<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant / /
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/x/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
HARKEN ENERGY CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
HARKEN ENERGY CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/x/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
- ---------------
(1) Set forth the amount on which the filing fee is calculated and state how
it was determined.
<PAGE> 2
HARKEN ENERGY CORPORATION
2505 NORTH HIGHWAY 360, SUITE 800
GRAND PRAIRIE, TEXAS 75050
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 3, 1994
Notice is hereby given that the 1994 Annual Meeting of Stockholders
(the "Meeting") of Harken Energy Corporation, a Delaware corporation
("Harken"), will be held at the West Chase Hilton & Towers, 9999 Westheimer,
Houston, Texas 77042, on June 3, 1994, at 5:00 p.m., local time, for the
following purposes:
(1) to elect three Class "A" Directors of Harken to hold office in
accordance with Harken's Certificate of Incorporation until
the 1997 Annual Meeting of Stockholders and until their
respective successors shall be duly elected and qualified;
(2) to ratify the appointment of independent public accountants
for Harken for fiscal year 1994; and
(3) to transact such other business as may properly be brought
before the meeting or any adjournments or postponements
thereof.
The Board of Directors has fixed the close of business on April 20,
1994 as the date of record for determining the stockholders entitled to
notice of and to vote, either in person or by proxy, at the Meeting and any
adjournments or postponements thereof.
The Annual Report to Stockholders, a Proxy Statement containing
information relative to the matters to be acted upon at the Meeting and a form
of Proxy accompany this Notice.
You are cordially invited to attend the Meeting. However, whether
or not you plan to attend, you are urged to date, sign and promptly return your
proxy so that your shares may be voted in accordance with your wishes and in
order that the presence of a quorum may be assured. YOUR VOTE IS
IMPORTANT. The giving of such proxy does not affect your right to revoke it
later or vote your shares in person if you should attend the meeting.
By Order of the Board of Directors
Larry E. Cummings
Secretary
Grand Prairie, Texas
April 22, 1994
<PAGE> 3
HARKEN ENERGY CORPORATION
2505 NORTH HIGHWAY 360, SUITE 800
GRAND PRAIRIE, TEXAS 75050
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 3, 1994
SOLICITATION AND REVOCATION OF PROXY
The accompanying proxy (the "Proxy") is solicited by and on behalf of
the Board of Directors of Harken Energy Corporation, a Delaware corporation
("Harken"), in connection with the Annual Meeting of Stockholders (the
"Meeting"), which will be held at the West Chase Hilton & Towers, 9999
Westheimer, Houston, Texas 77042, on June 3, 1994, at 5:00 p.m., local time,
and at any adjournments or postponements thereof for the purposes set forth
in the accompanying notice.
Any stockholder giving a Proxy has the power to revoke the Proxy at
any time prior to its exercise by filing with the Secretary of Harken a
written notice of revocation or by duly executing a proxy bearing a later
date. A Proxy may also be revoked by any stockholder present at the Meeting
who expresses a desire to vote his or her shares in person. Subject to such
revocation, shares will be voted in accordance with the instructions on the
Proxy. As to the election of Directors, a stockholder may, by checking the
appropriate box on the Proxy: (i) vote for all Director nominees as a group;
(ii) withhold authority to vote for all Director nominees as a group; or (iii)
vote for all Director nominees as a group except those nominees identified by
the stockholder in the appropriate area on the Proxy. With respect to each
other proposal, a stockholder may, by checking the appropriate box on the
Proxy: (i) vote "FOR" the proposal; (ii) vote "AGAINST" the proposal; or (iii)
"ABSTAIN" from voting on the proposal. In the event no instructions are given,
the persons named in the accompanying Proxy will vote (i) FOR the election of
the Director nominees listed in this Proxy Statement and (ii) FOR the
ratification of the appointment of independent public accountants for Harken's
fiscal year 1994. As to any other business that may properly be brought
before the Meeting, the persons named in the accompanying Proxy will vote in
accordance with their best judgment.
This Proxy Statement and the accompanying Proxy were first mailed to
the stockholders on or about April 22, 1994. The solicitation of Proxies
will be primarily by mail, but may also be by telephone, telegraph or oral
communications by officers, regular employees or agents of Harken. The
cost of preparing, assembling and mailing the Proxy, this Proxy Statement and
the other materials enclosed herewith, and all clerical and other expenses of
proxy solicitation, will be borne by Harken. Harken also will request
brokerage houses and other custodians , nominees and fiduciaries to forward
soliciting materials to the beneficial owners of Harken's common stock, $.01
par value per share ("Common Stock"), held of record by such parties and will
reimburse such parties for their expenses in forwarding such materials.
1
<PAGE> 4
VOTING AT THE MEETING AND VOTING SECURITIES
The Board of Directors has fixed the close of business on April 20,
1994 as the Record Date (herein so called) for determining the holders of
Common Stock who will be entitled to notice of and to vote, either in
person or by proxy, at the Meeting. The Common Stock is currently Harken's
only outstanding class of voting stock. Each holder of Common Stock will be
entitled to cast one vote for each share of Common Stock registered in his or
her name on the books of Harken as of the Record Date. In the election of
Directors, each holder of Common Stock will be entitled to cumulate his or her
votes by voting the total number of shares of Common Stock held by such
stockholder multiplied by the number of Directors to be elected, as such
stockholder may see fit. Any holder of Common Stock who intends to cumulate
his or her votes is required to give written notice of such intention to the
Secretary of Harken on or before the day preceding the election at which such
holder intends to cumulate his or her votes. Notice may be given on the
Proxy. All holders of Common Stock may cumulate their votes if any holder
has given such written notice. One or more stockholders personally present
or represented by proxy and holding more than fifty percent (50%) of the
outstanding shares of Common Stock as of the Record Date will constitute a
quorum.
In accordance with the Certificate of Incorporation and the Bylaws of
Harken, the affirmative vote of a majority of the shares of Common Stock
entitled to vote and represented in person or by proxy at the Meeting will be
required for the election of each of the Director nominees, and for the
ratification of the appointment of independent public accountants for
Harken for fiscal year 1994. Abstentions will have the effect of a vote
against the ratification of the appointment of independent public accountants
for Harken for fiscal year 1994. Broker non-votes will have no effect on the
election of the nominees to the Board of Directors or the ratification of the
appointment of the independent public accountants for Harken for fiscal year
1994. On April 15, 1994, Harken had outstanding 59,482,853 shares of Common
Stock, excluding 5,983,655 treasury shares.
ANNUAL REPORT
The Annual Report to Stockholders for Harken's fiscal year ended
December 31 1993, which includes Harken's 10(k) for December 31, 1993, is
being furnished with this Proxy Statement to stockholders of record on April
20, 1994. The Annual Report does not constitute a part of the Proxy
solicitation materials.
2
<PAGE> 5
OWNERSHIP OF COMMON STOCK
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information regarding ownership of
the Common Stock as of April 15, 1994 by each person who is known by
Harken to own beneficially more than five percent (5%) of the outstanding
Common Stock. Unless otherwise indicated, such persons have sole voting
and investment power with respect to such shares and all suchs hares are
owned beneficially and of record by the person indicated.
<TABLE>
<CAPTION>
AMOUNT OF
NAME AND ADDRESS OF BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP OF CLASS
------------------- --------- --------
<S> <C> <C>
Aeneas Venture Corporation 9,085,723 (1) 15.27%
c/o Harvard Management Company, Inc.
600 Atlantic Ave., 26th Floor
Boston, Massachusetts 02210-2203
Abdullah Taha Bakhsh 6,935,364 (2) 11.66%
Bakhashab Building, 4th Floor
P.O. Box 459
Jeddah, Saudi Arabia
Donald W. Raymond 5,460,334 9.18%
1990 North California, Suite 620
Walnut Creek, California 94596
Quadrant Capital Corp. 5,018,806 (3) 8.44%
c/o Quadrant Management Co., Inc.
127 East 73rd Street
New York, New York 10021
Harvey V. Risien, Jr. 4,695,926 7.89%
Fairmount Resources Corporation
700 North St. Mary's Street, Suite 950
San Antonio, Texas 78205
</TABLE>
__________________________
(1) Includes 25,000 shares of Common Stock that may be acquired through
the exercise of options exercisable at $5.625 per share, which
options were transferred to Aeneas from Michael R. Eisenson, a
Director of Harken, effective March 1, 1991. Also includes 468,367
shares of Common Stock owned beneficially by the Harvard Master
Trust, 234,204 shares of Common Stock owned beneficially by the
Harvard Yenching Institute and 321,679 shares of Common Stock owned
beneficially by Phemus Corporation, all of which parties are
affiliates of Aeneas. Aeneas has no investment or voting power over
the shares owned by the Harvard Master Trust and the Harvard Yenching
Institute.
(2) These shares are owned of record by Traco International, NV. ("Traco")
and Atherstone Corporation N.V. ("Atherstone"). According to a
Schedule 13D filed with Harken, Traco is wholly-owned by Mr. Bakhsh,
and Atherstone is indirectly owned by Mr. Bakhsh. The basis for
certain of this information is Amendment 8 to the report on Schedule
13D filed by Abdullah Taha Bakhsh dated August 7, 1992.
(3) Includes 526,686 shares of Common Stock that may be acquired through
the exercise of certain stock options. The basis for certain of this
information is a Form 4 dated October 8, 1993 filed by Quadrant
Capital Corp., Alan G. Quasha and NAR Group Limited.
3
<PAGE> 6
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the number of
shares of Common Stock beneficially owned by each Director, each Director
nominee, Harken's Chief Executive Officer, each of Harken's four other most
highly compensated executive officers for 1993 and all of Harken's Directors
and executive officers as a group as of April 15, 1994.
<TABLE>
<CAPTION>
AMOUNT SHARES
OF BENEFICIAL SUBJECT TO PERCENT
NAME OWNERSHIP (1) OPTIONS (2) OF CLASS
---- ------------- ----------- --------
<S> <C> <C> <C>
Michael M. Ameen, Jr. 6,000 5,000 (3)
Larry E. Cummings 205,223 185,064 (3)
Michael R. Eisenson 0 (4) 0 0.00%
Mikel D. Faulkner (5) 744,579 641,242 1.20%
Bruce N. Huff 275,000 275,000 (3)
Edwin C. Kettenbrink, Jr. (5) 0 0 0.00%
Talat M. Othman 25,000 (6) 25,000 (3)
Donald W. Raymond 5,460,394 0 8.83%
Harvey V. Risien, Jr. 4,695,926 0 7.60%
Alan G. Quasha (5) 5,018,806 (7) 526,686 8.44%
Richard H. Schroeder 400,000 400,000 (3)
Stephen C. Voss 265,000 265,000 (3)
All Directors and Executive 17,095,928 2,322,992 27.66%
Officers as a Group (13 Persons)
</TABLE>
- -----------------------
(1) Includes shares that may be acquired through the exercise of certain
options.
(2) The shares of Common Stock covered by such options whether or not
such options are currently vested are also included in the column
entitled "Amount of Beneficial Ownership."
(3) Less than one percent (1%).
(4) Aeneas Venture Corporation ("Aeneas") and Phemus Corporation
("Phemus") are wholly-owned subsidiaries of the President and Fellows
of Harvard College and affiliates of Aeneas Group, Inc. ("Aeneas
Group"), which manages the private equity portfolio of the Harvard
endowment fund. Mr. Eisenson is President of Aeneas Group and a Vice
President and director of Aeneas and Phemus. Aeneas beneficially owns
8,061,473 shares (excluding shares beneficially owned by Phemus) and
Phemus beneficially owns 321,679 shares of Common Stock. See
"Ownership of Common Stock - Security Ownership of Certain Beneficial
Owners." As a member of the investment committee of Aeneas Group, Mr.
Eisenson participates in the investment decisions of Aeneas and
Phemus. Mr. Eisenson has neither sole investment nor sole voting
power over the shares of Common Stock owned by Aeneas and Phemus. Mr.
Eisenson disclaims beneficial ownership of the shares owned by Aeneas
and Phemus.
(5) Nominees for Class "A" Directors.
(6) Dearborn Financial, Inc., of which Mr. Othman is the President, is an
affiliate of Traco and Atherstone, significant record stockholders of
Harken. See "Ownership of Common Stock - Security Ownership of
Certain Beneficial Owners."
(7) Includes the shares in which Mr. Quasha shares beneficial ownership
with Quadrant Capital Corp., including 526,686 shares of Common Stock
that may be acquired through the exercise of certain stock options.
4
<PAGE> 7
PROPOSAL ONE: ELECTION OF DIRECTORS
The number of directors constituting the full Board of Directors of
Harken has been established as nine (9) in accordance with Harken's Bylaws.
The Certificate of Incorporation provides that the number of Directors be
divided into Classes A, B and C, with staggered terms of three (3) years each.
Accordingly, Class A Directors will be elected at the Meeting to hold office
until the 1997 Annual Meeting of Stockholders and until their respective
successors are duly elected and qualified. Class A currently consists of three
Directors: Mr. Mikel D. Faulkner, Mr. Alan G. Quasha and Mr. Edwin C.
Kettenbrink, Jr. Messrs. Faulkner, Quasha and Kettenbrink have been nominated
for re-election by the Board of Directors for the Class A positions on the
Board.
Effective as of October 26, 1993 Mr. George W. Bush resigned as a
Class B Director of the Company. In accordance with Harken's Bylaws and
Delaware law, the remaining members of the Board of Directors filled the
vacancy created by Mr. Bush's resignation by electing Mr. Michael M. Ameen, Jr.
as a Class B Director on February 11, 1994. The term of Class B Directors
will expire at the Annual Meeting of Stockholders in 1995. On March 11, 1994
the Board of Directors, also in accordance with Harken's Bylaws and Delaware
law, elected Mr. Richard H. Schroeder as President of Harken and as a Class C
Director. In doing so the Board was expanded from eight (8) members to nine
(9) members. The term of Class C Directors will expire in 1996.
Unless otherwise instructed, the persons named in the Proxy intend to
vote all Proxies FOR the election of the nominees of Harken's Board of
Directors, being Messrs. Faulkner, Quasha and Kettenbrink. If any of the
nominees listed on the Proxy should not continue to be available for election,
the persons named in the Proxy will vote for such other person as the Board of
Directors may recommend. The Board does not presently contemplate that any of
the nominees will not become available for election for any reason. All
nominees have indicated their willingness to serve if re-elected.
The following includes information regarding each Director of Harken,
as of April 15, 1993, and the current nominees for Directors of Harken.
<TABLE>
<CAPTION>
Director
Continuously Term
Name, Age and Business Experience Since Expires
- --------------------------------- ---------------- -------
<S> <C> <C>
MICHAEL M. AMEEN, JR. (Age - 70) - Director of Harken; from 1994 1995
1989 to present Mr. Ameen has served as a part time consultant
to Harken with regard to Middle Eastern exploration projects;
Independent Consultant on Middle East Affairs for the past
five years; Director of Anera (a charitable organization);
Director of Amideast (a charitable organization); Director
of The American Center for Oriental Research (ACOR) and
Director of Seibel - Brule Group, (an insurance company).
MICHAEL R. EISENSON (Age - 38) - Director of Harken; 1987 1995
Director of Cambridge NeuroScience, Inc., a biotechnology
company; Director of ImmunoGen, Inc., a biopharmaceutical
company; and a Director of Somatix Therapy Corporation, a
biopharmaceutical company; President of Aeneas Group, Inc.
a wholly-owned subsidiary of Harvard Management, Inc., from
1986 to present, which manages the private equity portfolio
of the Harvard University endowment fund. Consultant to
Boston Consulting Group, a business consulting company,
from 1981 to 1986.
</TABLE>
5
<PAGE> 8
<TABLE>
<S> <C> <C>
MIKEL D. FAULKNER (Age - 44) - Chairman of the Board of 1982 1994
Harken since February 1991; Director of Harken; CEO
of Harken since 1982, and President of Harken from 1982
until February 1993.
EDWIN. C. KETTENBRINK, JR. (Age - 49) - Director of Harken; 1993 1994
Founder and sole shareholder of Landmark Environmental,
Inc., an environmental consulting firm, since 1989;
Vice President of Harken and certain of its subsidiaries
from 1984 to 1989.
TALAT M. OTHMAN (Age - 57) - Director of Harken; Director 1987 1994
of Hartmarx Corporation; Director of Tejas Power Corp.;
Chairman and CEO of Dearborn Financial, Inc., an investment
company, from 1983 to present.
ALAN G. QUASHA (Age - 44) - Director of Harken; Chairman of 1983 1994
the Board of Directors of Harken from 1983 to February 1991;
Director of E-Z Serve Corporation ("E-Z Serve"); Director of
Tejas; Director of Quadrant Capital Corp.; Chairman of the
Board of Directors of the Horn & Hardart Company; Partner
in the law firm of Quasha Wessely & Schneider (New York, N.Y.)
from 1980 to September 1991; President of Quadrant Management,
Inc., a management consulting company.
DONALD W. RAYMOND (Age - 56) - Director of and consultant to 1993 1996
Harken from February 1993 to present; Chairman, CFO and Treasurer
of Chuska Resources Corporation from 1988 to February 1993;
Chairman of Ute Oil Company and Sireen Oil, Inc. from 1984 to
present.
HARVEY V. RISIEN, JR. (Age - 40) - Director of Harken from 1993 1996
February 1993 to present; President of Fairmount Resources,
Inc., from December 1993 to present; President of Harken
from March 1993 to December 1993; President and Director of
Chuska Resources Corporation from April 1988 until December
1993; President of Ute Oil Company from 1984 to 1988.
RICHARD H. SCHROEDER (Age - 49) - Director and President of 1994 1996
Harken from March 11, 1994 to present; President and owner
of RHS Management, a consulting firm, from November 1990 to
March 1994; President of Rosewood Resources, Inc. from
January 1983 to November 1990.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RE-ELECTION OF
MESSRS. FAULKNER, QUASHA AND KETTENBRINK TO THE BOARD OF DIRECTORS.
DIRECTORS' MEETINGS AND COMMITTEES
During 1993, the Board of Directors held two meetings, which included
one regularly scheduled meeting and
6
<PAGE> 9
one special meeting. The Board of Directors has standing Audit and
Compensation Committees, but does not have a Nominating Committee. During
1993, the Audit Committee, comprised initially of Messrs. Othman, and Bush and
following Mr. Bush's resignation, Messrs. Othman and Kettenbrink, held two
meetings and reviewed the financial statements of Harken and received reports
and other communications from Harken's independent auditors. The present
members of the Audit Committee are Messrs. Othman and Kettenbrink. During
1993, the Compensation Committee, comprised of Messrs. Quasha and Eisenson,
held one meeting and was responsible for selecting parties eligible for grants
of stock options, for making and setting terms for such grants and for setting
compensation for executive officers of Harken and its subsidiaries. The
only member of the Compensation Committee at the present time is Mr. Eisenson.
During 1993, the Board of directors appointed a Special Compensation Committee
consisting of Messrs. Eisenson and Raymond to consider and recommend to the
Board a proposal for Harken to reacquire or terminate all outstanding Purchase
Grants which had previously been issued under Harken's Non-Qualified Incentive
Stock Option Plan. (See "Certain Transactions - Purchase Grant Acquisition.").
Mr. Quasha did not serve on this Special Compensation Committee due to a
conflict of interest. Directors who were officers, employees or paid
consultants of Harken received no separate compensation for their service as
Directors.
During 1993, each member of the Board of Directors attended or acted
upon at least seventy-five percent (75%) of (i) the meetings of the Board of
Directors (held during the period during which he was a Director), and (ii) the
meetings of the committees on which he served (held during the periods that he
served on such committees).
COMPENSATION OF DIRECTORS
During 1993, each Director who was not also an officer, employee or
paid consultant of Harken received a director's fee for each meeting of the
Board of Directors or one of its committees which he attended in the amount of
$2,000. The aggregate amount paid to the Directors during 1993 pursuant to
such arrangement was $8,000. Directors who were also officers, employees or
paid consultants of Harken received no separate compensation for service as
Directors.
CERTAIN MATTERS INVOLVING DIRECTORS AND EXECUTIVE OFFICERS
Pursuant to the terms of a consulting agreement dated September 29,
1992, Mr. Raymond, a Director of Harken, serves as a full time consultant to
Harken and in such role advises and consults with management on various
matters. The agreement provided that for a period of two years beginning on
February 16, 1993 Mr. Raymond would receive $200,000 per year as compensation
for the consulting services rendered thereunder, be entitled to benefits under
Harken's group health, disability and life insurance for its employees, be
eligible to participate in Harken's 401 (k) Savings Plan and 125 Cafeteria Plan
and be nominated by Harken to its Board of Directors. Harken further provides
an office and certain office support for Mr. Raymond's use in Walnut Creek,
California. At the 1993 Annual Shareholders Meeting Mr. Raymond was elected
as a Class C Director which term expires in 1996. (See "Certain Transactions
- - Certain Matters Involving Officers and Directors").
As of September 29, 1992, Harken entered into an agreement with Mr.
Risien, which provided that for a period of two years beginning on February 16,
1993, Mr. Risien would receive $200,000 per year as compensation, hold a
position as an executive officer of Harken and be nominated by Harken to its
Board of Directors. This agreement was amended as of December 29, 1993 to
provide that for the remaining term of this agreement Mr. Risien would serve as
a consultant to Harken. In such capacity he will receive the same base
compensation as previously provided. In addition, this amendment provided
that Mr. Risien would be eligible to continue to participate in Harken's
employee medical insurance, disability insurance, life insurance, 401(k)
Savings Plan, and 125 Cafeteria Plan. Harken further provides reimbursement
for expenses relating to Mr. Risien's office and office support in San
Antonio, Texas. Mr. Risien was elected as a Class C Director at the 1993
Annual Shareholders Meeting which term expires in 1996. (See "Certain
Transactions - Certain Matters Involving Officers and Directors").
Mr. Kettenbrink provided occasional services to Harken during 1993
through his environmental consulting firm, Landmark Environmental, Inc.
("Landmark"). The total of such fees paid during 1993 to Mr Kettenbrink
and/or Landmark pursuant to such services rendered was $4,900. Harken has no
contract or agreement with Landmark to
7
<PAGE> 10
utilize its services in preference to any other firm rendering similar
services.
Mr. Ameen has served as a part-time consultant to Harken under a
consulting agreement since 1989. Mr. Ameen primarily consults with Harken
concerning Harken's operations in Bahrain and/ or other Middle East projects
and related matters. During 1993 Mr. Ameen was paid a total of $20,000 in
consulting fees pursuant to such arrangement. This agreement may be
terminated by either party by giving notice to the other prior to the annual
renewal date for such agreement being December 31st. Unless so terminated the
agreement will automatically renew for a subsequent one year term under the
prior year terms.
EXECUTIVE OFFICERS OF HARKEN
The officers of Harken are elected annually by the Board of Directors
at the first meeting of the Board of Directors held following each Annual
Meeting of Stockholders, or as soon thereafter as necessary and convenient, in
order to fill vacancies or newly-created offices. Each officer holds office
until the earlier of such time as his or her successor is duly elected and
qualified, his or her death or he or she resigns or is removed from office.
Any officer or agent elected or appointed by the Board of Directors, may be
removed by the Board of Directors whenever, in its judgment, the best interests
of Harken will be served thereby, but such removal will be without prejudice to
the contract rights, if any, of the person so removed.
The executive officers of Harken as of April 15, 1994, their ages and
positions held with Harken and their business experience for the past five
years are listed in alphabetical order below.
<TABLE>
<CAPTION>
Name Age Position Held With Harken
---- --- -------------------------
<S> <C> <C>
Larry E. Cummings 41 Vice President, Secretary and
General Counsel
Mikel D. Faulkner 44 Chairman of the Board of Directors
and Chief Executive Officer
Bruce N. Huff 43 Senior Vice President and Chief
Financial Officer
Richard H. Schroeder 49 President, Chief Operating Officer and Director
Stephen C. Voss 44 Senior Vice President
</TABLE>
Larry E. Cummings - employed by Harken for over five years; Vice
President, Secretary and General Counsel of Harken from 1983 to present;
previously served as Senior Legal Counsel to Harken from 1978 to 1983.
Mikel D. Faulkner - Chairman of the Board of Harken since February
1991; Director of Harken; CEO of Harken since 1982 and President of Harken
between 1982 and 1993.
Bruce N. Huff - employed by Harken in May 1990 as Senior Vice
President and Chief Financial Officer; from 1976 to May 1990 Mr Huff was an
officer of Davis, Kinard & Co., a public accounting firm in Abilene, Texas.
Richard H. Schroeder - employed by Harken as President and Director
since March 11, 1994; from November 1990 to March 1994 Mr. Schroeder was
President and owner of RHS Management, a management consulting firm; from
January 1983 to November 1990 Mr. Schroeder was President of Rosewood
Resources, Inc. a privately owned oil and gas exploration and production
company.
Stephen C. Voss - Senior Vice President from 1990 to present;
President of Harken International, Ltd., Harken Resource Management
Corporation, Burns Drilling Company, Inc. and Supreme Well Service Company from
1990 to
8
<PAGE> 11
present; from 1981 to 1990 Mr. Voss was president of Reliant Drilling Company,
a drilling company.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain information regarding the
compensation paid during each of the last three (3) years to Harken's Chief
Executive Officer and its other executive officers in salary and other
compensation during 1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
--------------------------------------------- ----------------------
Name and Fiscal Other Annual Securities Underlying All Other
Principal Position Year Salary Bonus Compensation Options/SAR's (#) Compensation
- ------------------ ------ ------ ----- ------------ ----------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Mikel D. Faulkner 1993 $165,688 $65,000(1) --- 91,686 $ 11,264 (3)
Chairman, 1992 $123,420 -- --- --- 8,728
and Chief Executive 1991 $161,137 -- --- --- --
Officer
Bruce N. Huff 1993 $139,145 8 --- --- $ 11,111 (4)
Sr. Vice President 1992 $111,675 $35,000(1) --- --- 33,333 (4)
and Chief Financial 1991 $122,235 $ 1,017 --- --- 33,333 (4)
Officer
Stephen C. Voss 1993 $ 99,961 $25,089(1) --- --- $ 20,942 (5)
Sr. Vice President 1992 $ 94,206 -- --- --- --
1991 $108,200 $ 1,230 --- --- --
Larry E. Cummings 1993 $101,062 $ 89 --- 42,845 --
Vice President 1992 $ 74,223 $25,000(1) --- --- --
Secretary and 1991 $111,999 $ 1,017 --- --- --
General Counsel
Harvey V. Risien, Jr. 1993 $188,750 -- --- --- $ 3,420 (7)
President (6) 1992 -- -- --- --- --
1991 -- -- --- --- --
Monte N. Swetnam 1993 $ 95,807 -- --- --- $ 52,500(10)
(Former) Exec.Vice 1992 $ 98,586 $92,000(9) --- --- --
President (8) 1991 $149,555 $46,000 --- --- --
</TABLE>
(1) This amount shown as Bonus represented a portion of certain salary
reductions which these executive officers had voluntarily agreed to
make as an accommodation to Harken during 1992. Certain executive
officers elected to receive this payment in December 1992 and others
elected to receive it in January 1993.
(2) These stock options were granted during 1993 in connection with a
transaction wherein Harken reacquired restricted shares of common
stock held by these executive officers and issued these options which
transaction was determined by the Special Compensation Committee to be
economically neutral to both Harken and the employee (see "Certain
Transactions-Purchase Grant Acquisition").
(3) This includes $6,497 for use of a company car, and $4,767 for a
portion of his 1992 salary which was deferred until 1993.
(4) These amounts shown are scheduled debt forgiveness of a loan made to
Mr. Huff at his employment related to moving expenses.
9
<PAGE> 12
(5) This amount includes $17,500 of debt forgiveness and $3,442 relating
to use of a company car.
(6) Mr. Risien resigned as President of the Company effective December
29, 1993. (See "Certain Matters Involving Directors and Executive
Officers" for a discussion of an amendment to Mr. Risien's
employment agreement effected in connection with such resignation).
(7) Car allowance.
(8) Mr. Swetnam resigned as Executive Vice President of the Company
effective May 15, 1993.
(9) Includes Mr. Swetnam's bonus for both 1992 and 1993 all paid in 1992.
(10) This amount was paid to Mr. Swetnam as a consulting fee in connection
with his severance from Harken following his resignation.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Number of % of Total
Securities Options/SAR's
Underlying Granted to
Options/SAR's Employees Exercise Basis Expiration Grant Date
Name Granted In Fiscal Year Price ($/sh) Date Present Value(1)
- ---- ---------------- -------------- -------------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Mikel D. Faulkner (2) 91,686 25.8647% $1.50 09/01/03 $74,266
Bruce N. Huff -- -- -- -- --
Stephen C. Voss -- -- -- -- --
Larry E. Cummings (2) 42,845 12.0866% $1.50 09/01/03 $34,704
Harvey V. Risien Jr. -- -- -- -- --
Monte N. Swetnam -- -- -- -- --
</TABLE>
- -------------------
(1) The Grant Date Present Value of these options was calculated
based upon the Black-Scholles valuation method which calculated such
present value as $.81 per option. This analysis took into
consideration the grant date market price of the common stock of
$1.063 per share, the 10 year life of such options vesting over four
years and a market interest rate factor of 6.20%.
(2) The Options granted during 1993 to these executive officers were in
connection with Harken's termination of outstanding Purchase Grants
held by these parties in a transaction the Special Compensation
Committee found to be economically neutral (see "Certain Transactions
- Purchase Grant Acquisition").
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money
Number of Options/SAR's at Option/SAR's
Shares/SAR's Fiscal Year End at Fiscal Year End (1)
Acquired on Value ---------------- ----------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ -------- ------------ ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mikel D. Faulkner --- --- 316,242 -- $28,070 --
Bruce N. Huff --- --- 50,000 -- -0- --
Stephen C. Voss --- --- 40,000 -- -0- --
Larry E. Cummings --- --- 110,064 -- $ 8,402 --
Harvey V. Risien Jr. --- --- 0 -- -0- --
Monte N. Swetnam --- --- 45,947 -- -0- --
</TABLE>
- --------------------
(1) The closing price for the common stock as reported to the American
Stock Exchange as of December 31, 1993 was $1.125. Value was
calculated on the basis of the difference between the option
exercise price and such closing price multiplied by the number of
shares of common stock underlying the option.
10
<PAGE> 13
CERTAIN TRANSACTIONS
The following table sets forth the largest amount of indebtedness owed
to Harken by each of its Directors and Executive Officers as well as from one
former subsidiary and one Limited Partnership of which a subsidiary of Harken
served as manager during a portion of 1993. The table further shows the
amount of total indebtedness owed to Harken by each of these parties as of
April 15, 1994:
<TABLE>
<CAPTION>
Name and Largest Amount
Relationship with of Indebtedness Total Current
Harken During 1993 Indebtedness
-------- ------------- -------------
<S> <C> <C>
Mikel D. Faulkner $1,117,937(1) $520,000(2)
Executive Officer, Director
Bruce N. Huff $ 11,111(3) $ 0
Executive Officer
Stephen C. Voss $ 20,942 $ 0
Executive Officer
Larry E. Cummings $ 277,050(4) $ 6,000
Executive Officer
Harvey V. Risien, Jr. $ 19,980 $ 0
Former Executive Officer,
Director
Monte N. Swetnam $ 129,600(5) $ 0
Former Executive Officer
Alan G. Quasha $ 597,937(4) $ 0
Director
E-Z Serve Corporation $4,160,207(6) $870,000
Former Subsidiary
Harken Anadarko Partners, L.P. $ 404,000 $163,000(7)
Former managed Limited
Partnership
</TABLE>
-------------------------
(1) This balance includes $597,937 principal amount due to Harken under
certain non-recourse promissory notes which were given to Harken by
Mr. Faulkner in connection with the prior exercise of stock options
and purchase of restricted shares of Common Stock. These notes were
extinguished in full in connection with a transaction wherein Harken
reacquired these restricted shares of Common Stock and issued new
stock options in a transaction the Special Compensation Committee
found to be economically neutral (see "Certain Transactions - Purchase
Grant Acquisition").
(2) Represents a non-recourse note in the amount of $520,00 bearing
interest at the Broker Loan Rate plus 1/2% which is due October 2,
1999. The note is secured by vested options to purchase 266,790
shares of Harken's common stock at $1.00 per share under the Harken's
Incentive Non-Qualified Stock Option Plan. Subsequent to December
31, 1993, an agreement was reached with Mr. Faulkner whereby the
note, together with accrued interest, is scheduled to be forgiven
equally over three installments dated April 1994, July 1995 and
December
11
<PAGE> 14
1996, with each installment of such forgiveness being contingent
upon the officer's continued employment through the date of each such
installment. In addition the expiration date of the options held as
security for such note was extended until March 11, 2001.
(3) Represents the remaining balance of a loan made to Mr. Huff for
moving expenses related to his employment with Harken in 1990. This
remaining balance was forgiven during 1993.
(4) These balances reflect the principal amounts due to Harken from these
parties under certain non-recourse promissory notes which were given
by such parties to Harken in connection with their prior exercise
of stock options and purchase of restricted shares of Common Stock.
These notes were extinguished in full in connection with a transaction
wherein Harken reacquired these restricted shares of Common Stock and
issued new stock options in a transaction the Special Compensation
Committee found to be economically neutral (see "Certain Transactions-
Purchase Grant Acquisition").
(5) This balance represented the principal amount due to Harken from Mr.
Swetnam under certain non-recourse promissory notes which were given
by him to Harken in connection with his prior exercise of stock
options and purchase of restricted shares of common stock. These
notes were terminated and the shares of Common Stock held as security
thereunder transferred to Harken's treasury upon Mr. Swetnam's
resignation.
(6) Prior to April 30, 1991, E-Z Serve was a subsidiary of Harken. Mr.
Quasha is a director of Harken and E-Z Serve. Additionally, Mr.
Quasha also serves as a director of Quadrant Capital Corp., which has
a significant beneficial ownership in each of Harken and E-Z Serve,
and Mr. Eisenson, a Director of Harken, serves as a director and
officer of Aeneas Venture Corporation, which has a significant
beneficial ownership interest in each of Harken and E-Z Serve. As
part of a restructuring by E-Z Serve, Harken tendered and released to
E-Z Serve a 12% secured subordinated debenture in the principal
amount of $3,136,000 issued by E-Z Serve together with accrued
interest thereon of $154,207, along with other consideration in
exchange for 12,830 additional shares of E-Z Serve's Series C
Preferred Stock along with other benefits (see "Certain Transactions -
E-Z Serve Restructuring").
(7) Harken Anadarko Partners, L.P. ("HAP") was during 1993 an affiliate
of Aeneas Venture Corporation , a major shareholder of Harken. Mr.
Eisenson, a Director of Harken, is a director and officer of Aeneas
Venture Corporation. (See "Ownership of Common Stock - Security
Ownership of Certain Beneficial Owners"). Until May 1993 a
subsidiary of Harken acted as the manager of HAP. The amounts of
indebtedness shown represents net remaining activity during 1993
between Harken and HAP.
12
<PAGE> 15
Purchase Grant Acquisition. The Board of Directors at its regular
meeting held on April 7, 1993 determined that it would be in Harken's best
interest to effect a plan to reacquire and/or cancel all of the outstanding
Purchase Grant Shares which had previously been issued. Purchase Grant Shares
had previously been issued under Harken's Incentive Non-Qualified Stock Option
Plan (the "Non-Qualified Plan").
In the years 1986, 1988 and 1989, certain of the optionees under the
Non-Qualified Plan were given the election upon being granted options to have
their options made immediately exercisable on condition they immediately
exercised such options and purchased the shares. The Board of Directors
determined in making such grants that, as a result of the restricted nature of
the shares and the lack of any rights on the part of the optionee to cause
such shares to be registered, a fair and reasonable exercise price per share
would be 60% of the closing price for Harken's publicly traded shares on the
date of such grant. These individuals were further given the opportunity to
borrow the funds from Harken to exercise such options and purchase such shares.
In that event, the optionee gave a non-recourse promissory note bearing
interest at 5% per annum to Harken and Harken retained the shares as
collateral. These notes were due eight years from making or upon termination
of such optionee's employment with Harken. In 1986, 1988, and 1989
certain parties, including certain officers and directors, elected to
purchase Common Stock under these terms (which shares are referred to as the
"Purchase Grants"). Upon maturity of such notes given , if not repaid by
the maker, Harken could look only to the shares of Common Stock held as
security for satisfaction of such indebtedness.
The Board of Directors determined that it would be to Harken's
benefit to terminate all outstanding Purchase Grants and the associated related
party debt. A Special Compensation Committee was established by the Board
consisting of Mr. Eisenson and Mr. Raymond, both of whom were disinterested
Board members with regard to such Purchase Grants. This Special Committee
was authorized and directed by the Board to implement a plan and means to
terminate these Purchase Grants on an economically neutral basis such that
neither the individual holding such Purchase Grants nor Harken would realize
an immediate benefit or loss from the transaction implemented.
The Special Committee then engaged an independent consulting firm to
review the Purchase Grants and to independently determine a value for such
Purchase Grants as well as to make recommendations to the Special Committee
with regard thereto.
The consulting firm made its report to the Special Committee on April
28, 1993 and responded with a supplemental report concerning additional
information requested by the Committee on July 1,1993. In its report,
the consulting firm provided a valuation of each separate Purchase Grant
which was outstanding to any officer, employee or director of Harken. The
consulting firm also established a valuation of new stock options that could be
issued to each individual upon surrender of his Purchase Grants, which new
stock options would be approximately equal in present value, as determined by
such consulting firm through a Black-Scholles analysis, to the Purchase Grants
being surrendered.
The Special Committee subsequently approved and adopted the plan which
was presented to each holder of Purchase Grants on August 27, 1993 under
which each holder of Purchase Grants surrendered them all to Harken and the
associated note(s) would be terminated and such surrendering party would be
granted certain new stock options which had been determined by the consulting
firm to have a present value equal to the Purchase Grants being surrendered.
These new stock options were issued under the Non-Qualified Plan,
were immediately vested on issuance, would expire in ten years as provided in
the Non-Qualified Plan and were issued at an exercise price of $1.50 per
share, which constituted a premium over the then current market price for
Harken's common stock.
Subsequently, all individuals then holding Purchase Grants
surrendered all of their Purchase Grant shares to Harken. As a result Harken
reacquired 704,000 common shares into treasury and issued 274,483 new stock
options. (see "Compensation of Executive Officers").
The following table sets out the terms of the Purchase Grants and
related notes which were terminated by each Executive Officer and/or Director
of Harken:
13
<PAGE> 16
<TABLE>
<CAPTION>
Principal Amount
Name and Relationship Purchase Grant Purchase Price of Plus Accrued Interest Maturity Date
with Harken Shares Purchase Grant Shares of Promissory Note(s) of Promissory Note
- ----------- ------ --------------------- --------------------- ------------------
<S> <C> <C> <C> <C>
Mikel D. Faulkner 60,000 $1.20 $ 93,900 December, 1994
Executive Officer, 75,000 $2.5125 $233,188 March, 1996
Director 100,000 $3.375 $405,000 January, 1997
Alan G. Quasha 60,000 $1.20 $ 93,900 December, 1994
Director 75,000 $2.5125 $233,188 March, 1996
100,000 $3.375 $405,000 January, 1997
Larry E. Cummings 35,000 $1.20 $ 54,775 December, 1994
Executive Officer 24,000 $2.5125 $ 74,621 March, 1996
50,000 $3.375 $202,499 January, 1997
</TABLE>
E-Z Serve Restructuring. Harken held a 12% secured subordinated
debenture in the principal amount of $3,136,000, from E-Z Serve Corporation
("E-Z Serve"), a former subsidiary of Harken, which included $1,336,000 which
was issued by E-Z Serve in 1991 in exchange for 531,824 shares of Harken Common
Stock and was reflected as a reduction to stockholders' equity in Harken's
balance sheet. In April 1993, Harken agreed to enter into an exchange which E-Z
Serve had proposed in connection with an overall E-Z Serve restructuring. Under
this restructuring, which was consummated on April 21, 1993, E-Z Serve entered
into various agreements with its existing bank, a new bank, its major
stockholders including affiliates of Quadrant Capital Corp. and Aeneas Venture
Corporation, both major shareholders of Harken (see "Ownership of Common Stock -
Security Ownership of Certain Beneficial Owners"), as well as certain agreements
with Harken. Under the exchange which was made between E-Z Serve and Harken,
Harken tendered and released to E-Z Serve the 12% secured subordinated debenture
of $3,136,000 plus accrued interest receivable from E-Z Serve. Harken also
waived certain antidilution provisions of the E-Z Serve Series C Preferred Stock
held by Harken and made a capital contribution to E-Z Serve for $336,000 in
cash. In exchange for the above matters, Harken received a full and complete
release of Harken's guarantee previously given to E-Z Serve's bank for up to
$5,000,000 of a portion of E-Z Serve's bank debt. In addition, Harken
received 12,830 additional shares of E-Z Serve's Series C Preferred Stock and
received an agreement from E-Z Serve which would have allowed Harken to assist
E-Z Serve in identifying purchasers for the shares of Harken Common Stock which
were held by E-Z Serve and under which E-Z Serve would pay to Harken a fee to
be negotiated upon the sale of any such shares to such identified parties. All
of these shares of Harken Common Stock were subsequently sold by E-Z Serve under
an effective registration statement and did not require Harken's assistance nor
did Harken earn any fee in connection therewith.
Acquisition of Chuska Resources Corporation. Effective February 15,
1993, Harken consummated a merger between a wholly- owned subsidiary and Chuska
Resources Corporation ("Chuska"), a publicly held corporation, pursuant to which
Chuska became a wholly-owned subsidiary of Harken. In exchange for all of the
outstanding common stock of Chuska, Harken issued 14,210,357 shares of Harken
Common Stock. In connection with the merger, Harken filed a registration
statement, which became effective January 15, 1993, with the Securities and
Exchange Commission for the shares of Harken Common Stock issued through this
transaction. Mr. Raymond and Mr. Risien, who were each former executive
officers, directors and major shareholders of Chuska, agreed to exchange their
Chuska shares on the same terms as were offered to all other Chuska
shareholders. Mr. Raymond thereby initially acquired 5,998,641 shares of Harken
Common Stock and Mr. Risien thereby initially acquired 5,999,525 shares of
Harken Common Stock. In connection with such transaction Harken also entered
into certain consulting and/or employment agreements with each of Mr.
Raymond and Mr. Risien, respectively. ( See "Certain Transactions - Certain
Matters Involving Directors and Executive Officers").
Sale of HAP. On December 17, 1992, Harken, through its subsidiary
Harken Exploration Company
14
<PAGE> 17
("HEXCO"), entered into a Purchase and Sale Agreement (the "HAP Agreement"),
pursuant to which HEXCO sold its 12% general partner's interest in Harken
Anadarko Partners, L.P. ("HAP") to Aeneas Energy Corporation ("AEC"), an
affiliate of Aeneas Venture Corporation, on December 30, 1992. Aeneas Venture
Corporation is a major shareholder of Harken. (See "Ownership of Common Stock
- - Security Ownership of Certain Beneficial Owners").
Under the terms of the HAP Agreement, Harken continued to manage the
oil and gas property interests of HAP and operate certain of these
partnership properties. Harken was paid by HAP $50,000 per month to manage
the partnership interest in such properties in addition to the fees it received
for serving as operator of the properties pursuant to applicable joint
operating agreements. During the second quarter of 1993, the partnership
sold its interests in all oil and gas properties operated by Harken and Harken
ceased to manage the partnership effective May 1, 1993.
Certain Matters Involving Directors and Executive Officers. Mr.
George W. Bush resigned from Harken's Board of Directors effective October 26,
1993 and terminated the Consulting Agreement under which he had served as a
consultant to Harken since April 1987.
Pursuant to the terms of a consulting agreement dated September 29,
1992, Mr. Raymond, a Director of Harken, serves as full time consultant to
Harken and in such role advises and consults with management on various
matters. The agreement provided that for a period of two years beginning on
February 16, 1993 Mr. Raymond would receive $200,000 per year as compensation
for the consulting services rendered thereunder, be entitled to benefits
under Harken's group health, disability and life insurance as provided for its
employees, be eligible to participate in Harken's 401(k) and 125 Cafeteria
Plans and be nominated by Harken to its Board of Directors. Harken further
provides an office and certain office support for Mr. Raymond's use in Walnut
Creek, California. On February 1, 1994, Mr. Raymond agreed as an
accommodation to Harken to reduce the annual amount of this compensation and
extend the term of this contract accordingly.
As of September 29, 1992, Harken entered into an agreement with Mr.
Risien, which provided that for a period of two years beginning on February
16, 1993, Mr Risien would receive $200,000 per year as compensation, hold a
position as an executive officer of Harken and be nominated by Harken to its
Board of Directors. Upon Mr. Risien's resignation as an executive officer in
December 1993 this contract was amended to provide for Mr. Risien to serve as a
consultant instead of an executive officer and to be entitled to continue
under Harken's group health, disability and life insurance as provided for its
employees as well as participate in Harken's 401(k) and 125 Cafeteria Plans.
Harken further provides reimbursement for expenses relating to Mr. Risien's
office and office support in San Antonio, Texas.
General. All of the foregoing transactions were entered into after
arms-length negotiations. Directors of Harken who had a direct or indirect
interest in any such transaction other than as a director of Harken did not
participate in, and were not consulted in connection with, the meetings or
deliberations of the Board of Directors approving such transactions.
15
<PAGE> 18
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
Messrs. Quasha and Eisenson were during 1993, and have been since the
beginning of fiscal 1992, members of the Compensation Committee of Harken's
Board of Directors. Mr. Quasha was an executive officer of Harken prior to
1991, and was indebted to Harken during 1993 in the amount of $597,937,
which indebtedness was incurred in connection with his exercise of stock
options for Purchase Grants and was evidenced by promissory notes which bear
interest at 5% per annum and are due eight years after their making (See
"Certain Transactions - Indebtedness" and "Certain Transactions - Purchase
Grant Acquisitions"). Additionally, Mr. Quasha currently is, and Mr. Eisenson
was, a director of each of E-Z Serve Corporation ("E-Z Serve") and Tejas Power
Corporation ("Tejas"), former subsidiaries of Harken. Mr. Quasha also serves
as a director of Quadrant Capital Corp., which has a significant beneficial
ownership interest in each of Harken, E-Z Serve and Tejas, and Mr.
Eisenson serves as a director and officer of Aeneas Venture Corporation, which
has a significant beneficial ownership interest in each of Harken, E-Z Serve
and Tejas. Harken has entered into several significant transactions with E-Z
Serve and Aeneas Venture Corporation since the beginning of fiscal 1993. (See
"Certain Transactions - E-Z Serve Restructuring" and "Certain Transactions -
Sale of HAP"). Harken disclaims being an affiliate of either E-Z Serve or
Tejas.
Additionally, during the 1993 fiscal year, the Compensation Committee
was supplemented by the Special Compensation Committee which had been
established by the Board of Directors to consider and effect a termination of
the previously issued Purchase Grants. The Special Compensation Committee
consisted of Messrs. Eisenson and Raymond. Mr. Raymond, formerly an executive
officer, director and major shareholder of Chuska Resources Corporation,
acquired 5,998,641 shares of Harken Common Stock in connection with Harken's
acquisition of Chuska. In addition, in connection with such acquisition, Mr.
Raymond and Harken entered into a consulting agreement which provided that for
a period of two years beginning on February 16, 1993, Mr. Raymond would receive
$200,000 per year as compensation for the consulting services rendered
thereunder, be entitled to benefits under Harken's group health, disability and
life insurance as provided for its employees, be eligible to participate in
Harken's 401(k) and 125 Cafeteria Plans and be nominated by Harken to its Board
of Directors. On February 1, 1994, Mr. Raymond agreed as an accommodation to
Harken to reduce the annual amount of this compensation and extend the term of
this contract accordingly. (See "Certain Transactions").
16
<PAGE> 19
PERFORMANCE OF THE COMMON STOCK
The graph below compares the cumulative total return of Harken's
Common Stock to the S&P 500 Index and the Value Line Petroleum Producing
Companies Index.
(CHART)
COMPARISON OF CUMULATIVE SHAREHOLDER RETURN 1988 - 1993
<TABLE>
<CAPTION>
1988 1989 1990 1991 1922 1993
---- ---- ---- ---- ---- ----
Dollars
<S> <C> <C> <C> <C> <C> <C>
Harken Energy Corp. 100 87 22 89 57 20
S&P 500 100 132 127 166 179 197
Value Line Petroleum Producing Companies 100 140 114 103 108 119
=== === === === === ===
</TABLE>
Data Source: S&P Compustat Services
- -------------------------
(1) In 1990, through a rights offering to its stockholders, Harken
disposed of its gasoline retail and wholesale distribution subsidiary (E-Z
Serve Corporation) and its natural gas gathering, transmission and storage
subsidiary (Tejas Power Corporation).
The closing sale price of Harken's Common Stock as reported by the
American Stock Exchange on April 15, 1994 was $1.875 per share.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires Harken's Directors and executive officers, and
persons who own more than ten percent of a registered class of Harken's equity
securities, to file with the Securities and Exchange Commission (the "SEC")
initial reports of ownership and reports of changes in ownership of Common
Stock and other equity securities of Harken. Directors, executive officers
and greater than ten-percent stockholders are required by SEC regulations to
furnish Harken with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms and written
representations from certain reporting persons, Harken believes that all
filing requirements applicable to its Directors, executive officers and
persons who own more than 10% of a registered class of Harken's equity
securities have been complied with during 1993.
PROPOSAL TWO: INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for Harken have been Arthur
Andersen & Co. since fiscal year 1979. The
17
<PAGE> 20
Audit Committee has recommended to the Board of Directors that Arthur Andersen
& Co. be nominated as independent public accountants for fiscal year 1994, and
the Board of Directors approved the recommendation.
Unless otherwise specified, shares represented by Proxies will be
voted FOR ratification of the appointment of Arthur Andersen & Co. as
independent public accountants for fiscal year 1994. A representative of
Arthur Andersen & Co. is expected to attend the Meeting with the opportunity
to make a statement if such representative desires to do so and to be available
to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
OTHER BUSINESS
Management knows of no other business that will be presented for
consideration at the Meeting, but should any other matters be brought before
the Meeting, it is intended that the persons named in the accompanying Proxy
will vote such Proxy at their discretion.
STOCKHOLDER PROPOSALS FOR 1994 ANNUAL MEETING
Any stockholder desiring to present a proposal to the stockholders at
the 1995 Annual Meeting of Stockholders, which currently is expected to be
scheduled in June, 1995, must transmit such proposal to Harken so that it is
received by Harken at its principal executive offices to the attention of the
Corporate Secretary on or before December 23, 1994. All such proposals should
be in compliance with applicable Securities and Exchange Commission
regulations.
By Order of the Board of Directors
Larry E. Cummings,
Secretary
Grand Prairie, Texas
April 22, 1994
18
<PAGE> 21
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
The Compensation Committee is charged with reviewing and making
recommendations to the Board of Directors regarding cash compensation, granting
of stock options and other compensation to be paid to Harken's executive
officers. During the 1993 fiscal year the Compensation Committee was
supplemented by the Special Compensation Committee which had been established
by the Board of Directors to consider and effect a termination of the
previously issued Purchase Grants (See "Certain Transactions - Purchase Grant
Acquisition").
In establishing annual compensation for executive officers, the
Compensation Committee takes into consideration many factors in making a
determination of aggregate compensation. Such factors during 1993
included; 1) the financial results of Harken during the prior year; 2) the
performance of Harken's stock in the public market; 3) prior compensation paid
to such executives over the past five years; 4) compensation of executive
officers employed by companies comparable to Harken; 5) the achievements of
management in completing significant projects during the year; and 6)
management's dedication and commitment to the support of Harken.
The Committee has established a policy of aligning management's
benefits and incentives with those of the stockholders of Harken. In setting
compensation the Committee utilizes its subjective judgment based upon these
factors referenced above and does not apply a formula and/or assign a weight to
each factor considered when establishing compensation levels.
The compensation paid in 1993 to Harken's Chief Executive Officer, Mr.
Faulkner, included annual salary, use of company car, payment for unused
vacation days and options granted in connection with the termination of the
previously issued Purchase Grants, which options the Committee found to be of a
present value equal to the Purchase Grants held by Mr. Faulkner which were
terminated (see "Certain Transactions - Purchase Grant Acquisition" for a
discussion of this transaction). Mr. Faulkner had previously voluntarily
reduced his salary during 1992 as an accommodation to Harken. Effective
January 1, 1993, his salary was increased back to $148,000 which was the level
prior to the voluntary reduction.
The Committee considered in making its decisions on compensation, the
relationship between such compensation and corporate performance in all areas
of its operations. The Committee used its subjective judgment in weighing
these considerations along with the others referenced above.
During this past year, the Committee considered the granting of stock
options to members of Executive Management. After discussion and consultation
with the Board it was determined not to issue new stock options to executive
management as compensation during 1993 with the exception of these options
which were granted by the Special Compensation Committee in connection with
Harken's termination of the outstanding Purchase Grants. (See "Certain
Transactions - Purchase Grant Acquisition").
All discussions by the Compensation Committee relating to the
compensation of Harken's executive officers are customarily reviewed by the
full Board of Directors, except for decisions about awards under certain of
Harken's Stock Option Plans, which must be made solely by the Compensation
Committee to satisfy Exchange Act Rule 16b-3.
By: Michael R. Eisenson
Alan G. Quasha
Donald W. Raymond
19
<PAGE> 22
X PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED. WHERE NO
DIRECTION IS GIVEN, THE SHARES WILL BE VOTED "FOR" MATTERS (1) AND (2).
FOR WITHHELD
1. Election of Three ( ) ( )
Class A Directors
(see reverse side)
FOR AGAINST ABSTAIN
2. Ratification of the appointment of ( ) ( ) ( )
Arthur Andersen & Co. as independent
public accountants for Harken for
fiscal 1994.
3. In the discretion of the proxies on any ( ) ( ) ( )
other matters as may properly come
before the meeting or any adjournment(s)
thereof.
( ) Please mark this box if you
will personally be attend-
ing the meeting.
( ) Change of Address
SIGNATURE(S)______________________________ DATE_________________
SIGNATURE(S)______________________________ DATE_________________
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
PROXY
HARKEN ENERGY CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 3, 1994
The undersigned hereby (1) acknowledges receipt of the Notice of Annual
Meeting of Stockholders of Harken Energy Corporation ("Harken") to be held June
3, 1994, and (2) constitutes and appoints Bruce N. Huff and Larry E. Cummings,
and each of them, attorneys and proxies of the undersigned, with full power of
substitution to each, for and in the name, place, and stead of the undersigned,
to vote, and to act with respect to, all of the shares of Common Stock of
Harken standing in the name of the undersigned or with respect to which the
undersigned is entitled to vote and act at that meeting and at any meetings to
which that meeting is adjourned, as follows:
(change of address)
Election of Three Class "A" directors of _________________________________
Harken, to hold office in accordance
with Harken's Certificate of Incorporation _________________________________
and Bylaws until the 1997 Annual Meeting
of Stockholders: _________________________________
Mikel D. Faulkner, Alan G. Quasha and _________________________________
Edwin C. Kettenbrink, Jr. (If you have written in the above
space, please mark the
corresponding box on the reverse
side of this card.)
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES
(SEE REVERSE SIDE), BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXY COMMITTEE
CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
SEE REVERSE
SIDE
