Document:

magnum_8k-ex1004.htm

    
      
        

      

    

    EXHIBIT 10.4

        

    NON-STATUTORY
STOCK OPTION AGREEMENT

     

    THIS
NON-STATUTORY STOCK OPTION AGREEMENT (“Agreement”) executed March __, 2010 but
effective as of February 11, 2010, by and between MAGNUM HUNTER RESOURCES
CORPORATION, a Delaware corporation (“Corporation”), and H. C. Ferguson, III
(“Optionee”).

     

    R E C I T
A L

     

    The
Corporation wishes to grant Optionee options to purchase 300,000 shares of the
Corporation’s $.01 par value common stock (“Common Stock”) under the
Corporation’s 2006 Stock Incentive Plan (“Plan”), on the terms and subject to
the conditions set forth below.

     

    A G R E E
M E N T

     

    It is
hereby agreed as follows:

     

    1.    GRANT OF
OPTIONS.  The Corporation hereby grants to Optionee, options
(“Options”) to purchase all or any part of 300,000 shares (“Shares”) of the
Corporation’s Common Stock, upon the terms and subject to the conditions set
forth herein.  The Option and the Shares granted and issued pursuant
to this Agreement have been granted and issued under, and are subject to the
terms of, the Plan.  The terms of the Plan are incorporated by
reference in this Agreement in their entirety, and the Optionee, by execution of
this Agreement, acknowledges having received a copy of the Plan.  The
provisions of this Agreement will be interpreted as to be consistent with the
Plan, and any ambiguities in this Agreement will be interpreted by reference to
the Plan.  In the event that any provision of this Agreement is
inconsistent with the terms of the Plan, the terms of the Plan will
prevail.  All capitalized terms not herein defined shall have the
meanings ascribed to them by the Plan.

     

    2.    OPTION
PERIOD.  The Options shall partially vest upon the successful
achievement of each of the hereinafter defined events (“Vesting Event”) on an
individual basis.  Options for each successfully achieved Vesting
Event shall become exercisable at any time during the period commencing on
February 11, 2010 and expiring on February 11, 2020 unless earlier terminated
pursuant to Section 6 of the Agreement or Section 9 of the Plan:

     

    Vesting
Event 1 (covering 60,000 Options) shall occur on February 11, 2011 provided
that; the Optionee is employed by the Corporation as of the close of business on
February 11, 2011.

     

    Vesting
Event 2 (covering 60,000 Options) shall occur on February 11, 2011 provided
that; the Optionee is employed by the Corporation and that the twelve (12) month
average production of the Corporation and its subsidiaries commencing on
February 1, 2010 and ending on February 11, 2011 has averaged One Hundred
Thousand Barrels of Oil Equivalent (100,000 BOE) per month for twelve (12)
months..

     

    Vesting
Event 3 (covering 60,000 Options) shall occur at any time prior to February 11,
2011  provided that; the Optionee is employed by the Corporation and
that the Common Stock of the Corporation has traded at a daily VWAP of $4.00 or
more for 10 consecutive trading days.  The VWAP shall be that as found
in the market data provided by Bloomberg, LP.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Vesting
Event 4 (covering 60,000 Options) shall
occur at any time prior to February 11, 2012 provided that; the Optionee is
employed by the Corporation and that the fully diluted market capitalization of
the Corporation has reached Four Hundred  Million Dollars
($400,000,000) or greater.

     

    Vesting
Event 5 (covering 60,000 Options) shall occur at any time prior to August 31,
2010 provided that; the Optionee is employed by the Corporation and that the
Corporation has successfully drilled, completed, and placed on commercial
production at least two (2) Marcellus Shale wells and at least two (2) Eagle
Ford Shale wells. Successful well as it relates to Marcellus wells means a well
with an IP of at least 2.0 Mmcfe per day and internally estimated reserves of
3.0 Bcfe.  Successful well as it relates to Eagle Ford wells means a
well with an IP of at least 750 Boe per day and internally estimated reserves of
200,000 Boe.  The Compensation and Nominating Committee retains the
authority to toll the deadline for completion herein during the term of any
force majeure event.

     

    Notwithstanding
the foregoing, in the event of a Change in Control of the Company on or after
February 11, 2010, then all Options shall vest and become immediately
exercisable in full and will remain exercisable in accordance with their
terms.

     

    3.    METHOD OF
EXERCISE.  The Options shall be exercisable by Optionee by giving
written notice to the Corporation of the election to purchase and of the number
of Shares Optionee elects to purchase, such notice to be accompanied by such
other executed instruments or documents as may be required by the Corporation
pursuant to this Agreement or the Plan, and unless otherwise directed by the
Corporation, Optionee shall at the time of such exercise tender the purchase
price of the Shares he has elected to purchase.  Optionee may purchase
less than the total number of Shares for which the Option is exercisable,
provided that a partial exercise of an Option may not be for less than One
Hundred (100) Shares.  If Optionee shall not purchase all of the
Shares which he is entitled to purchase under the Options, his right to purchase
the remaining unpurchased Shares shall continue until expiration of the
Options.  The Options shall be exercisable with respect of whole
Shares only, and fractional Share interests shall be disregarded.

     

    4.    AMOUNT OF
PURCHASE PRICE.  The purchase price (“Purchase Price”) per Share for
each Share which Optionee is entitled to purchase under the Options shall be
$2.25 per Share.

     

    5.    PAYMENT OF
PURCHASE PRICE.  Except as the Corporation may allow in accordance
with the Plan, at the time of Optionee’s notice of exercise of the Options,
Optionee shall tender in cash or by certified or bank cashier’s check payable to
the Corporation, the purchase price for all Shares then being
purchased.

     

    6.    EFFECT OF
TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP.  If an Optionee’s
employment or other relationship with the Corporation (or a subsidiary)
terminates, the effect of the termination on the Optionee’s rights to acquire
Shares shall be as set forth in Section 9 of the Plan. 

     

    7.    NONTRANSFERABILITY OF
OPTIONS.  The Options shall not be transferable, either voluntarily or
by operation of law, except as provided in Section 12.3 of the
Plan.

     

    
      
        
        

      

      
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    8.    TIME OF
GRANTING OPTIONS.  The time the Options shall be deemed granted,
sometimes referred to herein as the “date of grant,” shall be February 11,
2010.

     

    9.    PRIVILEGES OF
STOCK OWNERSHIP.  Optionee shall not be entitled to the privileges of
stock ownership as to any Shares not actually issued and delivered to
Optionee.  No Shares shall be purchased upon the exercise of any
Options unless and until, in the opinion of the Corporation’s counsel, any then
applicable requirements of any laws, or governmental or regulatory agencies
having jurisdiction, and of any exchanges upon which the stock of the
Corporation may be listed shall have been fully complied with.

     

    10.    SECURITIES
LAWS COMPLIANCE.  The Corporation will diligently endeavor to comply
with all applicable securities laws before any stock is issued pursuant to the
Options.  Without limiting the generality of the foregoing, the
Corporation may require from the Optionee such investment representation or such
agreement, if any, as counsel for the Corporation may consider necessary in
order to comply with the Securities Act of 1933 as then in effect, and may
require that the Optionee agree that any sale of the Shares will be made only in
such manner as is permitted by the Corporation.  The Corporation may
in its discretion cause the Shares underlying the Options to be registered under
the Securities Act of 1933 as amended by filing a Form S-8 Registration
Statement covering the Options and the Shares underlying the
Options.  Optionee shall take any action reasonably requested by the
Corporation in connection with registration or qualification of the Shares under
federal or state securities laws.

     

    11.    INTENDED
TREATMENT AS NON-STATUTORY STOCK OPTIONS.  The Options granted herein
are intended to be non-statutory stock options described in U.S. Treasury
Regulation (“Treas. Reg.”) §1.83-7 to which Sections 421 and 422 of the
Internal Revenue Code of 1986, as amended from time to time (“Code”) do not
apply, and shall be construed to implement that intent.  If all or any
part of the Options shall not be described in Treas. Reg. §1.83-7 or be subject
to Sections 421 and 422 of the Code, the Options shall nevertheless be
valid and carried into effect.

     

    12.    SHARES
SUBJECT TO LEGEND.  If deemed necessary by the Corporation’s counsel,
all certificates issued to represent Shares purchased upon exercise of the
Options shall bear such appropriate legend conditions as counsel for the
Corporation shall require.

     

    13.    COMPLIANCE
WITH APPLICABLE LAWS.  THE CORPORATION’S OBLIGATION TO ISSUE SHARES OF
ITS COMMON STOCK UPON EXERCISE OF THE OPTIONS IS EXPRESSLY CONDITIONED UPON THE
COMPLETION BY THE CORPORATION OF ANY REGISTRATION OR OTHER QUALIFICATION OF SUCH
SHARES UNDER ANY STATE AND/OR FEDERAL LAW OR RULINGS OR REGULATIONS OF ANY
GOVERNMENTAL REGULATORY BODY, OR THE MAKING OF SUCH INVESTMENT REPRESENTATIONS
OR OTHER REPRESENTATIONS AND UNDERTAKINGS BY THE OPTIONEE OR ANY PERSON ENTITLED
TO EXERCISE THE OPTION IN ORDER TO COMPLY WITH THE REQUIREMENTS OF ANY EXEMPTION
FROM ANY SUCH REGISTRATION OR OTHER QUALIFICATION OF SUCH SHARES WHICH THE
CORPORATION SHALL, IN ITS SOLE DISCRETION, DEEM NECESSARY OR
ADVISABLE.  SUCH REQUIRED REPRESENTATIONS AND UNDERTAKINGS MAY INCLUDE
REPRESENTATIONS AND AGREEMENTS THAT THE OPTIONEE OR ANY PERSON ENTITLED TO
EXERCISE THE OPTION (i) IS NOT PURCHASING SUCH SHARES FOR DISTRIBUTION AND (ii)
AGREES TO HAVE PLACED UPON THE FACE AND REVERSE OF ANY CERTIFICATES A LEGEND
SETTING FORTH ANY REPRESENTATIONS AND UNDERTAKINGS WHICH HAVE BEEN GIVEN TO THE
CORPORATION OR A REFERENCE THERETO.

     

    
      
        
        

      

      
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    14.    NO RIGHTS TO
CONTINUED EMPLOYMENT OR RELATIONSHIP.  Nothing contained in this
Agreement shall obligate the Corporation to employ or have another relationship
with Optionee for any period or interfere in any way with the right of the
Corporation to reduce Optionee’s compensation or to terminate the employment of
or relationship with Optionee at any time.

     

    15.    MISCELLANEOUS.

     

    15.1    Binding
Effect.  This Agreement shall bind and inure to the benefit of the
successors, assigns, transferees, agents, personal representatives, heirs and
legatees of the respective parties.

     

    15.2    Further
Acts.  Each party agrees to perform any further acts and execute and
deliver any documents which may be necessary to carry out the provisions of this
Agreement.

     

    15.3    Amendment.  This
Agreement may be amended at any time by the written agreement of the Corporation
and the Optionee.

     

    15.4    Syntax.  Throughout
this Agreement, whenever the context so requires, the singular shall include the
plural, and the masculine gender shall include the feminine and neuter
genders.  The headings and captions of the various Sections hereof are
for convenience only and they shall not limit, expand or otherwise affect the
construction or interpretation of this Agreement.

     

    15.5    Choice of
Law.  The parties hereby agree that this Agreement has been executed
and delivered in the State of Texas and shall be construed, enforced and
governed by the laws thereof.  This Agreement is in all respects
intended by each party hereto to be deemed and construed to have been jointly
prepared by the parties and the parties hereby expressly agree that any
uncertainty or ambiguity existing herein shall not be interpreted against either
of them.

     

    15.6    Severability.
In the event that any provision of this Agreement shall be held invalid or
unenforceable, such provision shall be severable from, and such invalidity or
unenforceability shall not be construed to have any effect on, the remaining
provisions of this Agreement.

     

    15.7    Notices.  Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number set forth on
the signature pages attached hereto prior to 3:30 p.m. (Houston time)
on  any day except Saturday, Sunday and any day which shall be a
federal legal holiday in the United States (“Business Day”), (b) the next
Business Day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number set forth on the signature pages
attached hereto on a day that is not a Business Day or later than 3:30 p.m.
(Houston time) on any Business Day, (c) the 2nd Business Day following the date
of mailing, if sent by U.S. nationally recognized overnight courier service, or
(d) upon actual receipt by the party to whom such notice is required to be
given.  The address for such notices and communications shall be as
set forth on the signature pages attached hereto.  All notices and
demands to Optionee or the Corporation may be given to them at the following
addresses:

     

    
      
        
        

      

      
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              If
      to Optionee:

            	
              H.
      C. Ferguson, III

              6266
      Burgoyne

              Houston,
      Texas 77057

            

    

        

    
      	
               
      

            	
              If
      to Corporation:

            	
              Magnum
      Hunter Resources Corporation

              777
      Post Oak Blvd.

              Suite
      910

              Houston,
      Texas 77056

            

    

    
    

       

    Such
parties may designate in writing from time to time such other place or places
that such notices and demands may be given.

     

    15.8    Entire
Agreement.  This Agreement, as governed by and interpreted in
accordance with the Plan, constitutes the entire agreement between the parties
hereto pertaining to the subject matter hereof, this Agreement supersedes all
prior and contemporaneous agreements and understandings of the parties, and
there are no warranties, representations or other agreements between the parties
in connection with the subject matter hereof except as set forth or referred to
herein.  No supplement, modification or waiver or termination of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby.  No waiver of any of the provisions of this Agreement shall
constitute a waiver of any other provision hereof (whether or not similar) nor
shall such waiver constitute a continuing waiver.

     

    15.9    Attorneys’
Fees.  In the event that any party to this Agreement institutes any
action or proceeding, including, but not limited to, litigation or arbitration,
to preserve, to protect or to enforce any right or benefit created by or granted
under this Agreement, the prevailing party in each respective such action or
proceeding shall be entitled, in addition to any and all other relief granted by
a court or other tribunal or body, as may be appropriate, to an award in such
action or proceeding of that sum of money which represents the attorneys’ fees
reasonably incurred by the prevailing party therein in filing or otherwise
instituting and in prosecuting or otherwise pursuing or defending such action or
proceeding, and, additionally, the attorneys’ fees reasonably incurred by such
prevailing party in negotiating any and all matters underlying such action or
proceeding and in preparation for instituting or defending such action or
proceeding.

     

    
      
        
        

      

      
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    IN
WITNESS WHEREOF, the parties have entered into this Agreement as of the date
first set forth above.

     

    
       

      
        	 	
                “CORPORATION”

                 

                MAGNUM
      HUNTER RESOURCES CORPORATION,

                a
      Delaware corporation

                 

                By: 
      /s/ Gary C.
      Evans                                                            

                Gary
      C. Evans, Chief Executive Officer

                

                 

                “OPTIONEE”

                 

                
                  /s/ H.
      C. Ferguson,
      III                                                             

                  H. C. Ferguson, III

                

              

      

       

       

       

      -6-magnum_8k-ex1005.htm

    
      
        

      

    

    EXHIBIT
10.5

        

    AMENDMENT
TO

    NON-STATUTORY
STOCK OPTION AGREEMENT

     

    This
Amendment to Non-Statutory Stock Option Agreement (this “Amendment”) is entered
into effective as of July 15, 2010 (the “Effective Date”), by and between Magnum
Hunter Resources Corporation, a Delaware corporation (the “Company”), and
Herschal C. Ferguson, III (“Optionee”).

     

    W
I T N E S S E T H:

     

    WHEREAS, the Company and
Optionee have heretofore entered into that certain Non-Statutory Stock Option
Agreement with an effective date of February 11, 2010 (the “Stock Option
Agreement”) pursuant to which Optionee was granted an option (the “Option”) to
purchase shares of the common stock of the Company, par value $.01 per share
(“Common Stock”), on the terms and conditions set forth in the Stock Option
Agreement and the Company’s 2006 Stock Incentive Plan, as amended;
and

     

    WHEREAS, the Stock Option
Agreement originally covered 300,000 shares at an exercise price of $2.25 per
share; and

     

    WHEREAS, the Company has
determined that the language regarding Vesting Event 2 was
incorrect;

     

    NOW, THEREFORE, in
consideration of the foregoing and the mutual promises contained herein, the
parties, intending to be legally bound hereby, agree as follows, effective as of
the Effective Date:

     

    1.    The Stock
Option Agreement is hereby amended by deleting Section 2 Vesting Event 2 of the
Stock Option Agreement and substituting the following therefor:

     

    (a)           “Vesting
Event 2 (covering 60,000 Options) shall occur on February 11, 2011 provided
that; the Optionee is employed by the Corporation and the Corporation achieves
100,000 BOE of monthly production by February 11, 2011.”

     

    2.    The Stock
Option Agreement is hereby amended by deleting Section 2 Vesting Event 3 of the
Stock Option Agreement and substituting the following therefor:

     

    (a)           “Vesting
Event 3 (covering 60,000 Options) shall occur at any time prior to February 11,
2011  provided that; the Optionee is employed by the Corporation and
that the Common Stock of the Corporation has traded at a daily VWAP of $4.50 or
more for 10 consecutive trading days.  The VWAP shall be that as found
in the market data provided by Bloomberg, LP.”

     

    3.    (a)    Optionee
represents and warrants to the Company that: (i) this Amendment and the terms of
this Amendment have been freely made and without duress after having consulted
with professionals of Optionee’s choice; (ii) as of the Effective Date, Optionee
is the lawful owner of, and has good title to, the Option; (iii) the Option is
free and clear of all liens, encumbrances, and adverse claims; (iv) Optionee has
not heretofore assigned, transferred, sold, delivered, mortgaged, pledged,
granted options or rights to purchase, or encumbered the Option; (v) Optionee
has the right, power, and authority to enter into this Amendment; and (vi) this
Amendment has been duly executed by, and constitutes a legal, valid, binding and
enforceable obligation of, Optionee.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (b)           Optionee
acknowledges and agrees that Optionee is not relying upon any written or oral
statement or representation of the Company, its affiliates, or any of their
respective officers, directors, shareholders, agents, attorneys, or successors,
or any failure of such individual or entity to disclose information, or any
written or oral statements or representations or failure to disclose information
by any representative or agent of such individual or entity.  Optionee
acknowledges and agrees that in deciding to enter into this Amendment, Optionee
is relying on his or her own judgment and the judgment of the professionals of
Optionee’s choice with whom Optionee has consulted.

     

    4.    As amended
hereby, the Stock Option Agreement is specifically ratified and
reaffirmed.

     

    IN WITNESS WHEREOF, the
Company has caused this Amendment to be duly executed by an officer thereunto
duly authorized, and Optionee has executed this Amendment, as of the 15th day
of July 2010, effective as of the Effective Date.

    
       

      
      

         

      
        	 	

                Magnum
      Hunter Resources Corporation

                 

                 

                By:  /s/ Gary C.
      Evans                                                       

                Name:  Gary C.
      Evans

                Title:       
      Chief Executive Officer

                

                 

                OPTIONEE

                

                /s/ Herschal
      C. Ferguson,
      II                                             

                Herschal
      C. Ferguson, II

              

      

       

       

       

      -2-

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