Magnum Hunter Resources, Inc.
DOCS(R) Financing Program
1,726,217 Shares
(Common Stock, $0.002 par value)
SALES AGREEMENT
October 10, 2000
THIS SALES AGREEMENT (the "Agreement") dated as of October 10, 2000 between
RCG ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, a division of Ramius Securities, LLC, having its principal
office at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the "Sales Manager") and
Magnum Hunter Resources, Inc., a corporation organized and existing under the
laws of the State of Nevada (the "Company").
WHEREAS, the Company desires to issue and sell through the Sales Manager up
to 1,726,217 shares (the "Maximum Amount") of its common stock, par value $0.002
per share (the "Stock"), on the terms set forth in Article 2 hereof.
IN CONSIDERATION of the mutual covenants contained in this Agreement, the
Company and the Sales Manager agree as follows:
ARTICLE 1
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
1.1 The Company represents and warrants to, and agrees with, the Sales
Manager that:
(a) The Company meets the requirements for use of Form S-3 under the
Securities Act of 1933, as amended (the "Act"), and the rules and regulations
thereunder ("Rules and Regulations"). A registration statement on Form S-3
(Registration No. 333-45552) with respect to, among other securities, the Stock,
including a form of prospectus, has been prepared by the Company in conformity
with the requirements of the Act and the Rules and Regulations and filed with
the Securities and Exchange Commission (the "Commission"). Such registration
statement and prospectus may have been amended or supplemented prior to the date
hereof. Copies of such registration statement and prospectus, any such amendment
or supplement and all documents incorporated by reference therein that were
filed with the Commission have been delivered to the Sales Manager. Such
registration statement, as it may have heretofore been amended, and as it may
hereinafter be amended, is referred to herein as the "Registration Statement,"
and the final form of prospectus included in the Registration Statement, at the
time it becomes effective, as amended or supplemented from time to time, is
referred to herein as the "Prospectus." Any reference herein to the Registration
Statement, the Prospectus, or any amendment or supplement thereto shall be
deemed to refer to and include the documents incorporated (or deemed to be
incorporated) by reference therein, and any reference herein to the terms
"amend," "amendment" or "supplement" with respect to the Registration Statement
or Prospectus shall be deemed to refer to and include the filing after the
execution hereof of any document with the Commission deemed to be incorporated
by reference therein.
(b) Each part of the Registration Statement, when such part became or
becomes effective, and the Prospectus and any amendment or supplement thereto,
on the date of filing thereof with the Commission and at each Settlement Date
(as hereinafter defined), conformed or will conform in all material respects
with the requirements of the Act and the Rules and Regulations; each part of the
Registration Statement, when such part became or becomes effective, did not or
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and the Prospectus and any amendment or supplement
thereto, on the date of filing thereof with the Commission and at each
Settlement Date, did not or will not include an 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;
except that the foregoing shall not apply to statements in or omissions from any
such document in reliance upon, and in conformity with, written information
furnished to the Company by or on behalf of the Sales Manager, specifically for
use in the Registration Statement, the Prospectus or any amendment or supplement
thereto.
(c) The documents incorporated by reference in the Registration Statement
or the Prospectus, or any amendment or supplement thereto, when they became or
become effective under the Act or were or are filed with the Commission under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as the
case may be, conformed or will conform in all material respects with the
requirements of the Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder.
(d) The consolidated financial statements of the Company, together with the
related schedules and notes thereto, set forth or included or incorporated by
reference in the Registration Statement and Prospectus fairly present the
financial condition of the Company as of the dates indicated and the results of
operations, changes in financial position, stockholders' equity and cash flows
for the periods therein specified, in conformity with generally accepted
accounting principles consistently applied throughout the periods involved
(except as otherwise stated therein) and all adjustments necessary for a fair
presentation of results for such periods have been made. The summary and
selected financial and statistical data (if any) included or incorporated by
reference in the Registration Statement and the Prospectus present fairly the
information shown therein and, to the extent based upon or derived from the
financial statements, have been compiled on a basis consistent with the
financial statements presented therein. In addition, the pro forma financial
statements (if any) of the Company and the related notes thereto, included or
incorporated by reference in the Registration Statement and the Prospectus,
present fairly the information shown therein, have been prepared in accordance
with the Commission's rules and guidelines with respect to pro forma financial
statements and have been properly compiled on the basis described therein, and
the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the transactions and
circumstances referred to therein. Furthermore, all financial statements
required by Rule 3-14 of Regulation S-X ("Rule 3-14"), if any, have been
included or incorporated by reference in the Registration Statement and the
Prospectus and any such financial statements are in conformity with the
requirements of Rule 3-14. No other financial statements are required to be set
forth or incorporated by reference in the Registration Statement or the
Prospectus under the Rules and Regulations.
(e) The accountants who certified the financial statements and the
supporting schedules included in the Registration Statement are and, during the
periods covered by their reports, were independent public accountants as
required by the Act and the Rules and Regulations.
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(f) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Nevada. Other than
as listed on Schedule 1.1(f) hereto, and as disclosed in writing by the Company
to the Sales Manager from time to time, the Company has no subsidiary or
subsidiaries and does not control, directly or indirectly, any corporation,
partnership, limited liability company, joint venture, association or other
business organization. The Company is duly qualified and in good standing as a
foreign corporation in each jurisdiction in which the character or location of
its assets or properties (owned, leased or licensed) or the nature of its
business makes such qualification necessary (including every jurisdiction in
which it owns or leases property), except for such jurisdictions where the
failure to so qualify would not have a Material Adverse Effect on the
consolidated assets or properties, business, results of operations, prospects or
condition (financial or otherwise) of the Company. For purposes of this
Agreement, "Material Adverse Effect" means any adverse effect on the business,
operations, properties or financial condition of the entity with respect to
which such term is used and which is (either alone or together with all other
adverse effects) material to such entity and other entities controlling or
controlled by such entity taken as a whole, and any material adverse effect on
the transactions contemplated under this Agreement or any other agreement or
document contemplated hereby or thereby. Each of the Company's subsidiaries is
validly existing as a corporation, limited liability company or partnership, as
applicable, in its respective jurisdiction of formation. Other than as listed on
Schedule 1.1(f) hereto, none of the Company's subsidiaries is a significant
subsidiary (as defined in Section 1-02 of Regulation S-X) of the Company. All of
the issued and outstanding capital stock, limited liability company interests or
partnership interests, as applicable, of each subsidiary has been duly
authorized and validly issued, is fully paid and nonassessable and (except as
otherwise disclosed or incorporated by reference in the Registration Statement
and the Prospectus or as disclosed on Schedule 1.1(f)) is owned by the Company,
directly, free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity. Except as disclosed or incorporated by reference
in the Registration Statement and the Prospectus, the Company does not own,
lease or license any asset or property or conduct any business outside the
United States of America. The Company has all requisite corporate or limited
liability company power and authority, as applicable, and all necessary
authorizations, approvals, consents, orders, licenses, certificates and permits
of and from all governmental orders or regulatory bodies or any other person or
entity, to own, lease, license and operate its assets and properties and conduct
its business as now being conducted and as described or incorporated by
reference in the Registration Statement and the Prospectus; except for such
authorizations, approvals, consents, orders, licenses, certificates and permits
the absence of which would not have a Material Adverse Effect; and no such
authorization, approval, consent, order, license, certificate or permit contains
a materially burdensome restriction other than as disclosed or incorporated by
reference in the Registration Statement and the Prospectus.
(g) The Company and its subsidiaries own or possess, or can acquire on
reasonable terms, adequate patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures),
trademarks, service marks, trade names, or other intellectual property
(collectively, "Intellectual Property") necessary to carry on the business now
operated by them, and neither the Company nor any of its subsidiaries has
received any notice or is otherwise aware of any infringement of or breach of
asserted rights of others with respect to any Intellectual Property or of any
facts or circumstances which would render any Intellectual Property invalid or
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inadequate to protect the interest of the Company or any of its subsidiaries
therein, and which infringement or conflict (if the subject of any unfavorable
decision, ruling or finding) or invalidity or inadequacy, singly or in the
aggregate, would result in a Material Adverse Effect.
(h) The Company has good title to each of the items of personal property
which are reflected in the financial statements referred to in Section 1.1(d) or
are referred to in the Registration Statement and the Prospectus or any document
incorporated by reference therein as being owned by the Company and valid and
enforceable leasehold interests in each of the items of real and personal
property which are referred to in the Registration Statement and the Prospectus
or any document incorporated by reference therein as being leased by the
Company, in each case free and clear of all liens, encumbrances, claims,
security interests and defects, other than those described in the Registration
Statement and the Prospectus and those which do not and will not have a Material
Adverse Effect. No material operating assets are held by the Company or any
subsidiary as lessee or licensee.
(i) The Company has good and marketable title to, or leasehold interests
in, all real properties and assets (including, without limitation, mortgaged
assets) as described in the Registration Statement and the Prospectus or any
document incorporated by reference therein, owned by the Company, free and clear
of all liens, charges, encumbrances or restrictions, except such as are
described in the Registration Statement and the Prospectus or any document
incorporated by reference therein, or as disclosed on Schedule 1.1(i) hereto, or
are not material in relation to the business of the Company; and has peaceful
and undisturbed possession under all material leases to which it is party as
lessee.
(j) There is no litigation or governmental or other proceeding or
investigation before any court or before or by any public body or board pending
or, to the knowledge of the Company, threatened (and the Company does not know
of any basis therefor) against, or involving the assets, properties or
businesses of the Company which would materially adversely affect the value or
the operation of any such assets or otherwise have a Material Adverse Effect on
the Company.
(k) Except as disclosed in the Registration Statement or the Prospectus, or
in any document incorporated therein (i) there has been no storage, disposal,
generation, manufacture, refinement, transportation, handling or treatment of
toxic wastes, hazardous wastes or hazardous substances by the Company or any of
its subsidiaries (or to the knowledge of the Company, any of their predecessors
in interest) at, upon or from any of the property now or previously owned or
leased by the Company or its subsidiaries in violation of any applicable law,
ordinance, rule, regulation, order, judgment, decree or permit or which would
require remedial action under any applicable law, ordinance, rule, regulation,
order, judgment, decree or permit, except for any violation or remedial action
which would not have a Material Adverse Effect; (ii) there has been no material
spill, discharge, leak, emission, injection, escape, dumping or release of any
kind onto such property or into the environment surrounding such property of any
toxic wastes, solid wastes, hazardous wastes or hazardous substances due to or
caused by the Company or any of its subsidiaries, except for any such spill,
discharge, leak emission, injection, escape, dumping or release which would not
have a Material Adverse Effect; and (iii) the terms "hazardous wastes," "toxic
wastes" and "hazardous substances" shall have the meanings specified in any
applicable local, state, federal and foreign laws or regulations with respect to
environmental protection.
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(l) To the Company's knowledge, the Company maintains insurance (issued by
insurers of recognized financial responsibility) of the types and in the amounts
generally deemed adequate for its businesses and, to the knowledge of the
Company, consistent with insurance coverage maintained by similar companies in
similar businesses, including, but not limited to, insurance covering real and
personal property owned or leased by the Company against theft, damage,
destruction, acts of vandalism and all other risks customarily insured against,
all of which insurance is in full force and effect.
(m) Subsequent to the respective dates as of which information is given in
the Registration Statement and the Prospectus, except as described therein, (i)
there has not been any material adverse change in the assets or properties,
business, results of operations, prospects or condition (financial or otherwise)
of the Company, whether or not arising from transactions in the ordinary course
of business; (ii) the Company has not sustained any material loss or
interference with its assets, businesses or properties (whether owned or leased)
from fire, explosion, earthquake, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or any court or legislative or
other governmental action, order or decree; (iii) since the date of the latest
balance sheet, included or incorporated by reference in the Registration
Statement and the Prospectus, except as reflected therein, the Company has not
undertaken any liability or obligation, direct or contingent, except such
liabilities or obligations undertaken in the ordinary course of business; and
(iv) there has not been any transaction that is material to the Company, except
transactions in the ordinary course of business or as otherwise disclosed in the
Registration Statement and the Prospectus.
(n) There is no document or contract of a character required to be
described in the Registration Statement or the Prospectus or to be filed as an
exhibit to the Registration Statement which is not described or filed as
required. Each mortgage, line of credit agreement, loan agreement, guarantee,
employee leasing agreement, property management agreement, franchise agreement,
cost reimbursement agreement, employment contract, stock option agreement,
warrant agreement, registration rights agreement, leasing agreement,
construction contract, purchase agreement and all other agreements of the
Company described in the Registration Statement or the Prospectus or
incorporated by reference therein or listed as exhibits to the Registration
Statement are in full force and effect and are valid and enforceable by and
against the Company in accordance with their terms, assuming the due
authorization, execution and delivery thereof by each of the other parties
thereto. The Company is not, nor to the knowledge of the Company is any other
party, in default in the observance or performance of any term or obligation to
be performed by it under any such agreement, and no event has occurred which
with notice or lapse of time or both would constitute such a default, which
default or event would have a Material Adverse Effect. No default exists, and no
event has occurred which with notice or lapse of time or both would constitute a
default, in the due performance and observance of any term, covenant or
condition, by the Company of any other agreement or instrument to which the
Company is a party or by which it or its properties or business may be bound or
affected, which default or event would have a Material Adverse Effect.
(o) The Company is not in violation of any term or provision of its
charter, by-laws or operating agreement, as applicable, or of any franchise,
license, permit, judgment, decree, order, statute, rule or regulation, where the
consequences of such violation would have a Material Adverse Effect.
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(p) Neither the execution, delivery and performance of this Agreement by
the Company nor the consummation of any of the transactions contemplated hereby
(including, without limitation, the issuance and sale by the Company of the
Stock) will give rise to a right to terminate or accelerate the due date of any
payment due under, or conflict with or result in the breach of any term or
provision of, or constitute a default (or an event which with notice or lapse of
time or both would constitute a default) under, or require any consent or waiver
under, or result in the execution or imposition of any lien, charge,
encumbrance, claim, security interest, restriction or defect upon any properties
or assets of the Company pursuant to the terms of, any indenture, mortgage, deed
of trust or other agreement or instrument to which the Company is a party or by
which either is bound, or any of its properties or businesses are bound, or any
franchise, license, permit, judgment, decree, order, statute, rule or regulation
applicable to the Company or violate any provision of the charter or by-laws of
the Company, except for such consents or waivers which have already been
obtained and are in full force and effect; no consent, approval, authorizations
or order of , or filing with, any court or governmental agency or body is
required for the issue and sale of the Stock and the consummation by the company
of the transactions contemplated by this Agreement, except registration of the
Stock under the Act and except such as may be required by state securities or
blue sky laws.
(q) All of the outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid and nonassessable and none
of the shares were issued in violation of any preemptive or other similar right.
The Stock, when issued and sold pursuant to this Agreement, will be duly
authorized and validly issued, fully paid and nonassessable and will not be
issued in violation of any preemptive or other similar right. Except as
disclosed in the Registration Statement and the Prospectus, there is no
outstanding option, warrant or other right calling for the issuance of, and
there is no commitment, plan or arrangement to issue, any capital stock of the
Company or any security convertible into or exercisable or exchangeable for,
such capital stock. The common stock of the Company and the Stock conform in all
material respects to all statements relating thereto contained in the
Registration Statement and the Prospectus.
(r) Subsequent to the respective dates as of which information is given in
the Registration Statement and the Prospectus, except as described or referred
to therein, the Company has not (i) issued any securities or incurred any
liability or obligation, direct or contingent, except such liabilities or
obligations incurred in the ordinary course of business, (ii) entered into any
transaction not in the ordinary course of business or (iii) declared or paid any
dividend or made any distribution on any shares of its capital stock or
redeemed, purchased or otherwise acquired or agreed to redeem, purchase or
otherwise acquire any shares of its capital stock.
(s) No holder of any security of the Company has the right, which has not
been waived, to have any security owned by such holder included in the
Registration Statement or any right to demand registration of any security owned
by such holder.
(t) All necessary corporate or limited liability company action, as
applicable, has been duly and validly taken by the Company to authorize the
execution, delivery and performance of this Agreement and the issuance and sale
of the Stock by the Company. This Agreement has been duly and validly
authorized, executed and delivered by the Company and
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constitutes and will constitute the legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms. Each
approval, consent, order, authorization, designation, declaration or filing by
or with any regulatory, administrative or other governmental body necessary in
connection with the execution and delivery by the Company of this Agreement and
the consummation of the transactions contemplated hereby and the issuance and
sale of the Stock by the Company has been obtained or made and is in full force
and effect. The Stock is included for quotation on the Trading Market. For
purposes of this Agreement, the "Trading Market" is (i) the New York Stock
Exchange, Inc., the American Stock Exchange or any national securities exchange
on which the Stock is admitted for trading or (ii) the facilities of The NASDAQ
Stock Market ("NASDAQ ").
(u) The Company has not incurred any liability for a fee, commission or
other compensation on account of the employment of a broker or finder in
connection with the transactions contemplated by this Agreement other than as
contemplated hereby or as described in the Registration Statement.
(v) The Company is not involved in any labor dispute nor, to the knowledge
of the Company, is any such dispute threatened, which dispute would have a
Material Adverse Effect.
(w) The Company is conducting its business in compliance with all
applicable laws, rules and regulations of the jurisdictions in which it is
conducting business, including, without limitation, the Americans with
Disabilities Act of 1990 and all applicable local, state and federal employment,
truth-in-advertising, franchising and immigration laws and regulations, except
where the failure to be so in compliance would not have a Material Adverse
Effect.
(x) No transaction has occurred between or among the Company and any of its
officers or directors or any affiliate or affiliates of any such officer or
director that is required to be described in and is not described in the
Registration Statement and the Prospectus.
(y) The Company has not taken, nor will it take, directly or indirectly,
any action designed to or which might reasonably be expected to cause or result
in, or which has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of the common stock
of the Company to facilitate the sale or resale of any of the Stock.
(z) The Company has filed all federal, state, local and foreign tax returns
which are required to be filed through the date hereof (and will file all such
tax returns when and as required to be filed after the date hereof), or have
received extensions thereof, and have paid all taxes shown on such returns to be
due on or prior to the date hereof (and will pay all taxes shown on such returns
to be due after the date hereof) and all assessments received by it to the
extent that the same are material and have become due.
(aa) The Company is not an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(bb) The Company's systems of internal accounting controls taken as a whole
are sufficient to meet the broad objectives of internal accounting control
insofar as those objectives pertain to the prevention or detection of errors or
irregularities in amounts that would be material in relation to the Company's
financial statements; and, to the best of the Company's knowledge,
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neither the Company nor any employee or agent thereof has made any payment
of funds of the Company or received or retained any funds, and no funds of the
Company have been set aside to be used for any payment, in each case in
violation of any law, rule or regulation.
ARTICLE 2
SALE AND DELIVERY OF SECURITIES
2.1 (a) On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth, the
Company agrees to issue and sell through the Sales Manager, as agent, and the
Sales Manager agrees to sell, as agent for the Company, on a best efforts basis,
up to the Maximum Amount of the Stock during the term of this Agreement on the
terms set forth herein. The Stock will be sold from time to time in amounts and
at prices as directed by the Company and as agreed to by the Sales Manager.
(b) The Company or the Sales Manager may, upon notice to the other party
hereto by telephone (confirmed promptly by telecopy), at any time and from time
to time suspend the offering of Stock; provided, however, that such suspension
or termination shall not affect or impair the parties' respective obligations
with respect to shares of Stock sold hereunder prior to the giving of such
notice.
(c) The compensation to the Sales Manager for sales of Stock shall be at a
fixed commission rate of 3.25% of the gross sales price per share for the Stock
sold under this Agreement. The remaining proceeds, after further deduction for
any transaction fees imposed by any governmental or self-regulatory organization
in respect to such sale shall constitute the net proceeds to the Company for
such Stock (the "Net Proceeds").
(d) The Company shall open and maintain a trading account (the "Trading
Account") at a clearing agent designated by the Sales Manager to facilitate the
transactions contemplated by this Agreement. The Net Proceeds from the sale of
the Stock shall be available in the Trading Account on the third business day
(or such other day as is industry practice for regular-way trading) following
each sale of the Stock (each, a "Settlement Date"). The Company shall effect the
delivery of the applicable number of shares of Stock to an account designated by
the Sales Manager at The Depository Trust Company on or before the Settlement
Date of each sale hereunder. The Sales Manager's compensation shall be withheld
from the sales proceeds on each Settlement Date and shall be paid to the Sales
Manager. If settlement through DTC is not available, then the Company shall
effect the delivery of physical certificates for shares of Stock to the Trading
Account at the clearing agent designated by the Sales Manager. Such delivery
shall be made at 10:00 a.m., New York time, on the Settlement Date, or at such
other time as shall be agreed upon by the Sales Manager and the Company.
Certificates for the shares shall be registered in such name or names and in
such authorized denominations as the Sales Manager may request prior to the
Settlement Date.
(e) At each Settlement Date, the Company shall be deemed to have affirmed
each representation, warranty, covenant and other agreement contained in this
Agreement. Any obligation of the Sales Manager under this Agreement shall be
subject to the continuing accuracy of the representations and warranties of the
Company herein, to the performance by the
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Company of its obligations hereunder and to the continuing satisfaction of
the additional conditions specified in Article 4 of this Agreement.
(f) If the Company shall default on its obligation to deliver Stock on any
Settlement Date, the Company shall (i) hold the Sales Manager harmless against
any loss, claim or damage arising from or as a result of such default by the
Company and (ii) pay the Sales Manager any commission to which it would
otherwise be entitled absent such default.
ARTICLE 3
COVENANTS OF THE COMPANY
3.1 The Company covenants and agrees with the Sales Manager that:
(a) The Company has filed a Registration Statement to permit sales of the
Stock under the Act. The Company will use its best efforts to cause such
Registration Statement to become effective as promptly as possible.
(b) During the period in which a prospectus relating to the Stock is
required to be delivered under the Act, the Company will notify the Sales
Manager promptly of the time when any subsequent amendment to the Registration
Statement has become effective or any subsequent supplement to the Prospectus
has been filed and of any request by the Commission for any amendment or
supplement to the Registration Statement or the Prospectus or for additional
information; the Company will prepare and file with the Commission, promptly
upon the Sales Manager's request, any amendments or supplements to the
Registration Statement or Prospectus that, in the Sales Manager's reasonable
opinion, may be necessary or advisable in connection with the sale of the Stock
pursuant to this Agreement; the Company will not file any amendment or
supplement to the Registration Statement or Prospectus (other than any
prospectus supplement relating to the offering of other securities (including,
without limitation, common stock not included in a Delayed Offering of Equity
Securities, as defined below) registered under the Registration Statement)
unless a copy thereof has been submitted to the Sales Manager a reasonable
period of time before the filing and the Sales Manager has not reasonably
objected thereto; and it will furnish to the Sales Manager at the time of filing
thereof a copy of any document that upon filing is deemed to be incorporated by
reference in the Registration Statement or Prospectus; and the Company will
cause each amendment or supplement to the Prospectus to be filed with the
Commission as required pursuant to the Exchange Act, within the time period
prescribed. If the Sales Manager and the Company are unable reasonably to agree
on the form or contents of applicable disclosure, then either party may exercise
its termination rights under Sections 7.2 or 7.3 (as applicable) as if the first
anniversary of this Agreement had occurred.
(c) The Company will advise the Sales Manager, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration Statement, of
the suspension of the qualification of the Stock for offering or sale in any
jurisdiction, or of the initiation or threatening of any proceeding for any such
purpose; and it will promptly use its best efforts to prevent the issuance of
any stop order or to obtain its withdrawal if such a stop order should be
issued.
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(d) Within the time during which a prospectus relating to the Stock is
required to be delivered under the Act, the Company will comply with all
requirements imposed upon it by the Act and by the Rules and Regulations, as
from time to time in force, so far as necessary to permit the continuance of
sales of or dealings in the Stock as contemplated by the provisions hereof and
the Prospectus. If during such period any event occurs as a result of which the
Prospectus, as then amended or supplemented, would include an 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 then existing, not
misleading, or if during such period it is necessary to amend or supplement the
Registration Statement or Prospectus to comply with the Act, the Company will
promptly notify the Sales Manager to suspend the offering of Stock during such
period and the Company will amend or supplement the Registration Statement or
Prospectus (at the expense of the Company) so as to correct such statement or
omission or effect such compliance and will use its best efforts to have any
amendment or supplement to the Registration Statement or Prospectus declared
effective as soon as possible, unless the Company has reasonable business
reasons to defer public disclosure of the relevant information.
(e) The Company will use its best efforts to qualify the Stock for sale
under the securities laws of such jurisdictions as the Sales Manager designates
and to continue such qualifications in effect so long as required for the sale
of the Stock, except that the Company shall not be required in connection
therewith to qualify as a foreign corporation or to execute a general consent to
service of process in any jurisdiction.
(f) The Company will furnish to the Sales Manager and its counsel (at the
expense of the Company) copies of the Registration Statement, the Prospectus
(including all documents incorporated by reference therein) and all amendments
and supplements to the Registration Statement or Prospectus that are filed with
the Commission during the period in which a prospectus relating to the Stock is
required to be delivered under the Act (including all documents filed with the
Commission during such period that are deemed to be incorporated by reference
therein), in each case as soon as available and in such quantities as the Sales
Manager may from time to time reasonably request and, in the case when the
Trading Market is a national securities exchange, the Company will also furnish
copies of the Prospectus to such exchange in accordance with Rule 153 of the
Rules and Regulations.
(g) The Company will make generally available to its security holders as
soon as practicable, but in any event not later than 15 months after the end of
the Company's current fiscal quarter, an earnings statement (which need not be
audited) covering a 12-month period that satisfies the provisions of Section
11(a) of the Act and Rule 158 of the Rules and Regulations.
(h) The Company, whether or not the transactions contemplated hereunder are
consummated or this Agreement is terminated, will pay all of its expenses
incident to the performance of its obligations hereunder (including, but not
limited to, any transaction fees imposed by any governmental or self-regulatory
organization with respect to transactions contemplated by this Agreement and any
blue sky fees) and will pay the expenses of printing all documents relating to
the offering. The Company will reimburse the Sales Manager for its reasonable
out-of-pocket costs and expenses incurred in connection with entering into this
Agreement, including, without limitation, reasonable travel, reproduction,
printing and similar expenses, as well as the reasonable fees and disbursements
of its legal counsel.
10
(i) The Company agrees not to engage, enter into any agreement with or
solicit any other party to provide advice in respect of or otherwise act as
underwriter for any offering of securities involving a program similar, as
determined by the Sales Manager, to the Sales Manager's DOCS(R) transaction
contemplated by this Agreement (a "Delayed Offering of Equity Securities") until
the date one year from the date of this Agreement.
(j) The Company will apply the Net Proceeds from the sale of the Stock as
set forth in the Prospectus.
(k) The Company will not, directly or indirectly, offer or sell any shares
of common stock (other than the Stock) or securities convertible into or
exchangeable for, or any rights to purchase or acquire, common stock during the
period from the date of this Agreement through the final Settlement Date for the
sale of Stock hereunder without (i) giving the Sales Manager at least three
business days' prior written notice specifying the nature of the proposed sale
and the date of such proposed sale and (ii) suspending activity under this
program for such period of time as may reasonably be determined by agreement of
the Company and the Sales Manager; provided, however, that no such notice and
suspension shall be required in connection with the Company's issuance or sale
of (i) shares of common stock pursuant to any employee or director stock option
or benefits plan, stock ownership plan, dividend reinvestment plan now in effect
as such plans may be amended from time to time, and (ii) common stock issuable
upon conversion of securities or the exercise of warrants, options or other
rights in effect or outstanding on the date hereof.
(l) The Company will, at any time during the term of this Agreement, as
supplemented from time to time, advise the Sales Manager immediately after it
shall have received notice or obtain knowledge thereof, of any information or
fact that would alter or affect any opinion, certificate, letter and other
document provided to the Sales Manager pursuant to Article 4 herein.
(m) Each time that (i) the Registration Statement or the Prospectus shall
be amended or supplemented or (ii) there is filed with the Commission any
document incorporated by reference into the Prospectus (other than any Quarterly
Report on Form 10-Q or a Current Report on Form 8-K, unless the Sales Manager
shall otherwise request), the Company (unless the Company is not then selling
Stock through the Sales Manager and has not requested the Sales Manager to sell
Stock) shall furnish or cause to be furnished to the Sales Manager forthwith a
certificate dated the date of filing with the Commission of such amendment,
supplement or other document, the date of effectiveness of amendment, as the
case may be, in form satisfactory to the Sales Manager to the effect that the
statements contained in the certificate referred to in Sections 4.1(f) hereof
that were last furnished to the Sales Manager are true and correct at the time
of such amendment, supplement, filing, as the case may be, as though made at and
as of such time (except that such statements shall be deemed to relate to the
Registration Statement and the Prospectus as amended and supplemented to such
time) or, in lieu of such certificates, certificates of the same tenor as the
certificates referred to in said Sections 4.1(f), modified as necessary to
relate to the Registration Statement and the Prospectus as amended and
supplemented to the time of delivery of such certificate.
11
(n) Each time that (i) the Registration Statement or the Prospectus is
amended or supplemented or (ii) there is filed with the Commission any document
incorporated by reference into the Prospectus (other than any Quarterly Report
on Form 10-Q or a Current Report on Form 8-K, unless the Sales Manager shall
otherwise reasonably request), the Company (unless the Company is not then
selling Stock through the Sales Manager and has not requested the Sales Manager
to sell Stock) shall furnish or cause to be furnished forthwith to the Sales
Manager and to counsel to the Sales Manager (1) a written opinion of Fulbright &
▇▇▇▇▇▇▇▇ L.L.P., counsel to the Company ("Company Counsel"), or other counsel
satisfactory to the Sales Manager, dated the date of filing with the Commission
of such amendment, supplement or other document and the date of effectiveness of
such amendment, as the case may be, in form and substance satisfactory to the
Sales Manager, of the same tenor as the opinion referred to in Section 4.1(d)
hereof, but modified as necessary to relate to the Registration Statement and
the Prospectus as amended and supplemented to the time of delivery of such
opinion.
(o) Each time that the Registration Statement or the Prospectus shall be
amended or supplemented to include additional amended financial information or
there is filed with the Commission any document incorporated by reference into
the Prospectus which contains additional amended financial information, the
Company shall cause Deloitte & Touche LLP, or other independent accountants
satisfactory to the Sales Manager, forthwith to furnish to the Sales Manager a
letter, dated the date of effectiveness of such amendment, or the date of filing
of such supplement or other document with the Commission, as the case may be, in
form satisfactory to the Sales Manager, of the same tenor as the letter referred
to in Section 4.1(e) hereof but modified to relate to the Registration Statement
and the Prospectus, as amended and supplemented to the date of such letter.
(p) The Company shall use its best efforts to list, subject to notice of
issuance, the Stock on the applicable Trading Market.
(q) All sales of Stock pursuant to this Agreement will be made in
conformity with the provisions of Regulation M under the Exchange Act.
ARTICLE 4
CONDITIONS OF THE SALES MANAGER'S OBLIGATIONS
4.1 The obligations of the Sales Manager to sell the Stock as provided
herein shall be subject to the accuracy, as of the date hereof, and as of each
Settlement Date contemplated under this Agreement, of the representations and
warranties of the Company herein, to the performance by the Company of its
obligations hereunder and to the following additional conditions:
(a) The Registration Statement contemplated by Section 3.1(a) has been
declared effective. No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceeding for that purpose
shall have been instituted or, to the knowledge of the Company or the Sales
Manager, threatened by the Commission, and any request of the Commission for
additional information (to be included in the Registration Statement or the
Prospectus or otherwise) shall have been complied with to the Sales Manager's
satisfaction.
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(b) The Sales Manager shall not have advised the Company that the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, is not acceptable to it in its good faith opinion.
(c) Except as contemplated in the Prospectus, subsequent to the respective
dates as of which information is given in the Registration Statement and the
Prospectus, there shall not have been any material change, on a consolidated
basis, in the capital stock of the Company, or any material adverse change, or
any development that may reasonably be expected to cause a material adverse
change, in the condition (financial or other), business, prospects, net worth or
results of operations of the Company, or any change in the rating assigned to
any securities of the Company.
(d) The Sales Manager shall have received at the date of the first sale of
Stock hereunder (the "Commencement Date") and at every other date specified in
Section 3.1(n) hereof, opinions of Company Counsel, dated as of the Commencement
Date and dated as of such other date, respectively, to the effect that:
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Nevada; the Company
is duly qualified and in good standing as a foreign corporation in each
jurisdiction in which the character or location of its assets or properties
(owned, leased or licensed) or by the nature of its business makes such
qualification necessary (including every jurisdiction in which it owns or leases
property), except for such jurisdictions where the failure to so qualify would
not have a Material Adverse Effect; to the best of such counsel's knowledge, the
Company has no subsidiary or subsidiaries (other as disclosed on Schedule 1.1(f)
hereto) and does not control, directly or indirectly, any corporation,
partnership, joint venture, association or other business organization; and the
Company has all requisite corporate power and authority to own, lease, license
and operate its assets and properties and conduct its business as now being
conducted and as described in the Registration Statement and the Prospectus or
any document incorporated by reference therein.
(ii) The certificates evidencing the Stock are in due and proper legal form
and have been duly authorized for issuance by the Company; all of the
outstanding shares of capital stock of the Company have been duly authorized and
validly issued; and all of the outstanding shares of capital stock of the
Company are fully paid and nonassessable and none of them was issued in
violation of any preemptive or other similar right. The Stock, when issued and
sold pursuant to this Agreement, will be duly and validly issued, fully paid and
nonassessable and none of them will have been issued in violation of any
preemptive or other similar right. The Stock is subject of an effective
registration statement permitting their sale in the manner contemplated by this
Agreement. Except as disclosed in the Registration Statement and the Prospectus,
there is no outstanding option, warrant or other right calling for the issuance
of, and, to the knowledge of such counsel, there is no commitment, plan or
arrangement to issue, any share of capital stock, of the Company or any security
convertible into or exercisable or exchangeable for, capital stock of the
Company. The Stock conforms in all material respects to all statements relating
thereto contained in the Registration Statement and the Prospectus.
13
(iii) The information set forth under the caption "Description of Capital
Stock" in the Prospectus, to the extent that it constitutes matters of law,
summaries of legal matters, documents, or legal conclusions, has been reviewed
by such counsel and is correct in all material respects and presents the
information called for by the Act and the Rules and Regulations.
(iv) The descriptions contained or incorporated by reference in the
Registration Statement and the Prospectus of statutes, legal and governmental
proceedings, contracts and other documents are accurate, and insofar as such
statements constitute a summary of documents referred to therein, matters of law
or legal conclusions, are fair summaries of the material provisions thereof and
accurately present the information required with respect to such documents and
matters. All statutes, legal or governmental proceedings, and all agreements and
other documents required to be described in the Registration Statement (or
incorporated by reference therein) have been so described. All agreements and
other documents known to such counsel to be required to be filed as exhibits to
the Registration Statement have been so filed or incorporated by reference
therein.
(v) All necessary corporate action has been duly and validly taken by the
Company to authorize the execution, delivery and performance of this Agreement
and the issuance and sale of the Stock by the Company. This Agreement has been
duly and validly executed and delivered by the Company and constitutes the
legal, valid and binding obligation of the Company, enforceable in accordance
with its terms.
(vi) No filing, consent, approval, authorization, order, license,
certificate, permit, registration, designation or filing with any court or
governmental agency or body is required for the valid authorization, issue,
delivery and sale of the Stock or the consummation by the Company of the
transactions contemplated by this Agreement, except the registration under the
Act of the Stock, and such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky laws in
connection with the sale of the Stock by the Sales Manager.
(vii) Neither the execution, delivery and performance of this Agreement by
the Company nor the consummation of any of the transactions contemplated hereby
(including, without limitation, the issuance and sale by the Company of the
Stock) will give rise to a right to terminate or accelerate the due date of any
payment due under, or conflict with or result in the breach of any term or
provision of, or constitute a default (or any event which with notice or lapse
of time, or both, would constitute a default) under, or require consent or
waiver under, or result in the execution or imposition of any lien, charge or
encumbrance upon any properties or assets of the Company pursuant to the terms
of, any indenture, mortgage, deed of trust, note, franchise, license, permit or
other agreement or instrument known to such counsel and to which the Company is
a party or by which it or any of its properties or businesses are bound, or any
judgment, decree, order, statute, rule or regulation or violate any provision of
the charter or by-laws of the Company.
14
(viii) To the best of such counsel's knowledge, no default exists, and no
event has occurred which with notice or lapse of time, or both, would constitute
a default, in the due performance and observance by the Company of any term,
covenant or condition of any agreement, instrument or other document to which
the Company is a party or by which its assets or properties or businesses are
bound or affected.
(ix) To the best of such counsel's knowledge, the Company is not in
violation of any term or provision of its charter or by-laws and the Company is
not in violation of any term or provision of any franchise, license, permit,
judgment, decree, order, statute, rule or regulation applicable to it.
(x) To the best of such counsel's knowledge, there is no litigation or
governmental or other proceeding or investigation before any court or before or
by any public body or board pending or threatened against, or involving the
assets, properties or businesses of, the Company which is reasonably likely to
have a Material Adverse Effect.
(xi) The Registration Statement, when it became effective, the Prospectus,
each of the documents incorporated by reference in the Registration Statement
and the Prospectus and each amendment or supplement thereto, on the date of
filing thereof with the Commission (and at each Settlement Date on or prior to
the date of the opinion) (except for the financial statements and notes and
schedules and other financial and statistical information included therein, as
to which such counsel expresses no opinion) complied as to form in all material
respects with the requirements of the Act and the Rules and Regulations and the
Exchange Act and the rules and regulations promulgated thereunder, as the case
may be.
(xii) The Registration Statement has become effective under the Act; if
applicable, the filing of the Prospectus supplements have been made in the
manner and within the time period required by the Rules and Regulations; and, to
the best of such counsel's knowledge, no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are threatened or pending. The Stock has been
approved for quotation on the Trading Market.
(xiii) The Company is not an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(xiv) To the best of such counsel's knowledge, the conditions for use of a
Registration Statement on Form S-3 set forth in the General Instructions to Form
S-3 have been satisfied with respect to the Company and the transactions
contemplated by this Agreement and the Registration Statement.
To the extent deemed advisable by such counsel, they may rely as to matters
of fact on certificates of responsible officers of the Company and public
officials. Copies of such certificates shall be furnished to the Sales Manager
and its counsel.
15
In addition, such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the Company and
representatives of the independent certified public accountants of the Company,
at which conferences the contents of the Registration Statement and the
Prospectus and related matters were discussed and, although such counsel is not
passing upon and does not assume any responsibility for any accuracy,
completeness or fairness of the statements contained or incorporated by
reference in the Registration Statement and the Prospectus (except as specified
in the foregoing opinion), on the basis of the foregoing no facts have come to
the attention of such counsel which have caused such counsel to believe that the
Registration Statement at the time it (including each post-effective amendment
thereto) became effective, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or that the Prospectus and any
amendments or supplements thereto, on the date of filing thereof with the
Commission and at the Commencement Date and at each Settlement Date on or prior
to the date of the opinion, contained any untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (it being understood that such counsel need not express any belief
with respect to matters of title to properties owned by the Company or as to the
financial statements and schedules and other financial information included or
incorporated by reference in the Registration Statement or the Prospectus).
(e) At the Commencement Date and at such other dates specified in Section
3.1(o) hereof, the Sales Manager shall have received a letter from Deloitte &
Touche LLP, independent public accountants for the Company, or other independent
accountants satisfactory to the Sales Manager, dated the date of delivery
thereof, in form and substance satisfactory to the Sales Manager.
(f) The Sales Manager shall have received from the Company a certificate,
or certificates, signed by the Chairman of the Board, the President or a Vice
President and by the principal financial or accounting officer of the Company,
dated as of the Commencement Date and dated as of the first business day of each
calendar month thereafter (each, a "Certificate Date"), to the effect that, to
the best of their knowledge based upon reasonable investigation:
(i) The representations and warranties of the Company in this Agreement are
true and correct, as if made at and as of the Commencement Date or the
Certificate Date (as the case may be), and the Company has complied with all the
agreements and satisfied all the conditions on its part to be performed or
satisfied at or prior to the Commencement Date and each such Certificate Date
(as the case may be);
(ii) No stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceeding for that purpose has been
instituted or, to the knowledge of such officer after due inquiry, is
threatened, by the Commission;
(iii) Since the date of this Agreement there has occurred no event required
to be set forth in an amendment or supplement to the Registration Statement or
Prospectus that has not been so set forth and there has been no document
required to be filed under the Exchange Act and the rules and regulations of the
Commission thereunder that upon
16
such filing would be deemed to be incorporated by reference in the
Prospectus that has not been so filed; and
(iv) Since the date of this Agreement, there has not been any material
adverse change in the assets or properties, business, results of operations,
prospects or condition (financial or otherwise) of the Company, which has not
been described in an amendment or supplement to the Registration Statement or
Prospectus (directly or by incorporation).
In addition, on each Certificate Date the certificate shall also reconfirm
that the shares of Stock sold during the immediately preceding month were duly
and validly authorized by the Company and that all corporate action required to
be taken for the authorization, issuance and sale of such Stock had been validly
and sufficiently taken.
(g) At the Commencement Date and on each Settlement Date, the Company shall
have furnished to the Sales Manager such appropriate further information,
certificates and documents as the Sales Manager may reasonably request.
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are satisfactory in form and
substance to the Sales Manager. The Company will furnish the Sales Manager with
such conformed copies of such opinions, certificates, letters and other
documents as the Sales Manager shall reasonably request.
ARTICLE 5
INDEMNIFICATION AND CONTRIBUTION
5.1 (a) The Company agrees to indemnify and hold harmless the Sales Manager
and each person, if any, who controls the Sales Manager within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or any
amendment thereto), or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein
not misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto) or the omission or alleged
omission therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, or any such alleged untrue
statement or omission, if such settlement is effected with the written consent
of the Company; and
17
(iii) against any and all expense whatsoever, as incurred (including,
subject to Section 5(c) hereof, the reasonable fees and disbursements of counsel
chosen by the Sales Manager), reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever
based upon any such untrue statement or omission, or any such alleged untrue
statement or omission, to the extent that any such expense is not paid under (i)
or (ii) above;
provided, however, that this indemnity agreement shall not apply to any
loss, liability, claim, damage or expense to the extent arising out of any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with written information furnished to the
Company by the Sales Manager expressly for use in the Registration Statement (or
any amendment thereto) or any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto).
(b) The Sales Manager agrees to indemnify and hold harmless the Company and
its directors and each officer of the Company who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act against any and all
loss, liability, claim, damage and expense described in the indemnity contained
in Section 5.1(a), as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendments thereto) or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by the Sales
Manager expressly for use in the Registration Statement (or any amendment
thereto) or such preliminary prospectus or the Prospectus (or any amendment or
supplement thereto).
(c) Any indemnified party that proposes to assert the right to be
indemnified under this Article 5 will, promptly after receipt of notice of
commencement of any action against such party in respect of which a claim is to
be made against an indemnifying party or parties under this Article 5, notify
each such indemnifying party of the commencement of such action, enclosing a
copy of all papers served, but the omission so to notify such indemnifying party
will not relieve the indemnifying party from any liability that it might have to
any indemnified party. If any such action is brought against any indemnified
party and it notifies the indemnifying party of its commencement, the
indemnifying party will be entitled to participate in and, to the extent that it
elects by delivering written notice to the indemnified party promptly after
receiving notice of the commencement of the action from the indemnified party,
jointly with any other indemnifying party similarly notified, to assume the
defense of the action, with counsel satisfactory to the indemnified party, and
after notice from the indemnifying party to the indemnified party of its
election to assume the defense, the indemnifying party will not be liable to the
indemnified party for any legal or other expenses except as provided below and
except for the reasonable costs of investigation subsequently incurred by the
indemnified party in connection with the defense. The indemnified party will
have the right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel will be at the expense of such
indemnified party unless (1) the employment of counsel by the indemnified party
has been authorized in writing by the indemnifying party, (2) the indemnified
party has reasonably concluded (based on advice of counsel) that there may be
legal defenses available to
18
it or other indemnified parties that are different from or in addition to
those available to the indemnifying party, (3) a conflict or potential conflict
exists (based on advice of counsel to the indemnified party) between the
indemnified party and the indemnifying party (in which case the indemnifying
party will not have the right to direct the defense of such action on behalf of
the indemnified party) or (4) the indemnifying party has not in fact employed
counsel to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of which cases the
reasonable fees, disbursements and other charges of counsel will be at the
expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm admitted to
practice in such jurisdiction at any one time for all such indemnified party or
parties. All such fees, disbursements and other charges will be reimbursed by
the indemnifying party promptly as they are incurred. An indemnifying party will
not be liable for any settlement of any action or claim effected without its
written consent (which consent will not be unreasonably withheld).
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Article 5 is applicable in accordance with its terms but for
any reason is held to be unavailable from the Company or the Sales Manager, the
Company and the Sales Manager will contribute to the total losses, claims,
liabilities, expenses and damages (including any investigative, legal and other
expenses reasonably incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claim asserted, but after
deducting any contribution received by the Company from persons other than the
Sales Manager, such as persons who control the Company within the meaning of the
Act, officers of the Company who signed the Registration Statement and directors
of the Company, who also may be liable for contribution) to which the Company
and the Sales Manager may be subject in such proportion as shall be appropriate
to reflect the relative benefits received by the Company on the one hand and the
Sales Manager on the other. The relative benefits received by the Company on the
one hand and the Sales Manager on the other hand shall be deemed to be in the
same proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total compensation (before
deducting expenses) received by the Sales Manager from the sale of Stock on
behalf of the Company. If, but only if, the allocation provided by the foregoing
sentence is not permitted by applicable law, the allocation of contribution
shall be made in such proportion as is appropriate to reflect not only the
relative benefits referred to in the foregoing sentence but also the relative
fault of the Company, on the one hand, and the Sales Manager, on the other, with
respect to the statements or omission which resulted in such loss, claim,
liability, expense or damage, or action in respect thereof, as well as any other
relevant equitable considerations with respect to such offering. Such relative
fault shall be determined by reference to whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Company or the Sales Manager, the
intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the Sales Manager agree that it would not be just and equitable if contributions
pursuant to this Section 5.1(d) were to be determined by pro rata allocation or
by any other method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, liability, expense or damage, or action in
respect thereof, referred to above in this Section
19
5.1(d) shall be deemed to include, for the purpose of this Section 5.1(d),
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the foregoing provisions of this Section 5.1(d), the Sales
Manager shall not be required to contribute any amount in excess of the amount
by which the total actual sales price at which Stock sold by the Sales Manager
exceeds the amount of any damages that the Sales Manager has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission and no person found guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) will be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 5.1(d), any person who controls
a party to this Agreement within the meaning of the Act will have the same
rights to contribution as that party, and each officer of the Company who signed
the Registration Statement will have the same rights to contribution as the
Company, subject in each case to the provisions hereof. Any party entitled to
contribution, promptly after receipt of notice of commencement of any action
against such party in respect of which a claim for contribution may be made
under this Section 5.1(d), will notify any such party or parties from whom
contribution may be sought, but the omission so to notify will not relieve that
party or parties from whom contribution may be sought from any other obligation
it or they may have under this Section 5.1(d). No party will be liable for
contribution with respect to any action or claim settled without its written
consent (which consent will not be unreasonably withheld).
(e) The indemnity and contribution provided by this Article 5 shall not
relieve the Company and the Sales Manager from any liability the Company and the
Sales Manager may otherwise have (including, without limitation, any liability
the Sales Manager may have for a breach of its obligations under Article 2
hereof).
ARTICLE 6
REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY
6.1 All representations, warranties and agreements of the Company herein or
in certificates delivered pursuant hereto, and the agreements of the Sales
Manager contained in Article 5 hereof, shall remain operative and in full force
and effect regardless of any investigation made by or on behalf of the Sales
Manager or any controlling persons, or the Company (or any of their officers,
directors or controlling persons), and shall survive delivery of and payment for
the Stock.
ARTICLE 7
TERMINATION
7.1 The Sales Manager shall have the right by giving notice as hereinafter
specified at any time at or prior to any Settlement Date, to terminate this
Agreement if (i) any material adverse change, or any development that has
actually occurred and that is reasonably expected to cause material adverse
change, in the assets or properties, business, results of operations, prospects
or condition (financial or otherwise) of the Company has occurred which, in the
judgment of the Sales Manager, materially impairs the investment quality of the
Stock, (ii) the
20
Company shall have failed, refused or been unable, at or prior to any
Settlement Date, to perform any agreement on its part to be performed hereunder,
(iii) any other condition of the Sales Manager's obligations hereunder is not
fulfilled, (iv) any suspension or limitation of trading in the Stock on the
Trading Market, or any setting of minimum prices for trading of the Stock on
such Trading Market, shall have occurred, (v) any banking moratorium shall have
been declared by Federal or New York authorities or (vi) an outbreak or material
escalation of major hostilities in which the United States is involved, a
declaration of war by Congress, any other substantial national or international
calamity or any other event or occurrence of a similar character shall have
occurred since the execution of this Agreement that, in the judgment of the
Sales Manager, makes it impractical or inadvisable to proceed with the
completion of the sale of and payment for the Stock to be sold by the Sales
Manager on behalf of the Company. Any such termination shall be without
liability of any party to any other party except that the provisions of Section
3.1(h), Article 5 and Article 6 hereof shall remain in full force and effect
notwithstanding such termination. If the Sales Manager elects to terminate this
Agreement as provided in this Article, the Sales Manager shall provide the
required notice as specified herein.
7.2 The Company shall have the right, by giving notice as hereinafter
specified, to terminate this Agreement in its sole discretion at any time after
the first anniversary of the date of this Agreement. Any such termination shall
be without liability of any party to any other party except that the provisions
of Section 3.1(h), Article 5 and Article 6 hereof shall remain in full force and
effect notwithstanding such termination. If the Company terminates this
Agreement prior to the Sales Manager receiving commissions totaling $50,000
under this Agreement, the Company shall pay the Sales Manager liquidated damages
in an amount equal to $50,000 minus the total commissions received by the Sales
Manager under this Agreement.
7.3 The Sales Manager shall have the right, by giving notice as hereinafter
specified, to terminate this Agreement in its sole discretion at any time after
the earlier of (i) the first anniversary of the date of this Agreement. Any such
termination shall be without liability of any party to any other party except
that the provisions of Article 3.1(h), Article 5 and Article 6 hereof shall
remain in full force and effect notwithstanding such termination.
7.4 This Agreement shall remain in full force and effect unless terminated
pursuant to Section 7.1, 7.2 or 7.3 above or otherwise by mutual agreement of
the parties; provided that any such termination by mutual agreement shall in all
cases be deemed to provide that Section 3.1(h), Article 5 and Article 6 shall
remain in full force and effect.
7.5 Any termination of this Agreement shall be effective on the date
specified in such notice of termination; provided that such termination shall
not be effective until the close of business on the date of receipt of such
notice by the Sales Manager or the Company, as the case may be. If such
termination shall occur during a period when sales of Stock are being made
pursuant to this Agreement, any Stock made prior to the termination of this
Agreement shall settle in accordance with the provisions of this Agreement.
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ARTICLE 8
NOTICES
8.1 All notices or communications hereunder shall be in writing and if sent
to the Sales Manager shall be mailed, delivered or telecopied and confirmed to
the Sales Manager at RCG ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, facsimile number (▇▇▇) ▇▇▇-▇▇▇▇, Attention: Corporate Finance, or if sent
to the Company, shall be mailed, delivered or telecopied and confirmed to the
Company at Magnum Hunter Resources, Inc., ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, facsimile number (▇▇▇) ▇▇▇-▇▇▇▇, Attention: General
Counsel. Each party to this Agreement may change such address for notices by
sending to the parties to this Agreement written notice of a new address for
such purpose.
ARTICLE 9
MISCELLANEOUS
9.1 This Agreement shall inure to the benefit of and be binding upon the
Company and the Sales Manager and their respective successors and the
controlling persons, officers and directors referred to in Article 5 hereof, and
no other person will have any right or obligation hereunder.
9.2 This Agreement constitutes the entire agreement and supersedes all
other prior and contemporaneous agreements and undertakings, both written and
oral, among the parties hereto with regard to the subject matter hereof.
9.3 THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF
CONFLICTS OF LAWS.
9.4 This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. The parties agree that this Agreement will be
considered signed when the signature of a party is delivered by facsimile
transmission. Such facsimile transmission shall be treated in all respects as
having the same effect as an original signature.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the date hereof.
MAGNUM HUNTER RESOURCES, INC.
By:_______________________________
Name:
Title:
RCG ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, a division of
RAMIUS SECURITIES, LLC
By:_______________________________
Name:
Title:
23
SCHEDULE 1.1(f)
List of Subsidiaries
[SUBSIDIARY LIST]