) and such interest shall be paid in a lump sum on the actual date of payment of the Severance Amount. Further, if the payment described in the first sentence of this Paragraph 4(a) will occur after the date that is six months after the date of Executive's Involuntary Termination, then the Company shall, on or as soon as practicable after the date of Executive's Involuntary Termination, contribute cash in an amount equal to the Severance Amount plus the interest described in the preceding sentence to an irrevocable grantor ("rabbi") trust of which Executive is the sole beneficiary and the trustee of which is a nationally-recognized and solvent bank or trust company that is not affiliated with the Company (subject to the claims of the Company's creditors, as required pursuant to applicable Internal Revenue Service guidance to prevent the

imputation of income to Executive prior to distribution from the trust), pursuant to which such payment plus applicable interest shall be payable from the trust at the time provided herein, provided that (x) the Company shall remain liable to Executive for any deficiency in the payments from the trust and (y) in no event shall cash be transferred to the trust during any period in which such transfer would result in adverse tax consequences to Executive pursuant to Section 409A(b)(3) of the Code. As used herein, (A) the term "Interest Commencement Date" shall mean the fifth day after the effective date of the release described in Paragraph 7(i) hereof and (B) the term "Interest Credit Rate" shall mean the sum of 3% plus the "prime rate" of interest as reported in The Wall Street Journal as of the date of determination of the Interest Credit Rate as provided in the following sentence. The Interest Credit Rate shall initially be determined as of the Interest Commencement Date (or the first business day following such date if such date is not a business day) and shall be re-determined and adjusted as of each January 15 (or the first business day following such date if such date is not a business day) that occurs after the Interest Commencement Date and prior to the actual date of payment of the Severance Amount."

        2.     The following shall be added to the end of Paragraph 7(i)(2) of the Severance Agreement:

"Notwithstanding the preceding provisions of this Paragraph 7(i)(2), if Executive is entitled to a payment that would otherwise accrue interest at the Interest Credit Rate pursuant to Paragraph 4(a) but for the application of the preceding provisions of this Paragraph 7(i)(2), then (i) any interest that is to accrue with respect to such payment (whether pursuant to Paragraph 4(a) or this Paragraph 7(i)(2), but subject to Paragraph 5) shall be based on the Interest Credit Rate and (ii) for any period during which interest is provided with respect to such payment under both Paragraph 4(a) and this Paragraph 7(i)(2), interest shall accrue during such period under only one of such paragraphs."

        3.     This Amendment shall be effective as of December 31, 2008; provided, however, that this Amendment shall be void and of no effect if Executive's employment shall be subject to an "Involuntary Termination" (as such term is defined in the Severance Agreement) on or before such date. As amended hereby, the Severance Agreement is specifically ratified and reaffirmed.

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Amendment as of the    day of December, 2008, effective as herein provided.

FOREST OIL CORPORATION
By:	Name:
	Title:
EXECUTIVE

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Exhibit 10.30

AMENDMENT TO SEVERANCE AGREEMENT

EX-10.41

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Exhibit 10.41

FOREST OIL CORPORATION

EXECUTIVE DEFERRED COMPENSATION PLAN

As Amended and Restated
Effective as of December 1, 2008

TABLE OF CONTENTS

ARTICLE		PAGE
I.	DEFINITIONS AND CONSTRUCTION	I-1
II.	PARTICIPATION	II-1
III.	ACCOUNT CREDITS AND ALLOCATIONS OF INCOME OR LOSS	III-1
IV.	DEEMED INVESTMENT OF FUNDS	IV-1
V.	IN-SERVICE DISTRIBUTIONS	V-1
VI.	TERMINATION BENEFITS	VI-1
VII.	ADMINISTRATION OF THE PLAN	VII-1
VIII.	ADMINISTRATION OF FUNDS	VIII-1
IX.	NATURE OF THE PLAN	IX-1
X.	MISCELLANEOUS	X-1

i

FOREST OIL CORPORATION

EXECUTIVE DEFERRED COMPENSATION PLAN

W I T N E S S E T H :

WHEREAS, Forest Oil Corporation (the "Company") has heretofore adopted the FOREST OIL CORPORATION EXECUTIVE DEFERRED COMPENSATION PLAN (the "Plan") for the benefit of its eligible employees; and

WHEREAS, the Company desires to restate the Plan and to amend the Plan in several respects, intending thereby to provide an uninterrupted and continuing program of benefits;

NOW THEREFORE, the Plan is hereby restated in its entirety as follows with no interruption in time, effective as of December 1, 2008, except as otherwise indicated herein:

ii

I.

Definitions and Construction

1.1    Definitions.    The capitalized words or terms used in the Plan and which are not otherwise defined herein shall have the same meanings as such words or terms have in the Retirement Savings Plan of Forest Oil Corporation, as the same may be amended from time to time. Where the following words and phrases appear in the Plan, they shall have the respective meanings set forth below, unless their context clearly indicates to the contrary.

(1)

Account:    An individual account for each Member to which is credited, from and after the Effective Date, his deferrals pursuant to Sections 3.1 and 3.3, the Employer Deferrals made on his behalf pursuant to Section 3.2, and which reflects such Account's allocation of earnings and/or changes in value as provided in Section 3.4. As of the Effective Date, a Member's Account was credited with the balances, if any, as of the day immediately preceding such date in his "Grandfathered Account" and "Deferral Account" maintained under the Plan as in effect immediately prior to the Effective Date. A Member shall have a 100% nonforfeitable interest in his Account at all times.

(2)

Affiliate:    With respect to a person, any other person with whom the person would be considered a single employer under section 414(b) of the Code (employees of controlled group of corporations), and any other person with whom the person would be considered a single employer under section 414(c) of the Code (employees of partnerships, proprietorships, etc., under common control); provided, however, that (a) in applying section 1563(a)(1), (2), and (3) of the Code for purposes of determining a controlled group of corporations under section 414(b) of the Code, the language "at least 50 percent" shall be used instead of "at least 80 percent" each place it appears in section 1563(a)(1), (2), and (3) of the Code, and (b) in applying Treasury regulation section 1.414(c)-2 for purposes of determining trades or businesses (whether or not incorporated) that are under common control for purposes of section 414(c) of the Code, "at least 50 percent" shall be used instead of "at least 80 percent" each place it appears in Treasury regulation section 1.414(c)-2.

(3)

Bonus Compensation:    The annual incentive bonuses, if any, paid in cash by the Employer to or for the benefit of a Member for services rendered or labor performed, including the portion thereof that a Member could have received in cash in lieu of (i) deferrals pursuant to Section 3.3 and (ii) elective contributions made on his behalf by the Employer pursuant to a qualified cash or deferred arrangement (as defined in section 401(k) of the Code) or pursuant to a plan maintained under section 125 of the Code.

(4)

Change of Control:    The occurrence of any one or more of the following events: (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 Company's Board of Directors. 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.

I-1

(5)

Code:    The Internal Revenue Code of 1986, as amended.

(6)

Committee:    The Compensation Committee of the Board of Directors of the Company.

(7)

Company:    Forest Oil Corporation.

(8)

Compensation:    Amounts equal to a Member's "Compensation," as such term is defined under the Retirement Savings Plan, including amounts a Member could have received in cash in lieu of deferrals pursuant to Sections 3.1 and 3.3, and without regard to the maximum dollar limitation of section 401(a)(17) of the Code; provided, however, that for purposes of Section 3.1, Compensation shall not include Bonus Compensation.

(9)

Directors:    The Board of Directors of the Company.

(10)

Discretionary Contribution Percentage:    For each Plan Year and with respect to each Member, the percentage obtained by dividing (i) the Employer Discretionary Contribution, if any, allocated to such Member's Employer Contribution Account under the Retirement Savings Plan for such Plan Year by (ii) the amount of such Member's "Compensation" (as such term is defined in the Retirement Savings Plan) that was considered under the Retirement Savings Plan to determine such allocation for such Plan Year.

(11)

Effective Date:    December 1, 2008, as to this restatement of the Plan, except as otherwise indicated in specific provisions of the Plan. The original effective date of the Plan was July 1, 1994.

(12)

Employer:    The Company and any other adopting entity that adopts the Plan pursuant to the provisions of Section 2.3.

(13)

Employer Deferrals:    Deferrals made by the Employer on a Member's behalf pursuant to Section 3.2.

(14)

Entry Date:    The first day of each Plan Year.

(15)

Funds:    The investment funds designated from time to time for the deemed investment of Accounts pursuant to Article IV.

(16)

Match Compensation:    Amounts equal to a Member's Compensation plus amounts of base salary that a Member elects to defer pursuant to the Salary Deferral Plan.

(17)

Member:    Each individual who has been selected for participation in the Plan and who has become a Member pursuant to Article II.

(18)

Plan:    The Forest Oil Corporation Executive Deferred Compensation Plan, as amended from time to time.

(19)

Plan Year:    The twelve-consecutive month period commencing January 1 of each year.

(20)

Retirement Savings Plan:    The Retirement Savings Plan of Forest Oil Corporation, as amended from time to time.

(21)

Salary Deferral Plan:    The Forest Oil Corporation Salary Deferral Deferred Compensation Plan.

(22)

Termination of Service:    A Member's separation from service with the Employer and its Affiliates within the meaning of section 409A(a)(2)(A)(i) of the Code (and applicable administrative guidance thereunder).

(23)

Trust:    The trust, if any, established under the Trust Agreement.

(24)

Trust Agreement:    The agreement, if any, entered into between the Company and the Trustee pursuant to Article IX.

I-2

(25)

Trust Fund:    The funds and properties, if any, held pursuant to the provisions of the Trust Agreement, together with all income, profits and increments thereto.

(26)

Trustee:    The trustee or trustees qualified and acting under the Trust Agreement at any time.

(27)

Valuation Date:    Each calendar day.

1.2    Number and Gender.    Wherever appropriate herein, words used in the singular shall be considered to include the plural and words used in the plural shall be considered to include the singular. The masculine gender, where appearing in the Plan, shall be deemed to include the feminine gender.

1.3    Headings.    The headings of Articles and Sections herein are included solely for convenience, and if there is any conflict between such headings and the text of the Plan, the text shall control.

I-3

II.

Participation

2.1    Participation.    Prior to each Entry Date, the Committee, in its sole discretion, shall select and notify those management or highly compensated employees of the Employer who shall be eligible to become Members as of such Entry Date. Any such eligible employee may become a Member on such Entry Date by executing and filing with the Committee, prior to such Entry Date, the form prescribed by the Committee. Such form shall include, among other things prescribed by the Committee, the consent of such Member to be subject to all of the terms and provisions of the Plan including, without limitation, the Compensation deferral provisions set forth in Section 3.1. Subject to the provisions of Section 2.2, a Member shall remain eligible to defer Compensation and Bonus Compensation hereunder and receive an allocation of Employer Deferrals for each Plan Year following his initial year of participation in the Plan. By participating in the Plan for a Plan Year, a Member agrees that he shall not make any changes during such Plan Year to his deferral election with respect to Before-Tax Contributions for such Plan Year under the Retirement Savings Plan.

2.2    Cessation of Active Participation.    Notwithstanding any provision herein to the contrary, an individual who has become a Member of the Plan shall cease to be entitled to defer Compensation and Bonus Compensation hereunder or receive an allocation of Employer Deferrals effective as of the Entry Date of any subsequent Plan Year designated by the Committee. Any such Committee action shall be communicated to the affected individual prior to such Entry Date. Further, an individual who has become a Member of the Plan may cancel his Compensation and/or Bonus Compensation deferrals hereunder and his right to receive an allocation of Employer Deferrals, effective as of the Entry Date of any subsequent Plan Year, by executing and delivering to the Employer the form prescribed by the Committee prior to such Entry Date and within the time period prescribed by the Committee. An individual described in the preceding provisions of this Section may again become entitled to defer Compensation and Bonus Compensation hereunder and receive an allocation of Employer Deferrals beginning on any subsequent Entry Date selected by the Committee in its sole discretion.

2.3    Adopting Entities.    It is contemplated that other entities may adopt the Plan and thereby become an Employer. Any such entity, whether or not presently existing, may become a party hereto by appropriate action of its officers without the need for approval of its board of directors or of the Committee or the Directors; provided, however, that such entity must be an Affiliate of the Company. The provisions of the Plan shall apply separately and equally to each Employer and its employees in the same manner as is expressly provided for the Company and its employees, except that (a) the power to appoint or otherwise affect the Trustee and the power to amend or terminate the Plan or amend the Trust Agreement shall be exercised by the Committee alone and (b) the determination of whether a Change of Control has occurred shall be made based solely on the Company. Any Employer may, by appropriate action of its officers without the need for approval of its board of directors (or noncorporate counterpart) or the Committee or the Directors, terminate its participation in the Plan effective immediately prior to the start of any subsequent Plan Year. Moreover, the Committee may, in its discretion, terminate an Employer's Plan participation effective immediately prior to the start of any subsequent Plan Year; provided, however, that if an Employer ceases to be an Affiliate of the Company, such Employer's Plan participation may be terminated by the Committee effective immediately upon such cessation.

II-1

III.

Account Credits and Allocations of Income or Loss

3.1    Member Deferrals (other than with respect to Bonus Compensation).

        (a)   For each payroll period in which a Member's Before-Tax Contributions under the Retirement Savings Plan are limited as a result of the limitations contained in section 401(a)(17) and/or 402(g) of the Code, the Employer shall withhold from such Member's Compensation for such payroll period and the Member shall defer hereunder the amount by which such Member's Before-Tax Contributions to the Retirement Savings Plan are reduced solely because of the application of such limitations; provided, however, that (i) any amount withheld and deferred pursuant to this sentence shall be determined based upon the assumption that the Member's election with respect to the percentage rate of his Before-Tax Contributions under the Retirement Savings Plan in effect during such payroll period is equal to the percentage rate of his Before-Tax Contributions in effect on the first day of the Plan Year in which such payroll period occurs and (ii) the limitation contained in section 402(g) of the Code for a Plan Year shall be determined by including in such limitation the "catch-up contributions", if any, a Member is eligible to defer under the Retirement Savings Plan for such Plan Year pursuant to section 414(v) of the Code. For purposes of determining the amount of a Member's Compensation to be withheld and deferred under the preceding sentence (for each payroll period in which a Member's Before-Tax Contributions under the Retirement Savings Plan are limited as described in the preceding sentence), the amount of the Member's Compensation shall be deemed to be the Member's Match Compensation. Notwithstanding the foregoing, the maximum amount that may be withheld and deferred for any payroll period shall be the amount of 80% of the Member's Compensation for such period.

        (b)   For each Plan Year in which a Member's Before-Tax Contributions under the Retirement Savings Plan are limited as a result of the limitations contained in section 401(k)(3) and/or 415 of the Code, the Company shall withhold from such Member's Compensation and the Member shall defer hereunder an amount equal to the reduction in such Member's Before-Tax Contributions to the Retirement Savings Plan as a result solely of the application of such limitations.

        (c)   A Member's Compensation deferrals shall become effective as of the Entry Date which is coincident with or next following the date the Member executes and files with the Committee the form described in Section 2.1. A Member's Compensation deferrals shall remain in force and effect unless and until such deferrals are to cease in accordance with the provisions of Section 2.2. Compensation for a Plan Year not deferred by a Member pursuant to the above paragraphs shall be received by such Member in cash. Compensation deferrals made by a Member shall be credited to such Member's Account as of the date upon which the Compensation deferred would have been received by such Member in cash had no deferral been made pursuant to this Section 3.1.

3.2    Employer Deferrals.

        (a)   As of the last day of each payroll period, the Employer shall credit a Member's Account with an amount which equals a specified percentage (the "Match Percentage") of the deferrals made by such Member pursuant to Section 3.1(a) (determined without regard to the final sentence thereof, which provides that the maximum amount that may be withheld and deferred for any payroll period shall be the amount of 80% of the Member's Compensation for such period) and Section 3.1(b) during such payroll period that are not in excess of a specified percentage (the "Compensation Percentage") of such Member's Match Compensation for such payroll period. For purposes of the preceding sentence, the Match Percentage and the Compensation Percentage for a particular payroll period shall be determined based on the formula used for determining the amount of Employer Matching Contributions under the Retirement Savings Plan for such payroll

III-1

period. For example, if the Retirement Savings Plan provides that the Employer Matching Contributions for a payroll period shall equal 100% of the Before-Tax Contributions that were made by a participant during such payroll period that were not in excess of 8% of such participant's compensation for such payroll period, then the Match Percentage for such payroll period shall equal 100%, and the Compensation Percentage for such payroll period shall equal 8%.

        (b)   As of the last day of each Plan Year, the Employer shall credit a Member's Account with an amount equal to the difference, if any, between (i) the Discretionary Contribution Percentage applicable to such Member for such Plan Year multiplied by such Member's Compensation for such Plan Year, and (ii) the Employer Discretionary Contribution allocated to such Member's Employer Contribution Account under the Retirement Savings Plan for such Plan Year. Further, as of the last day of each Plan Year in which the Employer Matching Contributions and/or Employer Discretionary Contributions under the Retirement Savings Plan on behalf of a Member are limited as a result of the limitations contained in section 401(m)(2) and/or 415 of the Code, the Employer shall credit such Member's Account with an amount equal to the reduction in such Member's share of such contributions to the Retirement Savings Plan as a result solely of the application of such limitations.

        (c)   As of any date selected by the Committee, the Employer may credit a Member's Account with such amount, if any, as the Committee shall determine in its sole discretion. Such credits may be made on behalf of some Members but not others, and such credits may vary in amount among individual Members.

3.3    Deferrals of Bonus Compensation.

        (a)   In accordance with the procedures established from time to time by the Committee, a Member may annually elect to defer a percentage of 10% or any whole multiple of 10% (but in no event more than 100%) of his Bonus Compensation for the Plan Year. Bonus Compensation not so deferred by such election shall be received by such Member in cash. A Member's election to defer an amount of his Bonus Compensation pursuant to this Section shall be made by executing a Bonus Compensation deferral election in accordance with Paragraph (b) below pursuant to which the Member authorizes the Employer to reduce his Bonus Compensation in the elected amount and the Employer, in consideration thereof, agrees to credit an equal amount to the Member's Account. Bonus Compensation deferrals (including net income or net loss allocated with respect thereto) made by a Member shall be credited to his Account as of a date determined in accordance with the procedures established from time to time by the Committee; provided, however, that such deferrals shall be credited to the Account no later than 30 days after the date upon which the Bonus Compensation deferred would have been received by such Member in cash if he had not elected to defer such amount pursuant to this Section 3.3.

        (b)   A Member's annual election to defer a percentage of his Bonus Compensation earned with respect to a Plan Year under Paragraph (a) of this Section must be made prior to the start of such Plan Year and in accordance with the procedures established by the Committee, and shall become effective as of the first day of such Plan Year. Notwithstanding the foregoing, in accordance with the transition relief provided under Internal Revenue Service Notice 2007-86 concerning deferral elections made with respect to short-term deferrals, a Member's election to defer a percentage of his Bonus Compensation earned with respect to the Plan Year beginning on January 1, 2008, may be made at any time during the month of December, 2008, and shall become effective as of December 31, 2008. A deferral election under this Section with respect to a Plan Year shall be irrevocable as of the last day of the year immediately preceding such Plan Year; provided, however, that any such election with respect to the Plan Year beginning on January 1, 2008, shall be irrevocable as of December 31, 2008. A Member's deferral election with respect to

III-2

Bonus Compensation for a Plan Year shall apply to such Bonus Compensation even if it is paid after the close of such Plan Year.

3.4    Earnings Credits; Valuation of Accounts.    All amounts credited to a Member's Account shall be deemed invested as soon as administratively feasible among the Funds as provided in Article IV, and the balance of each Account shall reflect the result of daily pricing of the assets in which such Account is deemed invested from time to time until the time of distribution.

III-3

IV.

Deemed Investment of Funds

        Each Member shall designate, in accordance with the procedures established from time to time by the Committee, the manner in which the amounts allocated to his Account shall be deemed to be invested from among the Funds made available from time to time for such purpose by the Committee. Such Member may designate one of such Funds for the deemed investment of all the amounts allocated to his Account or he may split the deemed investment of the amounts allocated to his Account between such Funds in such increments as the Committee may prescribe. If a Member fails to make a proper designation, then his Account shall be deemed to be invested in the Fund or Funds designated by the Committee from time to time in a uniform and nondiscriminatory manner.

        A Member may change his deemed investment designation for future deferrals to be allocated to his Account. Any such change shall be made in accordance with the procedures established by the Committee, and the frequency of such changes may be limited by the Committee.

        A Member may elect to convert his deemed investment designation with respect to the amounts already allocated to his Account. Any such conversion shall be made in accordance with the procedures established by the Committee, and the frequency of such conversions may be limited by the Committee.

IV-1

V.

In-Service Distributions

5.1    Domestic Relations Order.    The Plan shall permit such acceleration of the time or schedule of a payment to an individual other than a Member as may be necessary to fulfill a domestic relations order (as defined in section 414(p)(1)(B) of the Code).

5.2    No Other In-Service Distributions.    Except as provided in Section 5.1, in-service distributions shall not be permitted under the Plan. Members shall not be permitted to make withdrawals from the Plan prior to a Termination of Service. Members shall not, at any time, be permitted to borrow from the Trust Fund. Following a Member's Termination of Service, the amounts credited to such Member's Account shall be payable to such Member in accordance with the provisions of Article VI.

V-1

VI.

Termination Benefits

6.1    Amount of Benefit.    Subject to Section 6.2, upon a Member's Termination of Service, the Member, or, in the event of the Member's death, the Member's designated beneficiary (as determined under Section 6.3), shall become entitled to receive a benefit equal in value to the aggregate balance in the Member's Account. The value of a Member's Account shall be determined as of the date payments are to commence from such Account pursuant to Section 6.2 (provided, however, that if an installment payment form was elected pursuant to Section 6.2, the amount of the installment payments shall be recalculated annually in accordance with the method set forth in Section 6.2(b)).

6.2    Time and Form of Payment.

        (a)   Subject to the delayed payment restriction of Section 6.2(e), payment of a Member's benefit under Section 6.1 shall commence on one of the following dates irrevocably elected by such Member in writing on the form prescribed by the Committee on or before the date he becomes a Member of the Plan:

        (1)   the first day of the second calendar month following the month in which the Member's Termination of Service occurs; or

        (2)   January 15 of any one of the next 10 succeeding calendar years (as elected by the Member) following the calendar year in which the Member's Termination of Service occurs; or

        (3)   February 1 of the year following the calendar year in which the Member's Termination of Service occurs (provided, however, that the time of payment provided for in this clause (3) may not be elected by any Member from and after the Effective Date).

In the event such Member fails to timely elect the date upon which payment of his benefit under Section 6.1 is to commence, such payment shall commence at the time provided in clause (1) of the preceding sentence.

        (b)   Payment of a Member's benefit under Section 6.1 shall be made in one of the following forms of payment irrevocably elected by such Member in writing on the form prescribed by the Committee on or before the date he becomes a Member of the Plan:

        (1)   a single lump sum payment; or

        (2)   annual installment payments for any whole number of years elected by such Member, with the first installment to be paid on the date payment of such Member's benefit is scheduled to commence pursuant to Section 6.2(a) and the subsequent installments to be paid on the annual anniversaries of such date; provided, however, that the installment period elected by such Member must be limited to a number of years that will permit all annual installments to be completed by no later than (i) the 10^th anniversary of the date payment of such Member's benefit is scheduled to commence pursuant to Section 6.2(a) if such Member elected that his benefit commence at the time provided in clause (1) of Section 6.2(a), (ii) January 15 of the 10^th calendar year following the calendar year in which such Member's Termination of Service occurs if such Member elected that his benefit commence at a time provided in clause (2) of Section 6.2(a), or (iii) February 1 of the 10^th calendar year following the calendar year in which such Member's Termination of Service occurs if such Member elected that his benefit commence at a time provided in clause (3) of Section 6.2(a). The amount of each annual installment shall be computed by dividing the Member's unpaid balance in his Account (determined initially as of the date payment of such Member's benefit is scheduled to commence pursuant to Section 6.2(a) and, in subsequent years during the

VI-1

elected installment period, on the annual anniversary of such date) by the number of annual installments remaining.

In the event such Member fails to timely elect the form in which his benefit under Section 6.1 is to be paid, such benefit shall be paid in the form of a single lump sum payment.

        (c)   Notwithstanding the provisions of Sections 6.2(a) and 6.2(b) to the contrary, and in accordance with the transition relief provided under Internal Revenue Service Notice 2007-86, during a period selected by the Company (which period shall begin no earlier than the Effective Date and shall end no later than December 31, 2008), each Member who has not incurred a Termination of Service as of the Effective Date and whose benefit under Section 6.1 would not otherwise be paid prior to January 1, 2009, shall be afforded the opportunity to elect a new time and/or form of payment with respect to all (but not less than all) of such Member's Section 6.1 benefit. During the period selected by the Company for making such election, each Member described in the preceding sentence may irrevocably elect in writing on the form prescribed by the Company (i) a new time of payment from among any of the permissible payment dates described in clauses (1) and (2) of Section 6.2(a) and/or (ii) a new form of payment from among any of the permissible payment forms described in clauses (1) and (2) of Section 6.2(b). The Committee may, in its sole discretion, choose not to honor a Member's election under this Section 6.2(c) by providing written notice of such decision to such Member on or before December 31, 2008.

        (d)   Notwithstanding the preceding provisions of this Section 6.2, on or after January 1, 2009, a Member may, on the form prescribed by the Committee, modify his elections as to time of payment and/or form of benefit payment with respect to all (but not less than all) of his Section 6.1 benefit; provided, however, that (i) such new election may not take effect until at least 12 months after the date on which the new election is made, (ii) the payment (or installment payments) with respect to which the new election is made must be deferred for a period of not less than five years from the date such payment would otherwise have been paid (or five years from the date the first installment was scheduled to be paid in the case of installment payments), (iii) any new election that relates to payment at a specified time (or pursuant to a fixed schedule) may not be made less than 12 months prior to the date the payment is scheduled to be paid (or 12 months prior to the date the first amount was scheduled to be paid in the case of installment payments), (iv) the new time of payment under the new election, if applicable, must be a date that could have been elected by the Member under Section 6.2(a) if such Member had initially elected such date under Section 6.2(a) or 6.2(c), and (v) the new form of payment under the new election, if applicable, must be a form of payment that could have been elected by the Member under Section 6.2(b) or 6.2(c) after taking into account any change in time of payment. For purposes of the Plan, the entitlement to installment payments shall be treated as the entitlement to a single payment for purposes of section 409A of the Code and applicable administrative guidance thereunder.

        (e)   With respect to a Member who is identified as a specified employee within the meaning of section 409A(a)(2)(B)(i) of the Code (and applicable administrative guidance thereunder), payment of the Member's Section 6.1 benefit shall not commence until the later of (i) the time elected by the Member in accordance with the preceding provisions of this Section 6.2 or (ii) the earlier of (A) the date that is six months after the Member's Termination of Service or (B) the date of death of the Member. If the event any payments are delayed pursuant to the preceding sentence beyond the time elected by the Member in accordance with the preceding provisions of this Section 6.2, such payments that the Member would have otherwise been entitled to during the first six months following the Member's Termination of Service (or, if earlier, prior to his date of death) shall be accumulated and paid to the Member on the date that is six months after the Member's Termination of Service or to the Member's designated beneficiary on the date of the Member's death, as applicable. By participating in the Plan, all Members agree to be bound by the

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Company's determination of the Employer's specified employees in accordance with any of the methods permitted under the regulations issued under section 409A of the Code.

6.3    Designation of Beneficiaries.

        (a)   Each Member shall have the right to designate the beneficiary or beneficiaries to receive payment of his benefit in the event of his death. Each such designation shall be made by executing the beneficiary designation form prescribed by the Committee and filing same with the Committee. Any such designation may be changed at any time by execution of a new designation in accordance with this Section.

        (b)   If no such designation is on file with the Committee at the time of the death of the Member or such designation is not effective for any reason as determined by the Committee, then the designated beneficiary or beneficiaries to receive such benefit shall be as follows:

        (i)    If a Member leaves a surviving spouse, his benefit shall be paid to such surviving spouse;

        (ii)   If a Member leaves no surviving spouse, his benefit shall be paid to such Member's executor or administrator, or to his heirs at law if there is no administration of such Member's estate.

6.4    Accelerated Pay-Out of Certain Benefits.    The Plan shall permit such acceleration of the time or schedule of a payment to an individual other than a Member as may be necessary to fulfill a domestic relations order (as defined in section 414(p)(1)(B) of the Code).

6.5    Payment of Benefits.    To the extent the Trust Fund has sufficient assets, the Trustee shall pay benefits to Members or their beneficiaries, except to the extent the Employer pays the benefits directly and provides adequate evidence of such payment to the Trustee. To the extent the Trustee does not or cannot pay benefits out of the Trust Fund, the benefits shall be paid by the Employer. Any benefit payments made to a Member or for his benefit pursuant to any provision of the Plan shall be debited to such Member's Account. All benefit payments pursuant to any provision of the Plan shall be made in cash to the fullest extent practicable.

6.6    Unclaimed Benefits.    In the case of a benefit payable on behalf of a Member, if the Committee is unable to locate the Member or beneficiary to whom such benefit is payable, upon the Committee's determination thereof, such benefit shall be forfeited to the Employer. Notwithstanding the foregoing, if subsequent to any such forfeiture the Member or beneficiary to whom such benefit is payable makes a valid claim for such benefit, such forfeited benefit (without any adjustment for earnings or loss after the time of such forfeiture) shall be restored to the Plan by the Employer and paid in accordance with the Plan.

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VII.

Administration of the Plan

7.1    The Committee.    The general administration of the Plan shall be vested in the Committee.

7.2    Self-Interest of Members.    No member of the Committee shall have any right to vote or decide upon any matter relating solely to himself under the Plan or to vote in any case in which his individual right to claim any benefit under the Plan is particularly involved. In any case in which a Committee member is so disqualified to act and the remaining members cannot agree, the Directors shall appoint a temporary substitute member to exercise all the powers of the disqualified member concerning the matter in which he is disqualified.

7.3    Committee Powers and Duties.    The Committee shall supervise the administration and enforcement of the Plan according to the terms and provisions hereof and shall have all powers necessary to accomplish these purposes, including, but not by way of limitation, the right, power, and authority:

        (a)   To make rules, regulations, and bylaws for the administration of the Plan that are not inconsistent with the terms and provisions hereof, and to enforce the terms of the Plan and the rules and regulations promulgated thereunder by the Committee;

        (b)   To construe in its discretion all terms, provisions, conditions, and limitations of the Plan;

        (c)   To correct any defect or to supply any omission or to reconcile any inconsistency that may appear in the Plan in such manner and to such extent as it shall deem in its discretion expedient to effectuate the purposes of the Plan;

        (d)   To employ and compensate such accountants, attorneys, investment advisors, and other agents, employees, and independent contractors as the Committee may deem necessary or advisable for the proper and efficient administration of the Plan;

        (e)   To determine in its discretion all questions relating to eligibility;

        (f)    To determine whether and when a Member has incurred a Termination of Service, and the reason for such termination;

        (g)   To make a determination in its discretion as to the right of any person to a benefit under the Plan and to prescribe procedures to be followed by distributees in obtaining benefits hereunder;

        (h)   To receive and review reports from the Trustee as to the financial condition of the Trust Fund, including its receipts and disbursements; and

        (i)    To establish or designate Funds as investment options as provided in Article IV.

7.4    Claims Review.

        (a)   Definitions.    For purposes of this Section, the following terms, when capitalized, will be defined as follows:

        (1)   Act:    The Employee Retirement Income Security Act of 1974, as amended.

        (2)   Adverse Benefit Determination:    Any denial, reduction or termination of or failure to provide or make payment (in whole or in part) for a Plan benefit, including any denial, reduction, termination or failure to provide or make payment that is based on a determination of a Claimant's eligibility to participate in the Plan. Further, any invalidation of a claim for failure to comply with the claim submission procedure will be treated as an Adverse Benefit Determination.

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        (3)   Benefits Administrator:    The Company's Benefits Supervisor, or such other person or office to whom the Committee has delegated day-to-day Plan administration responsibilities and who, pursuant to such delegation, processes Plan benefit claims in the ordinary course.

        (4)   Claimant:    A Member or beneficiary or an authorized representative of such Member or beneficiary who has filed or desires to file a claim for a Plan benefit.

        (b)   Filing of Benefit Claim.    To file a benefit claim under the Plan, a Claimant must obtain from the Benefits Administrator the information and benefit election forms, if any, provided for in the Plan and otherwise follow the procedures established from time to time by the Committee or the Benefits Administrator for claiming Plan benefits. If, after reviewing the information so provided, the Claimant needs additional information regarding his Plan benefits, he may obtain such information by submitting a written request to the Benefits Administrator describing the additional information needed. A Claimant may only request a Plan benefit by fully completing and submitting to the Benefits Administrator the benefit election forms, if any, provided for in the Plan and otherwise following the procedures established from time to time by the Committee or the Benefits Administrator for claiming Plan benefits.

        (c)   Processing of Benefit Claim.    Upon receipt of a fully completed benefit claim from a Claimant, the Benefits Administrator shall determine if the Claimant's right to the requested benefit, payable at the time or times and in the form requested, is clear and, if so, shall process such benefit claim without resort to the Committee. If the Benefits Administrator determines that the Claimant's right to the requested benefit, payable at the time or times and in the form requested, is not clear, it shall refer the benefit claim to the Committee for review and determination, which referral shall include:

        (1)   All materials submitted to the Benefits Administrator by the Claimant in connection with the claim;

        (2)   A written description of why the Benefits Administrator was of the view that the Claimant's right to the benefit, payable at the time or times and in the form requested, was not clear;

        (3)   A description of all Plan provisions pertaining to the benefit claim;

        (4)   Where appropriate, a summary as to whether such Plan provisions have in the past been consistently applied with respect to other similarly situated Claimants; and

        (5)   Such other information as may be helpful or relevant to the Committee in its consideration of the claim.

If the Claimant's claim is referred to the Committee, the Claimant may examine any relevant document relating to his claim and may submit written comments or other information to the Committee to supplement his benefit claim. Within 90 days of receipt of a fully completed benefit claim form from a Claimant that has been referred to the Committee by the Benefits Administrator (or such longer period as may be necessary due to unusual circumstances or to enable the Claimant to submit comments, but in any event not later than will permit the Committee sufficient time to fully and fairly consider the claim and make a determination within the time frame provided in Section 7.4(d)), the Committee shall consider the referral regarding the claim of the Claimant and make a decision as to whether it is to be approved, modified or denied. If the claim is approved, the Committee shall direct the Benefits Administrator to process the approved claim as soon as administratively practicable.

        (d)   Notification of Adverse Benefit Determination.    In any case of an Adverse Benefit Determination of a claim for a Plan benefit, the Committee shall furnish written notice to the affected Claimant within a reasonable period of time but not later than 90 days after receipt of

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such claim for Plan benefits (or within 180 days if special circumstances necessitate an extension of the 90-day period and the Claimant is informed of such extension in writing within the 90-day period and is provided with an extension notice consisting of an explanation of the special circumstances requiring the extension of time and the date by which the benefit determination will be rendered). Any notice that denies a benefit claim of a Claimant in whole or in part shall, in a manner calculated to be understood by the Claimant:

        (1)   State the specific reason or reasons for the Adverse Benefit Determination;

        (2)   Provide specific reference to pertinent Plan provisions on which the Adverse Benefit Determination is based;

        (3)   Describe any additional material or information necessary for the Claimant to perfect the claim and explain why such material or information is necessary; and

        (4)   Describe the Plan's review procedures and the time limits applicable to such procedures, including a statement of the Claimant's right to bring a civil action under section 502(a) of the Act following an Adverse Benefit Determination on review.

        (e)   Review of Adverse Benefit Determination.    A Claimant has the right to have an Adverse Benefit Determination reviewed in accordance with the following claims review procedure:

        (1)   The Claimant must submit a written request for such review to the Committee not later than 60 days following receipt by the Claimant of the Adverse Benefit Determination notification;

        (2)   The Claimant shall have the opportunity to submit written comments, documents, records, and other information relating to the claim for benefits to the Committee;

        (3)   The Claimant shall have the right to have all comments, documents, records, and other information relating to the claim for benefits that have been submitted by the Claimant considered on review without regard to whether such comments, documents, records or information were considered in the initial benefit determination; and

        (4)   The Claimant shall have reasonable access to, and copies of, all documents, records, and other information relevant to the claim for benefits free of charge upon request, including (i) documents, records or other information relied upon for the benefit determination, (ii) documents, records or other information submitted, considered or generated without regard to whether such documents, records or other information were relied upon in making the benefit determination, and (iii) documents, records or other information that demonstrates compliance with the standard claims procedure.

The decision on review by the Committee will be binding and conclusive upon all persons, and the Claimant shall neither be required nor be permitted to pursue further appeals to the Committee.

        (f)    Notification of Benefit Determination on Review.    Notice of the Committee's final benefit determination regarding an Adverse Benefit Determination will be furnished in writing or electronically to the Claimant after a full and fair review. Notice of an Adverse Benefit Determination upon review will:

        (1)   State the specific reason or reasons for the Adverse Benefit Determination;

        (2)   Provide specific reference to pertinent Plan provisions on which the Adverse Benefit Determination is based;

        (3)   State that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Claimant's claim for benefits including (i) documents, records or other information relied

VII-3

upon for the benefit determination, (ii) documents, records or other information submitted, considered or generated without regard to whether such documents, records or other information were relied upon in making the benefit determination, and (iii) documents, records or other information that demonstrates compliance with the standard claims procedure; and

        (4)   Describe the Claimant's right to bring an action under section 502(a) of the Act.

The Committee shall notify a Claimant of its determination on review with respect to the Adverse Benefit Determination of the Claimant within a reasonable period of time but not later than 60 days after the receipt of the Claimant's request for review unless the Committee determines that special circumstances require an extension of time for processing the review of the Adverse Benefit Determination. If the Committee determines that such extension of time is required, written notice of the extension (which shall indicate the special circumstances requiring the extension and the date by which the Committee expects to render the determination on review) shall be furnished to the Claimant prior to the termination of the initial 60-day review period. In no event shall such extension exceed a period of 60 days from the end of the initial 60-day review period. In the event such extension is due to the Claimant's failure to submit necessary information, the period for making the determination on a review will be tolled from the date on which the notification of the extension is sent to the Claimant until the date on which the Claimant responds to the request for additional information.

        (g)   Exhaustion of Administrative Remedies.    Completion of the claims procedures described in this Section will be a condition precedent to the commencement of any legal or equitable action in connection with a claim for benefits under the Plan by a Claimant or by any other person or entity claiming rights individually or through a Claimant; provided, however, that the Committee may, in its sole discretion, waive compliance with such claims procedures as a condition precedent to any such action.

        (h)   Payment of Benefits.    If the Benefits Administrator or Committee determines that a Claimant is entitled to a benefit hereunder, payment of such benefit will be made to such Claimant (or commence, as applicable) as soon as administratively practicable after the date the Benefits Administrator or Committee determines that such Claimant is entitled to such benefit or on such other date as may be established pursuant to the Plan provisions.

        (i)    Authorized Representatives.    An authorized representative may act on behalf of a Claimant in pursuing a benefit claim or an appeal of an Adverse Benefit Determination. An individual or entity will only be determined to be a Claimant's authorized representative for such purposes if the Claimant has provided the Committee with a written statement identifying such individual or entity as his authorized representative and describing the scope of the authority of such authorized representative. In the event a Claimant identifies an individual or entity as his authorized representative in writing to the Committee but fails to describe the scope of the authority of such authorized representative, the Committee shall assume that such authorized representative has full powers to act with respect to all matters pertaining to the Claimant's benefit claim under the Plan or appeal of an Adverse Benefit Determination with respect to such benefit claim.

7.5    Employer to Supply Information.    The Employer shall supply full and timely information to the Committee, including, but not limited to, information relating to each Member's Compensation, Bonus Compensation, age, retirement, death, or other cause of Termination of Service and such other pertinent facts as the Committee may require. The Employer shall advise the Trustee of such of the foregoing facts as are deemed necessary for the Trustee to carry out the Trustee's duties under the Plan and the Trust Agreement. When making a determination in connection with the Plan, the Committee shall be entitled to rely upon the aforesaid information furnished by the Employer.

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7.6    Indemnity.    To the extent permitted by applicable law, the Company shall indemnify and save harmless the Directors and each member of the Committee against any and all expenses, liabilities and claims (including legal fees incurred to defend against such liabilities and claims) arising out of their discharge in good faith of responsibilities under or incident to the Plan. Expenses and liabilities arising out of willful misconduct shall not be covered under this indemnity. This indemnity shall not preclude such further indemnities as may be available under insurance purchased by the Company or provided by the Company under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, as such indemnities are permitted under applicable law.

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VIII.

Administration of Funds

8.1    Payment of Expenses.    All expenses incident to the administration of the Plan and Trust, including but not limited to, legal, accounting, Trustee fees, and expenses of the Committee, may be paid by the Employer and, if not paid by the Employer, shall be paid by the Trustee from the Trust Fund, if any.

8.2    Trust Fund Property.    All income, profits, recoveries, contributions, forfeitures and any and all moneys, securities and properties of any kind at any time received or held by the Trustee, if any, shall be held for investment purposes as a commingled Trust Fund pursuant to the terms of the Trust Agreement. The Committee shall maintain an Account in the name of each Member, but the maintenance of an Account designated as the Account of a Member shall not mean that such Member shall have a greater or lesser interest than that due him by operation of the Plan and shall not be considered as segregating any funds or property from any other funds or property contained in the commingled fund. No Member shall have any title to any specific asset in the Trust Fund, if any.

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IX.

Nature of the Plan

        The Employer intends and desires by the adoption of the Plan to recognize the value to the Employer of the past and present services of employees covered by the Plan and to encourage and assure their continued service with the Employer by making more adequate provision for their future retirement security. The establishment of the Plan is, in part, made necessary by certain benefit limitations which are imposed on the Retirement Savings Plan by the Code. The Plan is intended to constitute an unfunded, unsecured plan of deferred compensation for a select group of management or highly compensated employees of the Employer. Plan benefits herein provided are a contractual obligation of the Employer and shall be paid out of the Employer's general assets. Nevertheless, subject to the terms hereof and of the Trust Agreement, the Employer may transfer money or other property to the Trustee to provide Plan benefits hereunder, and the Trustee shall pay Plan benefits to Members and their beneficiaries out of the Trust Fund.

        The Committee, in its sole discretion, may establish the Trust and direct the Employer to enter into the Trust Agreement. Notwithstanding the foregoing, immediately prior to the occurrence of a Change of Control, the Employer shall enter into the Trust Agreement and shall fund the Trust with money or other property having an aggregate value equal to not less than the aggregate balance in the Accounts maintained under the Plan on behalf of all Members and beneficiaries (determined as of the day immediately preceding the date of such funding of the Trust); provided, however, that the Employer shall not be required to take the actions described in this sentence if such actions would result in adverse tax consequences to one or more of the Members pursuant to Section 409A(b) of the Code. If the Employer enters into the Trust Agreement, then the Employer shall remain the owner of all assets in the Trust Fund and the assets shall be subject to the claims of the Employer's creditors if the Employer ever becomes insolvent. For purposes hereof, the Employer shall be considered "insolvent" if (a) the Employer is unable to pay its debts as such debts become due or (b) the Employer is subject to a pending proceeding as a debtor under the United Sates Bankruptcy Code (or any successor federal statute). The chief executive officer of the Employer and its board of directors shall have the duty to inform the Trustee in writing if the Employer becomes insolvent. Such notice given under the preceding sentence by any party shall satisfy all of the parties' duty to give notice. When so informed, the Trustee shall suspend payments to the Members and hold the assets for the benefit of the Employer's general creditors. If the Trustee receives a written allegation that the Employer is insolvent, the Trustee shall suspend payments to the Members and hold the Trust Fund for the benefit of the Employer's general creditors, and shall determine in the manner specified in the Trust Agreement whether the Employer is insolvent. If the Trustee determines that the Employer is not insolvent, the Trustee shall resume payments to the Members. No Member or beneficiary shall have any preferred claim to, or any beneficial ownership interest in, any assets of the Trust Fund, and, upon commencement of participation in the Plan, each Member shall have agreed to waive his priority credit position, if any, under applicable state law with respect to the assets of the Trust Fund.

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X.

Miscellaneous

10.1    Not Contract of Employment.    The adoption and maintenance of the Plan shall not be deemed to be a contract between the Employer and any person or to be consideration for the employment of any person. Nothing herein contained shall be deemed to (a) give any person the right to be retained in the employ of the Employer, (b) restrict the right of the Employer to discharge any person at any time, (c) give the Employer the right to require any person to remain in the employ of the Employer, or (d) restrict any person's right to terminate his employment at any time.

10.2    Alienation of Interest Forbidden.    The interest of a Member or his beneficiary or beneficiaries hereunder may not be sold, transferred, assigned, or encumbered in any manner, either voluntarily or involuntarily, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be null and void; neither shall the benefits hereunder be liable for or subject to the debts, contracts, liabilities, engagements or torts of any person to whom such benefits or funds are payable, nor shall they be an asset in bankruptcy or subject to garnishment, attachment or other legal or equitable proceedings. Notwithstanding the foregoing, the Plan shall comply with the terms of a domestic relations order as provided in Sections 5.1 and 6.4.

10.3    Withholding.    All Compensation and Bonus Compensation deferrals and Employer Deferrals and payments provided for hereunder shall be subject to applicable withholding and other deductions as shall be required of the Employer under any applicable local, state or federal law.

10.4    Amendment and Termination(a) .    The Committee may from time to time, in its discretion, amend, in whole or in part, any or all of the provisions of the Plan; provided, however, that no amendment may be made that would impair the rights of a Member with respect to amounts already allocated to his Account. The Committee may terminate the Plan, in whole or in part, at any time. In the event that the Plan is terminated, the balance in an affected Member's Account shall be paid to such Member or his designated beneficiary at the time specified by the Committee in a single lump sum, cash payment in full satisfaction of all of such Member's or beneficiary's benefits hereunder. Notwithstanding the preceding provisions of this Section, (a) to the extent required by section 409A of the Code, the Plan may not be amended or terminated in a manner that would give rise to an impermissible acceleration of the time or form of a payment of a benefit under the Plan pursuant to section 409A(a)(3) of the Code and any regulations or guidance issued thereunder and (b) if the Committee determines that the terms of the Plan do not, in whole or in part, satisfy the requirements of section 409A of the Code, then the Committee may, in its sole discretion, amend the Plan (without obtaining the consent of any Member) in such manner as the Committee deems appropriate to comply with section 409A of the Code and any regulations or guidance issued thereunder.

10.5    Severability.    If any provision of the Plan shall be held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions hereof; instead, each provision shall be fully severable and the Plan shall be construed and enforced as if said illegal or invalid provision had never been included herein.

10.6    Guaranty.    Notwithstanding any provisions of the Plan to the contrary, in the event any Affiliate of the Company that adopts the Plan pursuant to Section 2.3 hereof fails to make payment of the benefits due under the Plan on behalf of its Members, whether directly or through the Trust, the Company shall, during the period that such entity is an Affiliate of the Company, be liable for and shall make payment of such benefits due as a guarantor of such entity's obligations hereunder. The guaranty obligations provided herein shall (a) be satisfied directly and not through the Trust and (b) terminate with respect to a particular entity as of the date such entity ceases to be an Affiliate of the Company.

10.7    Governing Laws.    All provisions of the Plan shall be construed in accordance with the laws of Colorado except to the extent preempted by federal law.

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EXECUTED this 31^st day of December, 2008.

FOREST OIL CORPORATION
By:	/s/ H. CRAIG CLARK Name: H. Craig Clark Title: President and CEO

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FOREST OIL CORPORATION EXECUTIVE DEFERRED COMPENSATION PLAN

EX-21.1

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Exhibit 21.1

FOREST OIL CORPORATION
List of Subsidiaries of the Registrant
As of December 31, 2008

		State/Province of Incorporation
U.S. Subsidiaries
	Forest Oil Panhandle Resources L.P.	Texas
	Forest Oil Permian Corporation	Delaware
Canadian Subsidiary
	Canadian Forest Oil Ltd.	Alberta

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FOREST OIL CORPORATION List of Subsidiaries of the Registrant As of December 31, 2008

EX-23.1

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Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

        We consent to the incorporation by reference in (i) the Registration Statement (No. 33-48440) on Form S-8 of Forest Oil Corporation—1992 Stock Option Plan of Forest Oil Corporation, (ii) the Registration Statements (Nos. 333-05497 and 333-89174) on Form S-8 of Forest Oil Corporation—Stock Incentive Plan, (iii) the Registration Statements (Nos. 333-81529 and 333-127873) on Form S-8 of Forest Oil Corporation—Employee Stock Purchase Plan, (iv) the Registration Statements (Nos. 333-62408 and 333-108267) on Form S-8 of Forest Oil Corporation—2001 Stock Incentive Plan, (v) the Registration Statement (No. 333-145726) on Form S-8 of Forest Oil Corporation—2007 Stock Incentive Plan of Forest Oil Corporation and (vi) the Registration Statement (No. 333-153750) on Form S-3 of Forest Oil Corporation of our reports dated February 26, 2009, with respect to the consolidated financial statements of Forest Oil Corporation and subsidiaries, and the effectiveness of internal control over financial reporting of Forest Oil Corporation, included in this annual report (Form 10-K) for the year ended December 31, 2008.

/s/ Ernst & Young LLP
Denver, Colorado
February 26, 2009

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Consent of Independent Registered Public Accounting Firm

EX-23.2

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Exhibit 23.2

CONSENT OF INDEPENDENT PETROLEUM ENGINEERS

        We hereby consent to the use of our name and the information regarding our review of Forest's estimates of reserves in the section Independent Audit of Reserves in the Annual Report on Form 10-K of Forest Oil Corporation (the "Company") for the year ended December 31, 2008, and to the incorporation by reference thereof into the Company's Registration Statements as follows: (i) the Registration Statement (No. 333-48440) on Form S-8 of Forest Oil Corporation—1992 Stock Option Plan of Forest Oil Corporation, (ii) the Registration Statements (Nos. 333-05497 and 333-89174) on Form S-8 of Forest Oil Corporation—Stock Incentive Plan, (iii) the Registration Statements (Nos. 333-81529 and 333-127873) on Form S-8 of Forest Oil Corporation—Employee Stock Purchase Plan, (iv) the Registration Statements (Nos. 333-62408 and 333-108267) on Form S-8 of Forest Oil Corporation—2001 Stock Incentive Plan, (v) the Registration Statement (No. 333-145726) on Form S-8 of Forest Oil Corporation—2007 Stock Incentive Plan and (vi) the Registration Statement (No. 333-153750) on Form S-3 of Forest Oil Corporation.

DeGOLYER AND MacNAUGHTON

/s/ DeGolyer and MacNaughton

February 26, 2009

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CONSENT OF INDEPENDENT PETROLEUM ENGINEERS

EX-31.1

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Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, H. Craig Clark, certify that:

1.

I have reviewed this annual report on Form 10-K of Forest Oil Corporation;



2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;



3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;



4.

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:



a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;



b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;



c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and



d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;



5.

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):



a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and



b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

	/s/ H. CRAIG CLARK
March 2, 2009 (Date)	H. Craig Clark President and Chief Executive Officer

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Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

EX-31.2

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Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, David H. Keyte, certify that:

1.

I have reviewed this annual report on Form 10-K of Forest Oil Corporation;



2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;



3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;



4.

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:



a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;



b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;



c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and



d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;



5.

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):



a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and



b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

	/s/David H. Keyte
March 2, 2009 (Date)	David H. Keyte Executive Vice President and Chief Financial Officer

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Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

EX-32.1

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Exhibit 32.1

CERTIFICATION OF
CHIEF EXECUTIVE OFFICER
OF FOREST OIL CORPORATION
PURSUANT TO 18 U.S.C. SECTION 1350

        Pursuant to 18 U.S.C. Section 1350 and in connection with the accompanying report on Form 10-K for the year ended December 31, 2008 that is being filed concurrently with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned officer of Forest Oil Corporation (the "Company") hereby certifies that:

1.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

March 2, 2009
(Date) /s/ H. Craig Clark
H. Craig Clark
President and Chief Executive Officer

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Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER OF FOREST OIL CORPORATION PURSUANT TO 18 U.S.C. SECTION 1350

EX-32.2

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Exhibit 32.2

CERTIFICATION OF
CHIEF FINANCIAL OFFICER
OF FOREST OIL CORPORATION
PURSUANT TO 18 U.S.C. SECTION 1350

        Pursuant to 18 U.S.C. Section 1350 and in connection with the accompanying report on Form 10-K for the year ended December 31, 2008 that is being filed concurrently with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned officer of Forest Oil Corporation (the "Company") hereby certifies that:

1.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

March 2, 2009
(Date) /s/ David H. Keyte
David H. Keyte
Chief Financial Officer

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Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER OF FOREST OIL CORPORATION PURSUANT TO 18 U.S.C. SECTION 1350