<PAGE> 1
As filed with the Securities and Exchange Commission on May, 11, 1995
Registration No. 33-_________
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
____________________
HARKEN ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
____________________
DELAWARE 95-2841597
(State or other jurisdiction of (I.R.S. employer identification number)
incorporation or organization)
HARKEN ENERGY CORPORATION
5605 NORTH MACARTHUR BLVD., SUITE 400
IRVING, TEXAS 75038
(214) 753-6900
(Address, including zip code, and telephone number,
including area code, of registrant's
principal executive offices)
______________________________
<TABLE>
<S> <C>
copy to:
LARRY E. CUMMINGS HAYNES AND BOONE, L.L.P.
VICE PRESIDENT, SECRETARY 1300 BURNETT PLAZA
AND GENERAL COUNSEL 801 CHERRY STREET
HARKEN ENERGY CORPORATION FORT WORTH, TEXAS 76102
5605 NORTH MACARTHUR BLVD., SUITE 400 ATTN: WILLIAM D. GREENHILL
IRVING, TEXAS 75038 (817) 347-6600
(214) 753-6900
</TABLE>
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
________________________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement.
________________________________
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box: [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box: [X]
<TABLE>
<CAPTION>
=============================================================================================================================
Title of each class of Amount to be Proposed maximum Proposed maximum Amount of
securities to be registered registered offering price per aggregate offering registration fee
unit(1) price(1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $0.01 1,200,000 $1.62 $1,944,000 $670.50
per share
=============================================================================================================================
</TABLE>
___________
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) based on the average of the high and low prices
reported on the American Stock Exchange on May 9, 1995.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE> 2
CROSS REFERENCE SHEET
BETWEEN ITEMS OF FORM S-3 AND THE PROSPECTUS
<TABLE>
<CAPTION>
Item
No. Prospectus Caption or Page
---- --------------------------
<S> <C> <C>
1 Forepart of the Registration Statement Facing Page; Cross-Reference Sheet;
and Outside Front Cover Page of Outside Front Cover Page of Prospectus
Prospectus
2 Inside Front and Outside Back Cover Pages Inside Front and Outside Back Cover
of Prospectus Pages of Prospectus
3 Summary Information, Risk Factors and Outside Front Cover Page of Prospectus;
Ratio of Earnings to Fixed Charges Investment Considerations
4 Use of Proceeds Use of Proceeds
5 Determination of Offering Price *
6 Dilution *
7 Selling Security Holders Selling Stockholders
8 Plan of Distribution Plan of Distribution
9 Description of Securities to be *
Registered
10 Interests of Named Experts and Counsel *
11 Material Changes *
12 Incorporation of Certain Information by Inside Front Cover Page of Prospectus
Reference
13 Disclosure of Commission Position on *
Indemnification for Securities Act
Liabilities
</TABLE>
- -----------------
* Not Applicable
<PAGE> 3
***************************************************************************
* *
* Information contained herein is subject to completion or amendment. A *
* registration statement relating to these securities has been filed *
* with the Securities and Exchange Commission. These securities may not *
* be sold nor may offers to buy be accepted prior to the time the *
* registration statement becomes effective. This prospectus shall not *
* constitute an offer to sell or the solicitation of an offer to buy *
* nor shall there be any sale of these securities in any State in which *
* such offer, solicitation or sale would be unlawful prior to *
* registration or qualification under the securities laws of any such *
* State. *
* *
***************************************************************************
SUBJECT TO COMPLETION, DATED MAY 11, 1995
PROSPECTUS
1,200,000 Shares
HARKEN ENERGY CORPORATION
Common Stock
(par value $0.01 per share)
____________________
The 1,200,000 shares ("Shares") of common stock, par value $0.01 per
share ("Common Stock"), of Harken Energy Corporation, a Delaware corporation
("Harken"), offered hereby are being sold by the holder thereof (the "Selling
Stockholder"). See "SELLING STOCKHOLDER." Harken will not receive any part of
the proceeds from the sale of the Shares by the Selling Stockholder.
The Selling Stockholder may sell the Shares from time to time directly
or indirectly, through agents designated from time to time, in one or more open
market transactions, including block trades, on the American Stock Exchange, in
negotiated transactions or in a combination of any such methods of sale or
through dealers or underwriters also to be designated, on terms to be
determined at the time of sale. To the extent required, the specific Shares to
be sold, the name of the Selling Stockholder, purchase price, public offering
price, the name of any such agent, dealer or underwriter, and any applicable
commission or discount with respect to a particular offer will be set forth in
an accompanying prospectus supplement. The aggregate proceeds to the Selling
Stockholder from sales of the Shares will be the purchase price of the Shares
sold less the aggregate agents' commissions and underwriters' discounts, if
any, and other expenses of issuance and distribution. All of the registration
expenses of this offering will be paid for by Harken. See "PLAN OF
DISTRIBUTION."
The Selling Stockholder and any broker-dealers, agents or underwriters
that participate with the Selling Stockholder in the distribution of any of the
Shares may be deemed to be "underwriters" within the meaning of the Securities
Act of 1933, as amended (the "Securities Act"), and any commission received by
them and any profit on the resale of the Shares purchased by them may be deemed
to be underwriting commissions or discounts under the Securities Act. See
"PLAN OF DISTRIBUTION" for indemnification arrangements.
The Common Stock, including the Shares, is listed on the American
Stock Exchange. On May 9, 1995, the closing sales price of the Common Stock as
reported on the American Stock Exchange was $1 9/16 per share.
<PAGE> 4
PROSPECTIVE INVESTORS SHOULD CONSIDER AND REVIEW THE INFORMATION UNDER
THE CAPTION "INVESTMENT CONSIDERATIONS" IN CONNECTION WITH THEIR DECISION
CONCERNING THE PURCHASE OF THE SECURITIES OFFERED HEREBY.
____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
____________________
The date of this Prospectus is ___________, 1995.
4
<PAGE> 5
AVAILABLE INFORMATION
Harken is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended ("Exchange Act"), and in accordance therewith
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"), which can be inspected and copied at
the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Judiciary Plaza, Room 1024, Washington, D.C. 20549, and at the
following regional offices of the Commission: Chicago Regional Office, 500 W.
Madison Street, Suite 1400, Chicago, Illinois 60661; and New York Regional
Office, 7 World Trade Center, New York, New York 10048. Copies of such
material can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 at prescribed
rates. In addition, the Common Stock is listed on the American Stock Exchange,
and such reports, proxy statements and other information concerning Harken may
be inspected at the offices of the American Stock Exchange, 86 Trinity Place,
New York, New York 10006.
Harken has filed with the Commission a Registration Statement
("Registration Statement") under the Securities Act with respect to the
securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to Harken and such securities, reference is
made to such Registration Statement and to the exhibits thereto.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have been filed with the Commission are
incorporated herein by reference:
(1) Harken's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994;
(2) Proxy Statement for the Annual Meeting of Stockholders of
Harken to be held on June 16, 1995;
(3) Description of the Common Stock contained in Harken's
Registration Statements filed under Section 12 of the Exchange
Act, including Form 8-A dated March 13, 1991;
(4) Current Report on Form 8-K of Harken dated November 4, 1994,
reporting the acquisition of additional interest in the Four
Corners Properties;
5
<PAGE> 6
(5) Form 8-K/A of Harken dated January 3, 1995, amending the Form
8-K dated November 4, 1994;
(6) Annual Report on Form 10-K for the fiscal year ended December
31, 1994, of Search Exploration, Inc. ("Search") (Commission
File No. 0-18837);
(7) Form 10-K/A of Search dated April 6, 1995, amending Search's
Annual Report on Form 10-K for the fiscal year ended December
31, 1994; and
(8) Harken's Current Report on Form 8-K dated April 27, 1995,
reporting the results on an exploration well in Colombia,
South America.
All documents filed by Harken pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering made hereby shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of the filing of such documents. Any statement contained in this
Prospectus, in a supplement to this Prospectus or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently filed supplement to this Prospectus or
in any document that also is or is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
Harken hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, on the written or oral
request of any such person, a copy of any or all of the documents referred to
above which have been or may be incorporated in this Prospectus by reference,
other than exhibits to such documents unless such exhibits are specifically
incorporated by reference in such documents. Written or oral requests for such
copies should be directed to Larry E. Cummings, Vice President, Secretary and
General Counsel, Harken Energy Corporation, 5605 North MacArthur Blvd., Suite
400, Irving, Texas 75038 (Telephone: 214/753-6900).
____________________
6
<PAGE> 7
BUSINESS OF HARKEN
General
Harken is engaged in oil and gas exploration, development and
production operations both domestically and internationally through its various
wholly-owned subsidiaries and joint venture investments. Harken's domestic
operations primarily consist of the oil and gas exploration and production
operations of its wholly-owned subsidiary, Harken Southwest Corporation
("HSW"). Harken's international operations include three exclusive Colombian
Association Contracts between Harken's wholly-owned subsidiary, Harken de
Colombia, Ltd., and Empresa Colombiana de Petroleos, as well as a production
sharing agreement between Harken's wholly-owned subsidiary, Harken Bahrain Oil
Company, and the Bahrain National Oil Company. Harken's international
operations currently consist solely of exploration activities, however,
management is continuing to pursue international opportunities in all areas of
Harken's operations, including oil and gas exploration and development. Harken
considers that the opportunities to profitably deploy Harken's expertise and
assets internationally are generally greater than those available domestically.
Harken was incorporated in 1973 in the State of California and
reincorporated in 1979 in the State of Delaware. Harken's principal offices
are located at 5605 North MacArthur Blvd., Suite 400, Irving, Texas 75038 and
its telephone number is (214) 753- 6900.
Recent Developments
Search Acquisition. On November 8, 1994, Harken and its wholly-owned
subsidiary, Search Acquisition Corp. ("Acq. Sub."), entered into an Agreement
and Plan of Merger (the "Merger Agreement") with Search Exploration, Inc.
("Search"), a publicly held Delaware corporation. Search is primarily engaged
in the domestic exploration for, and development and production of, oil and gas
reserves. If the proposed merger ("Merger") is consummated, Harken anticipates
that Search, as a wholly-owned subsidiary, would continue to pursue its present
domestic oil and gas operations.
Under the terms of the Merger Agreement, certain contingencies must be
satisfied by Search, unless waived by Harken, prior to the consummation of the
Merger. Such contingencies include the requirement that Search shall have
terminated three private limited partnerships of which a wholly-owned
subsidiary of Search, McCullough Energy Corp. ("McCullough"), serves as the
managing general partner. The plan proposed by Search and McCullough to
terminate these partnerships must receive 100% approval by all of the other
limited and general
7
<PAGE> 8
partners of each of these partnerships. Assuming the successful termination of
these limited partnerships, Search must then submit the proposed merger to its
stockholders for their approval and receive the affirmative vote of a majority
of such stockholders. Unless the Merger is completed by May 30, 1995, or
unless such date is extended by the mutual agreement of the parties, either
Harken or Search may terminate the Merger Agreement. The Search stockholder
meeting to consider the Merger is scheduled to be held on May 22, 1995.
In the event that the Merger is completed then, upon closing, Search
will merge into Acq. Sub. with Acq. Sub. being the surviving entity. Each
share of Search common stock, $.05 par value (the "Search Common Stock"), then
outstanding will be exchanged for shares of Harken's Common Stock based upon
the Exchange Ratio (as defined below). Each share of Search preferred stock,
$.001 par value (the "Search Preferred Stock"), then outstanding will be
exchanged for shares of Harken's Common Stock based upon the Preferred Exchange
Ratio (as defined below). In addition, certain outstanding notes issued by
Search to third parties will be exchanged in the Merger for the number of
shares of Harken's Common Stock equal to the face amount of such notes divided
by the Strike Price (as defined below).
In addition, certain parties, including the holders of Search Common
Stock, the note holders and the holders of certain overriding royalty interests
who agree to reassign these interests to Search, may be entitled to
subsequently receive additional shares of Harken's Common Stock based upon the
subsequently determined value of certain undeveloped properties of Search.
Under the Merger Agreement, certain identified undeveloped properties of Search
will be valued by an independent petroleum engineer as of June 30, 1996 (the
"Valuation Date"). These parties may be entitled to receive such additional
shares of Harken's Common Stock based upon an increase in the value of these
undeveloped properties as of such Valuation Date.
The Merger Agreement provides, however, that Harken is not required in
any event to issue more than a maximum of eleven million shares of its Common
Stock, which will constitute less than 20% of its outstanding Common Stock, in
connection with all exchanges and transactions contemplated by the Merger
Agreement. The Merger Agreement does provide that in the event the undeveloped
properties of Search are valued as of the Valuation Date at an amount which
would provide for greater than eleven million shares of Harken's Common Stock
being issued in such transactions in the aggregate, then Harken may at its
option either pay such excess valuation in cash or obtain the approval of the
holders of Harken's Common Stock to issue additional shares of Common Stock in
excess of 20% of its outstanding shares of Common Stock.
8
<PAGE> 9
As of the execution date of the Merger Agreement, Search had
outstanding 3,690,632 shares of Search Common Stock and 575,000 shares of
Search Preferred Stock. The "Exchange Ratio" as provided in the Merger
Agreement is determined by dividing $.8099 by the Strike Price and the
"Preferred Exchange Ratio" is determined by dividing $1.00 by the Strike Price.
The "Strike Price" is defined as the average of the closing prices of a share
of Harken's Common Stock on the American Stock Exchange (as reported by the
Wall Street Journal or, if not reported thereby, by another authoritative
source) over the 30 days immediately preceding the date that is five trading
days prior to the closing of the Merger; provided, however, that in no event
shall the Strike Price be an amount which is (i) greater than $2.366 or (ii)
less than $1.274.
See "Unaudited Pro Forma Combined Condensed Financial Statements" for
certain additional information regarding the Merger.
Colombian Activities. On December 14, 1994, Harken entered into its
third Association Contract with Ecopetrol, the national oil company of
Colombia, covering a tract of land of approximately 10,000 acres in size
referred to as the Playero Contract Area. This area is located in the Llanos
Basis of Colombia and lies adjacent to Harken's Alcaravan Contract Area. On
December 20, 1994, Harken awarded a contract to Perforaciones El Dorado, S.A.
("El Dorado") to drill the Alcaravan #1 well in the Llanos Basin of Colombia.
Harken announced on April 24, 1995, that the well failed to produce commercial
quantities of oil and that it will be plugged and abandoned.
On January 19, 1995, Harken notified Ecopetrol of Harken's commitment
to drill a well on its Bocachico Association Contract Area and thereby extended
the contract into its second year. Harken currently anticipates that a well
site will be selected and drilling will commence by mid-1995. The Bocachico
area is located in Colombia's Middle Magdelena Basin.
CHAP Interest. In October 1994, Harken purchased an approximate
additional 20% participating interest in properties which it currently
operates, through the CHAP Joint Venture ("CHAP"), in the Paradox Basin, thus
increasing its and one of its subsidiary's total combined interest in CHAP to
approximately 70%. Each CHAP co-venturer, in proportion to its respective
participating interest, pays its share of the costs and expenses and receives
its share of revenues; thus, as a result of the acquisition, Harken and its
subsidiary's proportionate share in such costs, expenses, and revenues
increased by approximately 20% with respect to CHAP. The acquisition also
included the sellers' interests in certain oil and gas leases relating to
exploration acreage and development drilling locations and increased Harken's
ownership interest in the Aneth Gas Plant, all located in the Paradox Basin.
These sellers received
9
<PAGE> 10
960,000 shares of Harken Common Stock pursuant to this transaction. On April
12, 1995, the Commission declared effective Harken's Registration Statement on
Form S-3 (File No. 33-86829) with respect to the resale of these 960,000 shares
of Harken Common Stock.
UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial
statements give effect to the Merger under the purchase method of accounting.
The pro forma combined condensed balance sheet gives effect to the Merger as if
it had been consummated as of December 31, 1994. The pro forma combined
condensed statements of operations for the years ended December 31, 1993 and
1994, give effect to both the Search Merger and the acquisition of the
additional interest in CHAP as if both had occurred at the beginning of each
period.
These statements have been prepared from the historical consolidated
financial statements of Harken and Search and should be read in conjunction
with such statements and the related notes contained in each company's Annual
Report on Form 10-K for the year ended December 31, 1994.
10
<PAGE> 11
The pro forma data is presented for illustrative purposes only and are not
necessarily indicative of the financial position or operating results that would
have occurred had the transactions been consummated at the dates indicated, nor
are they indicative of future financial position or operating results.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
DECEMBER 31, 1994
(UNAUDITED) ($ in thousands)
<TABLE>
<CAPTION>
HARKEN SEARCH PRO FORMA
ACTUAL ACTUAL ADJUSTMENTS PRO FORMA
------- ------ ----------- ---------
<S> <C> <C> <C> <C>
Current Assets................................ $ 6,840 $ 489 $ $ 7,329
Property and Equipment, net................... 20,177 2,084 1,176(1) 23,879
442(2)
Investments in Former Subsidiaries............ 1,219 -- 1,219
Notes Receivable from Related Parties,
including interest.......................... 474 -- 474
Other Assets, Net............................. 250 -- 250
------- ------ --------- --------
Total Assets........................ $28,960 $2,573 $ 1,618 $33,151
======= ====== ========= ========
Current Liabilities........................... $ 5,133 $ 174 $ 215(1) $ 5,655
133(2)
Long-Term Debt................................ -- -- 309(2) 309
Redeemable Preferred Stock.................... 1,868 575 (575)(1) 1,868
Stockholders' Equity.......................... 21,959 1,824 1,536(1) 25,319
------- ------ --------- --------
$28,960 $2,573 $ 1,618 $33,151
======= ====== ========= ========
</TABLE>
PRO FORMA ADJUSTMENTS -- PRO FORMA COMBINED CONDENSED BALANCE SHEET
(1) Pro forma entry to record the acquisition of Search at December 31, 1994, in
exchange for Harken common stock. Purchase price was calculated using the
market value, discounted by 10%, of Harken common stock over the most
recent 30 days to determine the number of shares of Harken common stock to
be issued, according the Merger Agreement. Such purchase price results in a
total investment in Search of approximately $3,360,000, which includes
approximately $215,000 of estimated transaction costs.
(2) Pro forma entry to record the required roll-up acquisition by Search of the
non-owned interests in its managed limited partnerships in exchange for
notes payable bearing interest at 10% per annum.
11
<PAGE> 12
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1993
(UNAUDITED) ($ in thousands)
<TABLE>
<CAPTION>
ACQUIRED PRO FORMA PRO FORMA
HARKEN INTEREST IN SEARCH ADJUSTMENT- ADJUSTMENTS-
ACTUAL CHAP-ACTUAL ACTUAL CHAP SEARCH PRO FORMA
------- ------------- ------- ------------ ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Oil and gas revenue............. $ 4,970 $ 2,135 $ 1,057 $ $ 131(5) $ 8,293
Other revenues.................. 1,631 57 44 1,732
------- ------ ------- ------ ---------- --------
Total Revenues.......... 6,601 2,192 1,101 131 10,025
------- ------ ------- ------ ---------- --------
Oil and gas operating
expenses...................... 1,825 676 286 38(5) 2,825
General and administrative
expenses...................... 3,179 199 788 4,166
Depreciation and amortization... 2,571 810 670 (511)(3) (246)(4) 3,294
Provision for asset
impairments................... 726 326 462 (326)(3) (462)(4) 726
Interest and other.............. 97 13 135 41(5) 286
------- ------ ------- ------ ---------- --------
8,398 2,024 2,341 (837) (629) 11,297
------- ------ ------- ------ ---------- --------
Income tax expense (benefit).... -- -- (335) 335(6) --
------- ------ ------- ------ ---------- --------
Income (loss) from continuing
operations.................... $(1,797) $ 168 $ (905) $ 837 $ 425 $(1,272)
======= ====== ======= ====== ========== ========
Net loss per share from
continuing operations
attributable to common
stock......................... $ (0.03) $ (0.02)
======= ========
Weighted Average Shares
Outstanding................... 58,392,901 61,349,284
========== ==========
</TABLE>
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
ACQUIRED PRO FORMA PRO FORMA
HARKEN INTEREST IN SEARCH ADJUSTMENT- ADJUSTMENTS-
ACTUAL CHAP-ACTUAL ACTUAL CHAP SEARCH PRO FORMA
------- ------------- ------- ------------ ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Oil and gas revenue............. $ 4,156 $ 1,035 $ 495 $ $ 89(5) $ 5,775
Other revenues.................. 739 39 221 999
------- ------ ------- ------ ---------- --------
Total Revenues.......... 4,895 1,074 716 89 6,774
------- ------ ------- ------ ---------- --------
Oil and gas operating
expenses...................... 1,535 337 274 37(5) 2,183
General and administrative
expenses...................... 3,132 96 698 2(5) 3,928
Depreciation and amortization... 1,993 416 499 (324)(3) (128)(4) 2,456
Provision for asset
impairments................... 6,361 -- 2,667 (2,667)(4) 6,361
Interest and other.............. 85 -- 5 27(5) 117
------- ------ ------- ------ ---------- --------
13,106 849 4,143 (324) (2,729) 15,045
------- ------ ------- ------ ---------- --------
Income tax expense (benefit).... -- -- (227) 227(6) --
------- ------ ------- ------ ---------- --------
Income (loss) from continuing
operations.................... $(8,211) $ 225 $(3,200) $ 324 $ 2,591 $(8,271)
======= ====== ======= ====== ========== ========
Net loss per share from
continuing operations
attributable to common
stock......................... $ (0.14) $ (0.13)
======= ========
Weighted Average Shares
Outstanding................... 59,722,853 62,439,236
========== ==========
</TABLE>
12
<PAGE> 13
PRO FORMA ADJUSTMENTS -- PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
(3) Pro forma entry to adjust actual depreciation and depletion expense and
valuation provision on oil and gas properties for the acquired interest in
CHAP to the depreciation and depletion calculated on a consolidated basis.
(4) Pro forma entry to adjust actual depreciation and depletion expense and
valuation provision on oil and gas properties for Search to the
depreciation and depletion calculated on a consolidated basis.
(5) Pro forma entry to reflect the additional revenues and expenses of Search's
required roll-up of its managed limited partnerships, along with related
interest expense on the notes payable to be issued.
(6) Pro forma entry to eliminate income tax benefit of Search.
13
<PAGE> 14
INVESTMENT CONSIDERATIONS
The following matters should be considered with all other information
contained and incorporated by reference in this Prospectus in evaluating an
investment in the Common Stock.
Losses From Continuing Operations
Harken reported income (losses) from continuing operations for the
fiscal years ended December 31, 1992, 1993, and 1994, in the amounts of
$661,000, $(1,797,000), and $(8,211,000), respectively. While the reasons for
most of these losses, as explained below, are nonrecurring, there can be no
assurance that Harken will not continue to report losses, including future
losses from other nonrecurring items.
Harken reported a net loss from continuing operations for the year
ended December 31, 1994, of $8,211,000 primarily due to a reduction in Harken's
carrying value in its investment in E-Z Serve Series C Preferred and related
accrued dividends by approximately $5.8 million due to a permanent decline in
value as indicated by efforts of Harken management to sell the investment in
early 1995. Despite production declines on existing wells and the lack of new
production from drilling activities, Harken did bolster its oil and gas reserve
and revenue base through the acquisition of approximately an additional 20% of
CHAP during the last half of 1994. Total gross revenues from oil and gas
operations were $4,156,000 with a gross profit before depreciation and
amortization and general and administrative expenses of $2,621,000.
Harken reported a net loss from continuing operations for the year
ended December 31, 1993, of $1,797,000. Effective February 15, 1993, Harken
consummated a merger pursuant to which Chuska Resources Corporation ("Chuska")
became a wholly-owned subsidiary of Harken. As a result of the merger with
Chuska, Harken began reflecting oil and gas sales revenues and related
operating expenses and depreciation and amortization in 1993. Harken's
exploration and production operations generated gross revenues of $5,505,000
and gross profit before depreciation and amortization and general and
administrative expenses totalled $3,680,000 during 1993, primarily generated
from the Chuska acquisition. Contributing to the loss from continuing
operations was the expensing of a total of $551,000 of accrued interest related
to certain non-recourse notes receivable from certain current and former
employees, officers and directors.
Harken reported net income from continuing operations for the year
ended December 31, 1992, of $661,000. In December 1992, Harken entered into a
Purchase and Sale Agreement pursuant to which Harken sold its 12% general
partner's
14
<PAGE> 15
interest in its managed limited partnership, Harken Anadarko Partners, L.P.
("HAP"), for cash of $2,650,000. The transaction resulted in Harken
recognizing a gain on the sale of $1,449,000 during December 1992. As result
of this gain, operating profit for Harken's exploration and production
operations was $2,872,000 during 1992.
Effect of Sales of Common Stock and Other Events on Market Price
As of May 8, 1995, there were 61,642,853 shares of Common Stock
outstanding. Harken, on behalf of the Selling Stockholder, is registering for
sale 1,200,000 shares of Common Stock pursuant to the Registration Statement of
which this Prospectus is a part. Harken has no knowledge of a proposed plan of
distribution of the Shares other than as described in this Prospectus. See
"PLAN OF DISTRIBUTION." In addition, Harken has registered with the Commission
960,000 shares of Common Stock for resale by certain selling stockholders (see
"Recent Developments--CHAP Interest"). If the Merger (see "Recent Developments
- - Search Acquisition") is consummated, up to a maximum of 11 million shares of
Harken's Common Stock may be issued at various times following the closing
thereof. Assuming a Strike Price calculated for Harken's Common Stock at the
time of closing as provided under the Merger Agreement of $2.00 per share,
Harken expects that up to approximately 2,002,021 of such shares will be issued
upon consummation of the Merger and be freely tradeable immediately as a result
of such shares being registered under applicable securities laws, except for a
portion of the shares held by certain "affiliates" as described below.
Regarding the remainder of such 11 million shares which may be issued under
this transaction, the shares of Harken Common Stock to be issued in the Merger
and the shares issuable upon an exercise of the Harken Warrants (herein so
called) issued in the Merger in exchange for the Search Warrants (herein so
called) will be subject to adjustment on June 30, 1996, in the event the
valuation of certain Search undeveloped oil and gas properties increases during
the period from the effective date of the Merger to June 30, 1996. These
shares of Common Stock to be issued as a result of a valuation increase, if
any, will be distributed by September 30, 1996. Additionally, any shares of
Common Stock issuable upon the exercise of Search Warrants which were not
exchanged in the Merger will be issued not later than November 14, 1998;
provided the holder of the unexchanged Search Warrant exercises it prior to
such date. If exercised prior to its termination date, the unexchanged Search
Warrant will be entitled to be exercisable for additional shares of Common
Stock due to the June 30, 1996 valuation increase, if any. There is no
assurance that these undeveloped properties will result in any increase in
value and thereby give rise to additional shares of Harken's Common Stock being
issued or for the holders of the Search Warrants to either exchange their
Search Warrants for Harken Warrants or, if so exchanged, to exercise such
Harken Warrants, before their expiration on June 30, 1996. Shares of Harken's
Common
15
<PAGE> 16
Stock acquired by "affiliates" (as that term is defined in the Securities Act)
of Search at the time the Merger is submitted to a vote of its stockholders may
be sold by them only in transactions permitted by the resale provisions of Rule
145 promulgated under the Securities Act (or Rule 144 in case such persons
become affiliates of Harken) or as otherwise permitted under the Securities
Act. Harken estimates that up to approximately 32.23% of shares of its Common
Stock which can be issued in this transaction may be acquired by affiliates of
Search, based upon an assumed Strike Price of $2.00 per share for Harken's
Common Stock and further upon the assumption of full acceptance by the
affiliates of Search of the Warrant Exchange Offer and subsequent exercise of
the Harken Warrants issued in such exchange. There can be no assurance that
the sale of the Shares by the Selling Stockholder or the shares of Common Stock
(i) issued and registered in connection with the transaction described in
"Recent Developments -- CHAP Interest" above or (ii) to be issued in connection
with the proposed Search Merger transaction will not have a material adverse
effect on the then prevailing market price of the Harken Common Stock. The
closing price of a share of Harken Common Stock on the American Stock Exchange
on May 9, 1995, was $1 9/16.
Preferred Stock Authorized for Issuance
Harken has available for issuance 10 million shares of preferred
stock, par value $1.00 per share. The Board of Directors is authorized to
provide for the issuance of such preferred stock in one or more series and to
set the designations, preferences, powers and relative participating, optional
or other rights and restrictions thereof. Presently, Harken has three series
of preferred stock authorized, of which only one has any shares currently
outstanding. Such shares have certain preferences over the shares of Common
Stock with respect to the payment of dividends and upon liquidation,
dissolution, winding-up and in certain instances, voting. The Board of
Directors of Harken also may authorize other series of preferred stock in the
future that have similar as well as other preferences over the shares of Common
Stock.
Factors Related to International Operations
Harken conducts international operations presently and anticipates
that it will conduct significant international operations in the future.
Foreign properties, operations or investments may be adversely affected by
local political and economic developments, exchange controls, currency
fluctuations, royalty and tax increases, retroactive tax claims, renegotiation
of contracts with governmental entities, expropriation, import and export
regulations and other foreign laws or policies governing operations of
foreign-based companies, as well as by laws and policies of the United States
affecting foreign trade, taxation and investment. In addition, as
16
<PAGE> 17
certain of Harken's operations are governed by foreign laws, in the event of a
dispute, Harken may be subject to the exclusive jurisdiction of foreign courts
or may not be successful in subjecting foreign persons to the jurisdiction of
courts in the United States. Harken may also be hindered or prevented from
enforcing its rights with respect to a governmental instrumentality because of
the doctrine of sovereign immunity. Exploration and production activities in
areas outside the United States are also subject to the risks inherent in
foreign operations, including loss of revenue, property and equipment as a
result of hazards such as expropriation, nationalization, war, insurrection and
other political risks.
Regarding Harken's activities in Colombia, management anticipates that
full development of reserves in the Alcaravan area of the Llanos Basin and the
Bocachico area of the Middle Magdelena Basin may take several years and may
require extensive production facilities which could require significant
additional capital expenditures. The ultimate amount of such expenditures
cannot be presently predicted. Harken anticipates that amounts required to
fund international activities, including those in Colombia, will be funded from
existing cash balances, asset sales, stock issuances, operating cash flows and
potentially from industry partners; however, there can be no assurances that
industry partners can be obtained to fund such international activities, nor
that Harken will have adequate funds available to it to fund its international
activities without participation from industry partners. While pipelines
presently connect the major producing fields in Colombia to export facilities
and various refineries, Harken anticipates that additional pipeline capacity
will likely be needed in the future. Guerilla activity in Colombia has in the
past disrupted the operation of certain oil and gas projects of some
foreign-based companies. Harken does not anticipate that future guerilla
activity will have a material impact on Harken's eventual exploration and
development of the Alcaravan or Bocachico areas. However, there can be no
assurance that such activity will not occur or have such an impact.
Price Volatility
The revenues generated by Harken are highly dependent upon the prices
of crude oil and natural gas. Fluctuations in the energy market make it
difficult to estimate future prices of oil and natural gas. Fluctuations in
energy prices are caused by a number of factors, including regional, domestic
and international demand, energy legislation, federal or state taxes (if any)
on sales of crude oil and natural gas, production guidelines established by the
Organization of Petroleum Exporting Countries, and the relative abundance of
supplies of alternative fuel such as coal. Additionally, changing
international economic and political conditions may have a dramatic impact upon
crude oil and natural gas prices. Many of these factors are beyond the control
of Harken.
17
<PAGE> 18
Business Risks
Harken must continually acquire or explore for and develop new oil and
gas reserves to replace those being depleted by production. Without successful
drilling or acquisition ventures, Harken's oil and gas assets, properties and
revenues derived therefrom will decline over time. To the extent Harken
engages in drilling activities, such activities carry the risk that no
commercially viable oil or gas production will be obtained. The cost of
drilling, completing and operating wells is often uncertain. Moreover,
drilling may be curtailed, delayed or canceled as a result of many factors,
including title problems, weather conditions, shortages of or delays in
delivery of equipment, as well as the financial instability of well operators,
major working interest owners and drilling and well servicing companies. The
availability of a ready market for Harken's oil and gas depends on numerous
factors beyond its control, including the demand for and supply of oil and gas,
the proximity of Harken's natural gas reserves to pipelines, the capacity of
such pipelines, fluctuation in seasonal demand, the effects of inclement
weather, and government regulation. New gas wells may be shut-in for lack of a
market until a gas pipeline or gathering system with available capacity is
extended into the area.
In February 1994, the Navajo Nation issued a moratorium on future oil
and gas development agreements and exploration on lands situated within the
Aneth Chapter of the Navajo Reservation, which is an area that includes much of
HSW's undeveloped acreage. It is unknown what effect, if any, this moratorium
will have on HSW's operations. Any acreage under the 1987 Tribal Agreement
which is not held by production as of July 31, 1995, will expire unless
extended by Harken and the Navajo Nation by subsequent agreement.
Operating Hazards and Uninsured Risks
The operations of Harken are subject to the inherent risks normally
associated with exploration for and production of oil and gas, including
blowouts, cratering, pollution and fires, each of which could result in damage
to or destruction of oil and gas wells or production facilities or damage to
persons and property. As is common in the oil and gas industry, Harken is not
fully insured against of these risks, either because insurance is not available
or because Harken has elected to self-insure due to high premium costs. The
occurrence of a significant event not fully insured against could have a
material adverse effect on Harken's financial condition.
18
<PAGE> 19
Environmental Regulation
The activities of Harken are subject to various Navajo, federal,
state, and local laws and regulations covering the discharge of material into
the environment or otherwise relating to protection of the environment. In
particular, Harken's oil and gas exploration, development, production, its
activities in connection with storage and transportation of liquid hydrocarbons
and its use of facilities for treating, processing, recovering, or otherwise
handling hydrocarbons and wastes therefrom are subject to stringent
environmental regulation by governmental authorities. In addition to these
domestic laws and regulations, Harken's international operations are subject to
the laws, regulations and governmental approvals of each foreign country in
which it conducts activities including, but not limited to, environmental laws
and regulations governing oil and gas operations. Such domestic and foreign
laws and regulations have increased the costs of planning, designing, drilling,
installing, operating and abandoning Harken's oil and gas wells and other
facilities.
The Aneth Gas Plant facility, of which HSW is a co-owner, was in
operation for many years prior to HSW's becoming an owner. The operations at
the Aneth Gas Plant previously used open, unlined drip pits for storage of
various waste products. The plant owners have replaced all of the open ground
pits currently being used with steel tanks. The plant owners are currently in
the process of closing the open ground pits.
Texaco, the plant's operator, received a letter from the EPA dated
July 2, 1991 and a subsequent letter dated June 8, 1992, in which the EPA
requested certain information in order to determine if there had been at the
Aneth Gas Plant the release of hazardous substances to the environment. Texaco
has advised HSW that certain information was supplied to the EPA pursuant to
this request. Subsequently, core samples in and around certain pit areas were
taken by the EPA and Texaco jointly. The EPA has responded to the initial
sampling of the drip pits and Texaco is now planning the next phase of required
evaluation.
Texaco had indicated to HSW that it believes that some of these pits
may require reclamation or remediation. In the event such action should or
must be taken, the plant owners, including HSW, will seek contractual
indemnification from the previous owner of the Aneth Gas Plant for the costs
incurred in the reclamation and remediation process. At this time, however, it
is impossible for HSW to determine or estimate the costs of the cleanup at the
Aneth Gas Plant or if the prior owner will indemnify the present owners,
including HSW, for such costs.
Harken has expended significant resources, both financial and
managerial, to comply with environmental regulations and permitting
requirements and anticipates
19
<PAGE> 20
that it will continue to do so in the future. Although Harken believes that
its respective operations and facilities are in general compliance with
applicable environmental laws and regulations, risks of substantial costs and
liabilities are inherent in oil and gas operations, and there can be no
assurance that significant costs and liabilities will not be incurred in the
future. Moreover, it is possible that other developments, such as increasingly
strict environmental laws, regulations and enforcement policies thereunder, and
claims for damages to property, employees, other persons and the environment
resulting from Harken's operations, could result in substantial costs and
liabilities in the future.
Imprecise Nature of Reserve Estimates
Reserve estimates are imprecise and may be expected to change as
additional information becomes available. Furthermore, estimates of oil and
gas reserves, of necessity, are projections based on engineering data, and
there are uncertainties inherent in the interpretation of such data as well as
the projection of future rates of production and the timing of development
expenditures. Reserve engineering is a subjective process of estimating
underground accumulations of oil and gas that cannot be measured in an exact
way, and the accuracy of any reserve estimate is a function of the quality of
available data and of engineering and geological interpretation and judgment.
Competitive Factors in Oil and Gas Industry
The oil and gas industry is competitive in all its phases.
Competition is particularly intense respecting the acquisition of desirable
producing properties and the sale of oil and natural gas production. Harken's
competitors in oil and gas exploration, development and production, include
major oil companies and numerous independent oil and gas companies, and
individual producers and operators. Many of Harken's competitors possess and
employ financial and personnel resources substantially greater than those which
are available to Harken, and may, therefore, be able to pay greater amounts for
desirable leases and to define, evaluate, bid for and purchase a greater number
of producing prospects than the financial or personnel resources of Harken will
permit.
Regulatory Items
The production of oil and gas is subject to extensive Navajo, federal
and state laws, rules, orders and regulations governing a wide variety of
matters, including the drilling and spacing of wells, allowable rates of
production, prevention of waste and pollution and protection of the
environment. In addition to the direct costs borne in complying with such
regulations, operations and revenues may be impacted to the
20
<PAGE> 21
extent that certain regulations limit oil and gas production to below economic
levels. Although the particular regulations applicable in each state in which
operations are conducted vary, such regulations are generally designed to
ensure that oil and gas operations are carried out in a safe and efficient
manner and to ensure that similarly-situated operators are provided with
reasonable opportunities to produce their respective fair shares of available
oil and gas reserves. However, since these regulations generally apply to all
oil and gas producers, management of Harken believes that these regulations
should not put Harken at a material disadvantage to other oil and gas
producers.
Certain sales, transportation, and resales of natural gas by Harken
are subject to Navajo, federal and state laws and regulations, including, but
not limited to, The Natural Gas Act of 1938, as amended ("NGA"), the Natural
Gas Policy Act of 1978, as amended ("NGPA") and regulations promulgated by the
Federal Energy Regulatory Commission ("FERC") under the NGA, the NGPA and other
statutes. The provisions of the NGA and NGPA, as well as the regulations
thereunder, are complex, and can affect all who produce, resell, transport,
purchase or consume natural gas.
Although recent FERC transportation regulations do not directly apply
to Harken because they are not engaged in rendering jurisdictional
transportation services, these regulations do affect the operations of Harken
by virtue of the need to deliver its gas production to markets served by
interstate or intrastate pipelines. In most instances, interstate pipelines
represent the only available method of accomplishing such transportation.
In addition to these domestic laws and regulations, Harken's
international operations are subject to the laws, regulations and governmental
approvals of each foreign country in which it conducts activities including,
but not limited to, environmental laws and regulations governing oil and gas
operations.
UNAUDITED COMBINED OIL AND GAS RESERVE DATA
The following unaudited pro forma combined oil and gas reserve data
gives effect to the Search merger as if it has been consummated as of January
1, 1994. The information is presented with regard to Harken and Search's proved
oil and gas reserves, all of which are located in the United States. The
reserve values reflected in the following reserve disclosure are based on
prices received as of year end.
<TABLE>
<CAPTION>
Pro Forma 1994:
Harken Search Combined
------ ------ --------
(In thousands)
<S> <C> <C> <C>
Crude Oil and Condensate (Barrels):
Proved reserves - December 31, 1993 ... 1,035 159 1,194
Extensions and discoveries ......... 0 18 18
Revisions of previous estimates .... 186 2 188
Production ......................... (158) (10) (168)
Sales of reserves-in-place ......... 0 (150) (150)
Purchase of reserves-in-place ...... 458 0 458
---------------------------
Proved reserves - December 31, 1994 ... 1,521 19 1,540
===========================
Proved developed reserves -
December 31, 1993 .................. 624 159 783
===========================
December 31, 1994 .................. 915 19 934
===========================
Natural Gas (Mcf):
Proved reserves - December 31, 1993 ... 4,970 2,068 7,038
Extensions and discoveries ......... 0 960 960
Revisions of previous estimates .... 476 (739) (263)
Production ......................... (426) (238) (664)
Sales of reserves-in-place ......... 0 (753) (753)
Purchases of reserves-in-place ..... 2,128 0 2,128
---------------------------
Proved reserves - December 31, 1994 ... 7,148 1,298 8,446
===========================
Proved developed reserves -
December 31, 1993 .................. 1,624 2,068 3,692
===========================
December 31, 1994 .................. 2,207 1,298 3,505
===========================
</TABLE>
Standardized Measure of Discounted Future Net Cash Flows Relating to
Proved Oil and Gas Reserves As of December 31, 1994:
<TABLE>
<CAPTION>
Harken Search Combined
------ ------ --------
(In thousands)
<S> <C> <C> <C>
Future cash inflows ................... $ 37,612 $3,039 $ 40,651
Production and development costs ... (17,434) (625) (18,059)
-----------------------------
Future net inflows before income tax .. 20,178 2,414 22,592
Future income taxes ................... 0 0 0
-----------------------------
Future net cash flows ................. 20,178 2,414 22,592
10% discount factor ................... (8,466) (901) (9,367)
-----------------------------
Standardized measure of discounted
future net cash flow ............... $ 11,712 $1,513 $ 13,225
=============================
</TABLE>
Changes in Standardized Measure of Discounted Future Net Cash Flows
Relating to Proved Oil and Gas Reserves For the Year Ended December 31, 1994:
<TABLE>
<CAPTION>
Harken Search Combined
------ ------ --------
(In thousands)
<S> <C> <C> <C>
Standardized measure - December 31, 1993 ... $ 8,230 $ 3,126 $11,356
Increase (decrease):
Sales, net of production costs .......... (2,398) (221) (2,619)
Net changes in prices, net of
production costs ..................... 364 (411) (47)
Change in future development costs ...... (208) 0 (208)
Revisions of quantity estimates ......... 1,450 (353) 1,097
Accretion of discount ................... 823 (313) 510
Changes in production rates, timing
and other ............................ (150) 0 (150)
Extensions and discoveries, net of
future costs ......................... 0 1,091 1,091
Net change in income taxes .............. 0 129 129
Sales of reserves-in-place .............. 0 (1,535) (1,535)
Purchases of reserves-in-place .......... 3,601 0 3,601
------------------------------
Standardized measure - December 31, 1994 ... $11,712 $ 1,513 $13,225
==============================
</TABLE>
21
<PAGE> 22
USE OF PROCEEDS
Harken will not receive any part of the proceeds from the sale of
Shares by the Selling Stockholder.
SELLING STOCKHOLDER
This Prospectus covers offers from time to time by the Selling
Stockholder of its shares of Common Stock. Set forth below is the name of the
Selling Stockholder, the number of shares of Common Stock owned of record by
the Selling Stockholder as of May 8, 1995, the number of shares of Common Stock
which may be offered by the Selling Stockholder pursuant to this Prospectus,
and the number of shares of Common Stock and percentage of the class of Common
Stock to be owned by the Selling Stockholder upon completion of the offering if
all Shares are sold. Any or all of the Shares listed below may be offered for
sale by the Selling Stockholder from time to time.
<TABLE>
<CAPTION>
Shares Shares
Owned Prior Shares Owned After Percent of Class
to the Registered the After the
Selling Stockholder Offering Hereunder Offering(1) Offering
------------------ -------- -------- ----------- --------
<S> <C> <C> <C> <C>
Banque Franck, S.A. 1,200,000 1,200,000 -0- - 0-
</TABLE>
_________________
(1) Assumes no other disposition or acquisition of Common Stock and all
Shares included herein are sold.
PLAN OF DISTRIBUTION
Any or all of the Shares may be sold from time to time for a period of
six months from the date of this Prospectus (November __, 1995) to purchasers
directly by the Selling Stockholder in one or more open market transactions,
including block trades on the American Stock Exchange, in negotiated
transactions or in a combination of any such methods of sale. Alternatively,
the Selling Stockholder may from time to time offer the Shares through
underwriters, dealers or agents, who may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling Stockholder
or the purchasers of the Shares for whom they may act as agent. The Selling
Stockholder and any such underwriters, dealers or agents that participate in
the distribution of the Shares may be deemed to be
22
<PAGE> 23
underwriters, and any profit on the sale of the Shares by them and any
discounts, commissions or concessions received by any such underwriters,
dealers or agents might be deemed to be underwriting discounts and commissions
under the Securities Act. At the time a particular offer of the Shares is
made, to the extent required, a Prospectus Supplement will be distributed that
will set forth the aggregate amount of Shares being offered and the terms of
the offering, including the name or names of any underwriters, dealers or
agents, any discounts, commissions and other items constituting compensation
from the Selling Stockholder and any discounts, commissions or concessions
allowed or reallowed or paid to dealers, including the proposed selling price
to the public. Harken will not receive any of the proceeds from the sale by
the Selling Stockholder of the Shares offered hereby. All of the registration
expenses of the offering will be paid by Harken.
The Shares may be sold from time to time in one or more transactions
at a fixed offering price, which may be changed, or at varying prices
determined at the time of sale or at negotiated prices.
Harken has agreed to indemnify in certain circumstances the Selling
Stockholder and any underwriter, selling brokers, dealer managers or similar
persons who participate in the distribution of the Shares, if any, and certain
persons related to the foregoing persons, against certain liabilities,
including liabilities under the Securities Act. The Selling Stockholder has
agreed to indemnify, in certain circumstances, Harken and certain persons
related to Harken against certain liabilities, including liabilities under the
Securities Act.
In order to comply with certain states' securities laws, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless the Shares have been registered or qualified for
sale in such state or an exemption from registration or qualification is
available and is complied with.
LEGAL MATTERS
The validity of the Shares will be passed upon for Harken by Larry E.
Cummings, Vice President, General Counsel and Secretary of Harken.
23
<PAGE> 24
EXPERTS
The (i) consolidated financial statements and schedules of Harken
included in Harken's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, and (ii) financial statements of the CHAP Venture as of
December 31, 1993, included in Harken's Amendment to Application or Report on
Form 8-K/A dated January 3, 1995, each of which are incorporated by reference
in this Registration Statement of which this Prospectus forms a part, have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports.
The consolidated balance sheet as of December 31, 1993, and the
related consolidated statements of operations, changes in stockholders' equity,
and cash flows of Search and its subsidiaries for the years ended December 31,
1993 and 1992, included in Search's Annual Report on Form 10-K for the year
ended December 31, 1994, included herein and incorporated by reference in the
Registration Statement of which this Statement forms a part, have been audited
by Deloitte & Touche LLP, independent certified public accountants, as stated
in their report appearing therein, and have been so included in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
The consolidated financial statements and financial statements
schedules of Search for the year ended December 31, 1994, included in Search's
Annual Report on Form 10-K for the year ended December 31, 1994, included
herein and incorporated by reference in the Registration Statement of which
this statement forms a part, have been audited by Hein + Associates LLP,
independent certified public accountants, as indicated in their report with
respect thereto, and are incorporated by reference herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
reports.
The estimated net quantities of proved, developed and undeveloped oil
and gas reserves of McCulloch, a wholly-owned subsidiary of Search, which are
included in Search's Annual Report on Form 10-K for the year ended December 31,
1994, were prepared by Search based on the estimates as of December 31, 1994,
of the petroleum engineering firm of Gerald W. DuPont Enterprises, Inc. The
estimate of such reserves prepared by Gerald W. DuPont Enterprises, Inc. are
incorporated by reference in the Registration Statement of which this statement
forms a part from the Search Annual Report in reliance upon reports of such
petroleum engineering firm on such reserves and upon the authority of such firm
as an expert in petroleum engineering.
24
<PAGE> 25
- --------------------------------------------------------------------------------
No dealer, salesperson or any other individual has been authorized to give
any information or to make any representation not contained or incorporated by
reference in this Prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized by Harken or
any Selling Stockholder. This Prospectus does not constitute an offer to sell or
a solicitation of an offer to buy any of the securities offered hereby in
any jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create any implication
that the information herein is correct as of any time subsequent to the date
hereof or that there has been no change in the affairs of Harken since such
date.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Available Information . . . . 5
Incorporation of Certain
Documents by Reference . . . . 5
Business of Harken . . . . . 7
Unaudited Pro Forma
Combined Condensed
Financial Statements . . . . 10
Investment Considerations . . . 14
Use of Proceeds . . . . . . . . 22
Selling Stockholder . . . . . . 22
Plan of Distribution . . . . . 22
Legal Matters . . . . . . . . . 23
Experts . . . . . . . . . . . . 24
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1,200,000 Shares
HARKEN ENERGY CORPORATION
COMMON STOCK
--------------------
P R O S P E C T U S
--------------------
_____________, 1995
- --------------------------------------------------------------------------------
<PAGE> 26
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The estimated expenses (other than underwriting discounts and commissions)
in connection with the offering described in this Registration Statement are as
follows:
<TABLE>
<S> <C>
SEC Registration Fee . . . . . . . . . . . . $ 670.50
AMEX Listing Fee . . . . . . . . . . . . . . 24,000.00
Printing and Engraving Expenses . . . . . . 5,000.00
Accounting Fees and Expenses . . . . . . . . 5,000.00
Legal Fees and Expenses . . . . . . . . . . 5,000.00
Blue Sky Fees and Expenses . . . . . . . . . -
Miscellaneous . . . . . . . . . . . . . . . 2,000.50
Total . . . . . . . . . . . . . . . . . 41,671.00
</TABLE>
- ---------------
All of the foregoing expenses will be paid by Harken.
Item 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware
provides generally and in pertinent part that a Delaware corporation may
indemnify its directors and officers against expenses, judgments, fines and
settlements actually and reasonably incurred by them in connection with any
civil, criminal, administrative, or investigative suit or action except actions
by or in the right of the corporation if, in connection with the matters in
issue, they acted in good faith and in a manner they reasonably believed to be
in or not opposed to the best interests of the corporation, and in connection
with any criminal suit or proceeding, if in connection with the matters in
issue, they had no reasonable cause to believe their conduct was unlawful.
Section 145 further provides that in connection with the defense or settlement
of any action by or in the right of the corporation, a Delaware corporation may
indemnify its directors and officers against expenses actually and reasonably
incurred by them if, in connection with the matters in issue, they acted in
good faith, in a manner they reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification may be made
with respect to any claim, issue or matter as to which such person has been
adjudged liable for negligence or misconduct unless the Court of Chancery or
the court in which such action or suit is brought approves such
indemnification. Section 145 further permits a Delaware corporation to grant
its directors and officers additional rights of
II-1
<PAGE> 27
indemnification through bylaw provisions and otherwise, and to purchase
indemnity insurance on behalf of its directors and officers.
Article Ten of the Registrant's Certificate of Incorporation and
Article VII of the Registrant's bylaws provide, in general, that the Registrant
shall indemnify its directors and officers under certain of the circumstances
defined in Section 145. The Registrant has entered into agreements with each
member of its Board of Directors pursuant to which it will advance to each
director costs of litigation in accordance with the indemnification provisions
of the Registrant's Certificate of Incorporation and bylaws.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act") may be permitted to
directors, officers or persons controlling the Registrant pursuant to the
foregoing provisions, the Registrant has been informed that in the opinion of
the SEC such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
Item 16. Exhibits.
2.1 - Agreement and Plan of Merger dated November 8, 1994, between
Harken Energy Corporation, Search Acquisition Corp. and
Search Exploration, Inc. (incorporated by reference as
Exhibit 2.1 to the Registration Statement on Form S-3 of
Harken Energy Corporation (Registration No. 33-56829)
4.1 - Certificate of Incorporation of Harken Energy Corporation,
as amended (incorporated by reference as Exhibit 3.1 to
Harken Energy Corporation's Annual Report on Form 10-K for
fiscal year ended December 31, 1989)
4.2 - Amendment to the Certificate of Incorporation of Harken
Energy Corporation (incorporated by reference as Exhibit
28.8 to the Registration Statement on Form S-1, as amended,
of E-Z Serve Corporation and Tejas Power Corporation --
Registration No. 33-37141); Amendment dated February 28,
1991, to the Certificate of Incorporation of Harken
(incorporated by reference as Exhibit 3 to Harken's
Quarterly Report on Form 10-Q for the quarter ended March
31, 1991); Amendment dated July 8, 1991, to Harken's
Certificate of Incorporation (incorporated by reference as
Exhibit 3 to Harken's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1991); and Amendment dated June 30,
1992, to Harken's Certificate of Incorporation (incorporated
by reference as Exhibit 3 to
II-2
<PAGE> 28
Harken's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1992)
4.3 - Bylaws of Harken Energy Corporation, as amended
(incorporated by reference as Exhibit 3.2 to Harken Energy
Corporation's Annual Report on Form 10-K for fiscal year
ended December 31, 1989)
4.4 - Certificate of the Designations, Powers, Preferences and
Rights of Series C Cumulative Convertible Preferred Stock,
$1.00 par value of Harken Energy Corporation (incorporated
by reference as Exhibit 4.3 to Harken Energy Corporation's
Annual Report on Form 10-K for fiscal year ended December
31, 1989)
*5.1 - Opinion of Larry E. Cummings, General Counsel of Harken
Energy Corporation
*23.1 - Consent of Arthur Andersen LLP
*23.2 - Consent of Larry E. Cummings (included in opinion filed as
Exhibit 5.1)
*23.3 - Consent of Deloitte & Touche, LLP
*23.4 - Consent of Hein + Associates, LLP
*23.5 - Consent of Dupont Enterprises, Inc. Petroleum Engineers
*24.1 - Powers of Attorney.
99.1 - Form of Concession and Lease Purchase Agreement dated as of
October 20, 1994 and effective as of August 1, 1994, by and
among C.A.B. Resources, Inc., Crusader, Inc., Australian
Hydrocarbons, Inc. and Harken Energy Corporation
(incorporated by reference as an exhibit to Harken's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994).
*99.2 Subscription and Registration Rights Agreements between
Banque Franck, S.A. and Harken dated March 1, 1995, and
April 7, 1995, respectively.
_____________
* Filed herewith.
II-3
<PAGE> 29
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act, each filing of
the Registrant's Annual Report pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(b) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)
(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the
Registration Statement (or the most recent
post-effective amendment thereto) which,
individually or in the aggregate, represent a
fundamental change in the information set forth in
the Registration Statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed
in the Registration Statement or any material
change to such information in the Registration
Statement;
provided, however, that paragraphs (i) and (ii) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in the Registration Statement.
(2) That, for the purpose of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-4
<PAGE> 30
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that, in the opinion of the
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-5
<PAGE> 31
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Irving, State of Texas, on May 11, 1995.
HARKEN ENERGY CORPORATION
*
---------------------------------------------
Mikel D. Faulkner, Chairman of the Board and
Chief Executive Officer (Principal Executive
Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------------- ----------------------------- ------------
<S> <C> <C>
* Chairman of the Board and May 11, 1995
------------------------------------ Chief Executive Officer
Mikel D. Faulkner (Principal Executive Officer)
* President and Director May 11, 1995
------------------------------------
Richard H. Schroeder
* Senior Vice President and May 11, 1995
------------------------------------ Chief Financial Officer
Bruce N. Huff (Principal Accounting
Officer and Principal
Financial Officer)
* Director May 11, 1995
------------------------------------
Michael M. Ameen, Jr.
</TABLE>
II-6
<PAGE> 32
<TABLE>
<S> <C> <C>
* Director May 11, 1995
------------------------------------
Michael R. Eisenson
* Director May 11, 1995
------------------------------------
Edwin C. Kettenbrink, Jr.
Director May 11, 1995
------------------------------------
Talat M. Othman
* Director May 11, 1995
------------------------------------
Donald W. Raymond
</TABLE>
*Larry E. Cummings, by signing his name hereto, does hereby sign this
Registration Statement on behalf of Harken Energy Corporation and each of the
above-named officers and directors of such Company pursuant to powers of
attorney, executed on behalf of the Company by each officer and director.
/s/ Larry E. Cummings
Larry E. Cummings,
Attorney-in-Fact
II-7
<PAGE> 33
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Exhibit No. Exhibit Numbered Page
----------- ------------------------------------------------------------- -------------
<S> <C> <C>
2.1 Agreement and Plan of Merger dated November 8, 1994, between
Harken Energy Corporation, Search Acquisition Corp. and
Search Exploration, Inc. (incorporated by reference as
Exhibit 2.1 to the Registration Statemnt on Form S-3 of
Harken Energy Corporation (Registration No. 33-56829)
4.1 Certificate of Incorporation of Harken Energy Corporation,
as amended (incorporated by reference as Exhibit 3.1 to
Harken Energy Corporation's Annual Report on Form 10-K for
fiscal year ended December 31, 1989)
4.2 Amendment to the Certificate of Incorporation of Harken
Energy Corporation (incorporated by reference as Exhibit
28.8 to the Registration Statement on Form S-1, as amended,
of E-Z Serve Corporation and Tejas Power Corporation --
Registration No. 33-37141); Amendment dated February 28,
1991, to the Certificate ofIncorporation of Harken
(incorporated by reference as Exhibit 3 to Harken's
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1991); Amendment dated July 8, 1991, to Harken's
Certificate of Incorporation (incorporated by reference as
Exhibit 3 to Harken's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1991); and Amendment dated June 30,
1992, to Harken's Certificate of Incorporation (incorporated
by reference as Exhibit 3 to Harken's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1992)
4.3 Bylaws of Harken Energy Corporation, as amended
(incorporated by reference as Exhibit 3.2 to Harken Energy
Corporation's Annual Report on Form 10-K for fiscal year
ended December 31, 1989)
4.4 Certificate of the Designations, Powers, Preferences and
Rights of Series C Cumulative Convertible Preferred Stock,
$1.00 par value of Harken Energy Corporation (incorporated
by reference as Exhibit 4.3 to Harken Energy Corporation's
Annual Report on Form 10-K for fiscal year ended
December 31, 1989)
*5.1 Opinion of Larry E. Cummings, General Counsel of Harken
Energy Corporation
*23.1 Consent of Arthur Andersen LLP
*23.2 Consent of Larry E. Cummings (included in opinion filed as
Exhibit 5.1)
*23.3 Consent of Deloitte & Touche, LLP
*23.4 Consent of Hein + Associates, LLP
*23.5 Consent of Gerald Dupont Enterprises, Inc. Petroleum
Engineers
*24.1 Powers of Attorney
99.1 Form of Concession and Lease Purchase Agreement dated as of
October 20, 1994 and effective as of August 1, 1994, by and
among C.A.B. Resources, Inc., Crusader, Inc., Australian
Hydrocarbons, Inc. and Harken Energy Corporation
(incorporated by reference as an exhibit to Harken's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994)
*99.2 Subscription and Registration Rights Agreements between
Banque Franck, S.A. and Harken dated March 1, 1995, and
April 7, 1995, respectivelly.
</TABLE>
_______________
* Filed herewith.
<PAGE> 1
EXHIBIT 5.1
[HARKEN ENERGY CORPORATION LETTERHEAD]
May 11, 1995
Harken Energy Corporation
5605 North MacArthur, Suite 400
Irving, Texas 75038
Re: Registration on Form S-3 of 1,200,000 Shares of the Common
Stock of Harken Energy Corporation; Registration No. 33-______
Gentlemen:
This opinion is rendered in connection with the registration and sale
by a certain selling stockholder under the Securities Act of 1933, as amended
(the "Securities Act"), of 1,200,000 shares (the "Shares") of the common stock,
par value $.01 per share (the "Common Stock"), of Harken Energy Corporation, a
Delaware corporation (the "Company"). The Shares are being registered under
the Securities Act pursuant to a Registration Statement on Form S-3 (as amended
at the time it is declared effective by the Securities and Exchange Commission
being referred to herein as the "Registration Statement"). In connection with
the opinions expressed below, I have examined and relied upon the Company's
Certificate of Incorporation, as amended, the Bylaws, and records of corporate
proceedings with respect to the authorization, issuance, and sale of the Shares
to the selling stockholders, and have made such other investigation as I have
deemed necessary for the purposes of this opinion.
Based on the foregoing, and having due regard for such legal
considerations as I have deemed relevant, I am of the opinion that:
1. The Company is a corporation duly incorporated, validly
existing, and in good standing as a corporation under the laws
of the State of Delaware.
2. The Shares have been validly issued and are fully paid and
non-assessable.
I hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an Exhibit to the Registration Statement and to the use
of my name where ever contained therein and in the Prospectus constituting a
part thereof.
Sincerely,
/s/ Larry E. Cummings
Larry E. Cummings
General Counsel
<PAGE> 1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-3 of (i) our report dated
February 10, 1995, on the financial statements of Harken Energy Corporation as
of December 31, 1994, included in Form 10-K of Harken Energy Corporation filed
with the Securities and Exchange Commission, (ii) our report dated January 3,
1995, on the financial statements of CHAP Venture as of December 31, 1993,
included on Form 8K/A, and (iii) to all references to our firm included in this
registration statement.
/s/ ARTHUR ANDERSEN LLP
Dallas, Texas
May 9, 1995
<PAGE> 1
INDEPENDENT AUDITORS' CONSENT
We Consent to the incorporation by reference in this Registration Statement of
Harken Energy Corporation on Form S-3 of our report dated April 12, 1994
appearing in the Annual Report on Form 10-K of Search Exploration, Inc. for the
year ended December 31, 1994 and to the reference to us under the heading
"Experts" in the Prospectus, which is part of this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
Dallas, Texas
May 9, 1995
<PAGE> 1
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in the Form S-3 Registration
Statement and Prospectus of Harken Energy Corporation of our report dated
February 10, 1995, accompanying the consolidated financial statements of Search
Exploration, Inc. incorporated by reference in such Registration Statement, and
to the use of our name and the statements with respect to us, as appearing
under the heading "Experts" in the prospectus.
HEIN + ASSOCIATES LLP
/s/ HEIN + ASSOCIATES LLP
May 9, 1995
Dallas, Texas
<PAGE> 1
GERALD DUPONT ENTERPRISES, INC.
PETROLEUM ENGINEER
P.O. BOX 1590
SUGAR LAND, TEXAS 77487-1590
(713) 240-2822 FAX (713) 242-2822
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS
Gerald W. DuPont Enterprises, Inc. consents to the incorporation by reference
of our evaluation of the estimated reserves and future net revenues of certain
interests owned by McMulloch Energy, Inc. in the Reserve Report, dated January
1, 1995, included in the Annual Report on Form 10-K of Search Exploration, Inc.
for the year ended December 31, 1994.
- ----------------------------------
Petroleum Engineer
May 10, 1995
- ----------------------------------
Date
<PAGE> 1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Mikel D. Faulkner, Bruce N. Huff or Larry E. Cummings, or any of them
(with full power to each of them to act alone), his true and lawful
attorney-in-fact and agent, with full power of substitution, for him and on his
behalf and in his name, place and stead, in any and all capacities, to sign,
execute, and file a Registration Statement on Form S-3 under the Securities Act
of 1933, as amended, and any or all amendments (including without limitation,
post-effective amendments and any amendment or amendments increasing the amount
of securities for which registration is being sought), with all exhibits and
any and all documents required to be filed with respect thereto, with the
Securities and Exchange Commission and/or any regulatory authority relating to
the registration of the Corporation's Common Stock, $0.01 par value, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises in order to effectuate the same,
as fully and to all intents and purposes as he himself might or could do if
personally present, hereby ratifying and confirming all that the said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done.
IN WITNESS WHEREOF, this Power of Attorney has been signed by the following
persons in the capacities indicated on the 5th day of May, 1995.
<TABLE>
<CAPTION>
NAME CAPACITIES
- ---- ----------
<S> <C>
/s/ MIKEL D FAULKNER Chairman of the Board, Director and
Mikel D. Faulkner Chief Executive Officer
(Principal Executive Officer)
/s/ BRUCE N. HUFF Senior Vice President and
Bruce N. Huff Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ RICHARD H. SCHROEDER President and Director
Richard H. Schroeder
</TABLE>
<PAGE> 2
POWER OF ATTORNEY
May 5, 1995
Page - 2
<TABLE>
<S> <C>
/s/ Michael M. Ameen, Jr. Director
Michael M. Ameen, Jr.
/s/ Michael R. Eisenson Director
Michael R. Eisenson
/s/ Talat M. Othman Director
Talat M. Othman
/s/ Donald W. Raymond Director
Donald W. Raymond
/s/ Edwin C. Kettenbrink, Jr. Director
Edwin C. Kettenbrink, Jr.
</TABLE>
<PAGE> 1
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT, dated as of the date of
acceptance set forth below, by and between HARKEN ENERGY CORPORATION, a
Delaware corporation, with headquarters located at 5605 North MacArthur, Suite
400, Irving, Texas 75038 (the "Company"), and the undersigned (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and
delivering this Agreement in reliance upon the exemption from securities
registration afforded by Rule 506 under Regulation D ("Regulation D") as
promulgated by the United States Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Buyer wishes to subscribe for and purchase shares
of Common Stock, $0.01 par value (the "Common Stock"), of the Company upon the
terms and subject to the conditions of this Agreement, subject to acceptance of
this Agreement by the Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
A. SUBSCRIPTION. The undersigned hereby subscribes for
and agrees to purchase the number of shares of Common Stock set forth on the
signature page of this Agreement (the "Shares") at the price per Share set
forth on the signature page of this Agreement. The aggregate purchase price
for the Shares shall be as set forth on the signature page hereto and shall be
payable in United States Dollars.
B. FORM OF PAYMENT. The Buyer shall pay the purchase
price for the Shares by delivering good funds in United States Dollars to the
escrow agent identified in the Joint Escrow Instructions attached hereto as
ANNEX I (the "Escrow Agent"). Such delivery of funds shall be made against
delivery by the Company of a certificate for the Shares. Promptly following
payment by the Buyer to the Escrow Agent of the subscription price for the
Shares, the Company shall deliver a certificate for the Shares to the Escrow
Agent. By signing this Agreement, the Buyer and the Company each agrees to all
of the terms and conditions of, and becomes a party to, the Joint Escrow
Instructions attached hereto as ANNEX I, all of the provisions of which are
incorporated herein by this reference as if set forth in full.
C. METHOD OF PAYMENT. Payment of the purchase price for
the Shares shall be made by wire transfer of funds to:
<PAGE> 2
Citibank, N.A.
153 East 53rd Street
New York, New York 10043
ABA#021000089
For Further Credit to A/C#37179446
for credit to the account of Brian W. Pusch Attorney Escrow
Account
Not later than 4:00 p.m., New York City time, on the date which is three New
York Stock Exchange trading days after the Company shall have accepted this
Agreement and returned a signed counterpart of this Agreement to the Buyer, the
Buyer shall deposit with the Escrow Agent the aggregate subscription price for
the Shares.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees
with, the Company as follows:
a. The Buyer is purchasing the Shares for its own
account for investment only and not with a view towards the public sale or
distribution thereof;
b. The Buyer is an "Accredited Investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act by
reason of Rule 501(a)(3);
c. All subsequent offers and sales of the Shares by the
Buyer shall be made pursuant to registration of the Shares under the 1933 Act
or pursuant to an exemption from registration;
d. The Buyer understands that the Shares are being
offered and sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying upon the truth and accuracy of, and the Buyer's compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Shares;
e. The Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Shares which
have been requested by the Buyer. The Buyer and its advisors, if any, have
been afforded the opportunity to ask questions of the Company and have received
complete and satisfactory answers to any such inquiries. Without limiting the
generality of the foregoing, the Buyer has had the opportunity to obtain and to
review the Company's (1) Annual Report on Form 10-K for the year ended December
31, 1993, (2) Quarterly Reports on Form 10-Q for the quarters ended March 31,
-2-
<PAGE> 3
June 30, and September 30, 1994, (3) Proxy Statement for the Company's 1994
Annual Meeting and (4) Current Reports on Form 8-K, dated November 4, 1994, in
each case as filed with the SEC. The Buyer understands that its investment in
the Shares involves a high degree of risk;
f. The Buyer understands that no United States federal
or state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Shares; and
g. This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Buyer and is a valid and binding
agreement of the Buyer enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to bankruptcy or other laws
affecting the enforcement of creditors' rights generally.
3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Buyer that:
A. CONCERNING THE SHARES. The Shares, when issued,
delivered and paid for in accordance with this Agreement, will be duly and
validly authorized and issued, fully paid and non-assessable and will not
subject the holder thereof to personal liability by reason of being such
holder. There are no preemptive rights of any stockholder of the Company, as
such, to acquire the Shares.
B. SUBSCRIPTION AGREEMENT. This Agreement has been duly
and validly authorized, executed and delivered on behalf of the Company and is
a valid and binding agreement of the Company enforceable in accordance with its
terms, subject as to enforceability to general principles of equity and to
bankruptcy or other laws affecting the enforcement of creditors' rights
generally.
C. NON-CONTRAVENTION. The execution and delivery of
this Agreement by the Company and the consummation by the Company of the
issuance of the Shares and the other transactions contemplated by this
Agreement do not and will not conflict with or result in a breach by the
Company of any of the terms or provisions of, or constitute a default under,
the certificate of incorporation or by-laws of the Company, or any indenture,
mortgage, deed of trust or other material agreement or instrument to which the
Company is a party or by which it or any of its properties or assets are bound,
or any existing applicable law, rule or regulation or any applicable decree,
judgment or order of any court, United States federal or state regulatory body,
administrative agency or other governmental body having jurisdiction over the
Company or any of its properties or assets.
-3-
<PAGE> 4
D. APPROVALS. The Company is not aware of any
authorization, approval or consent of any governmental body which is required
to be obtained by the Company for the issuance and sale of the Shares as
contemplated by this Agreement.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
A. TRANSFER RESTRICTIONS. The Buyer acknowledges that
(1) the Shares to be issued to it hereunder have not been and are not being
registered under the provisions of the 1933 Act (except as provided in the
Registration Rights Agreement referred to in Section 4(c) of this Agreement),
and may not be transferred unless (A) the Shares are subsequently registered
thereunder or (B) the Buyer shall have delivered to the Company an opinion of
counsel, reasonably satisfactory in form, scope and substance to the Company,
to the effect that the Shares may be sold or transferred pursuant to an
exemption from such registration; (2) any sale of the Shares made in reliance
on Rule 144 promulgated under the 1933 Act may be made only in accordance with
the terms of said Rule and further, if said Rule is not applicable, any resale
of such Shares under circumstances in which the seller, or the person through
whom the sale is made, may be deemed to be an underwriter, as that term is used
in the 1933 Act, may require compliance with some other exemption under the
1933 Act or the rules and regulations of the SEC thereunder; and (3) neither
the Company nor any other person is under any obligations to register the
Shares (other than pursuant to the Registration Rights Agreement referred to in
Section 4(c) of this Agreement) under the 1933 Act or to comply with the terms
and conditions of any exemption thereunder.
B. RESTRICTIVE LEGEND. The Buyer acknowledges and
agrees that the certificates for the Shares may bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of the certificates for the Shares):
The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The
shares have been acquired for investment and may not be sold,
transferred or assigned in the absence of an effective
registration statement for these shares under the Securities
Act of 1933, as amended, or an opinion of the Company's
counsel that registration is not required under said Act.
C. REGISTRATION RIGHTS AGREEMENT. The parties hereto
agree to enter into a Registration Rights Agreement in the form attached hereto
as ANNEX II.
D. FORM D. The Company agrees to file a Form D with
respect to the Shares as required under Regulation D.
-4-
<PAGE> 5
E. REPORTING STATUS. So long as the Buyer beneficially
owns any of the Shares, the Company shall file all reports required to be filed
with the SEC pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended (the "1934 Act"), and the Company shall not terminate its
status as an issuer required to file reports under the 1934 Act even if the
1934 Act or the rules and regulations thereunder would permit such termination.
5. TRANSFER AGENT INSTRUCTIONS.
Promptly following the delivery by the Buyer of the aggregate
subscription price for the Shares in accordance with Section 1(c) hereof, the
Company's transfer agent will be instructed to issue one or more certificates
for the Shares, bearing the restrictive legend specified in Section 4(b) of
this Agreement, registered in the name of the Buyer or its nominee and in such
denominations to be specified by the Buyer prior to the closing. The Company
warrants that no instruction other than such instructions referred to in this
Section 5 and stop transfer instructions to give effect to Section 4(a) hereof
will be given by the Company to the transfer agent and that the Shares shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement. Nothing in this Section shall affect
in any way the Buyer's obligations and agreement to comply with all applicable
securities laws upon resale of the Shares. If the Buyer provides the Company
with an opinion of counsel that registration of a resale by the Buyer of any of
the Shares in accordance with clause (1)(B) of Section 4(a) is not required
under the 1933 Act, the Company shall permit the transfer of the Shares and
promptly instruct the Company's transfer agent to issue one or more share
certificates in such name and in such denominations as specified by the Buyer.
6. STOCK DELIVERY INSTRUCTIONS.
The certificate for the Shares shall be delivered by the
Company to the Escrow Agent pursuant to Section 1(b) hereof on a delivery
against payment basis at the closing.
7. CLOSING DATE.
The date and time of the issuance and sale of the Shares (the
"Closing Date") shall be 12:00 noon, New York City time, on the date which is
five New York Stock Exchange trading days after the date on which the Buyer has
deposited the aggregate subscription price for the Shares with the Escrow Agent
in accordance with Section 1(c) hereof, or such other mutually agreed to time.
The closing shall occur on the Closing Date at the offices of the Escrow Agent.
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<PAGE> 6
8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell
the Shares to the Buyer pursuant to this Agreement is conditioned upon:
a. The receipt and acceptance by the Company of the
Buyer's subscription for the Shares as evidenced by execution of this Agreement
by the Company;
b. Delivery by the Buyer to the Escrow Agent of good
funds as payment in full of an amount equal to the aggregate subscription price
for the Shares in accordance with Section 1(c) hereof; and
c. The accuracy on the Closing Date of the
representations and warranties of the Buyer contained in this Agreement and the
performance by the Buyer on or before the Closing Date of all covenants and
agreements of the Buyer required to be performed on or before such Closing
Date.
9. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the
Shares is conditioned upon:
a. Delivery by the Company to the Escrow Agent of one or
more certificates for the Shares in accordance with this Agreement;
b. The accuracy on the Closing Date of the
representations and warranties of the Company contained in this Agreement and
the performance by the Company on or before the Closing Date of all covenants
and agreements of the Company required to be performed on or before such
Closing Date; and
c. On the Closing Date, the Buyer shall have received an
opinion of counsel for the Company, in form, scope and substance reasonably
satisfactory to the Buyer, to the effect set forth in ANNEX III attached
hereto.
10. GOVERNING LAW; MISCELLANEOUS. This Agreement shall
be governed by and interpreted in accordance with the laws of the State of New
York. A facsimile transmission of this signed agreement shall be legal and
binding on all parties hereto. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement. Any notices
required
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<PAGE> 7
or permitted to be given under the terms of this Agreement shall be sent by
mail or delivered personally or by courier and shall be effective five days
after being placed in the mail, if mailed, or upon receipt, if delivered
personally or by courier, in each case addressed to a party at such party's
address shown in the introductory paragraph or on the signature page of this
Agreement or such other address as a party shall have provided by notice to the
other party in accordance with this provision.
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<PAGE> 8
IN WITNESS WHEREOF, this Agreement has been duly executed by
the Buyer or one of its officers thereunto duly authorized as of the date set
forth below.
NUMBER OF SHARES: ____________
PRICE PER SHARE: $ ____________(1)
AGGREGATE SUBSCRIPTION PRICE: $ ____________
NAME OF BUYER: ____________________________
SIGNATURE ____________________________
Title: _______________________________
Date: ____________________________
Address: ____________________________
____________________________
____________________________
This Agreement has been accepted as of the date set forth below.
HARKEN ENERGY CORPORATION
By: ________________________
Title: _____________________
Date: _____________________
__________________________________
(1) Closing bid price of the Common Stock on __________ __, 1995, as reported by
NASDAQ/NMS, less 25%.
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<PAGE> 9
ANNEX I
TO
SUBSCRIPTION AGREEMENT
JOINT ESCROW INSTRUCTIONS
Dated as of the date of the
Subscription Agreement to
Which These Joint Escrow
Instructions Are Attached
Law Offices of
Brian W. Pusch
Penthouse Suite
29 West 57th Street
New York, New York 10019
Attention: Brian W. Pusch, Esq.
Dear Mr. Pusch:
As Escrow Agent for both Harken Energy Corporation, a Delaware
corporation (the "Corporation"), and the purchaser of shares (the "Shares") of
Common Stock, $0.01 par value, of the Corporation (the "Buyer"), who is named
in the Subscription Agreement between the Corporation and the Buyer (the
"Agreement"), the Escrow Agent is hereby authorized and directed to hold the
documents and funds (together with any interest thereon, the "Escrow Funds")
delivered to the Escrow Agent pursuant to the terms of the Agreement to which a
copy of these Joint Escrow Instructions is attached as Annex I, in accordance
with the following instructions:
1. After receipt of written or oral notice from the
Corporation and the Buyer to the Escrow Agent that their respective conditions
precedent to the purchase and sale of the Shares have been satisfied or waived
by the Corporation and the Buyer, the Escrow Agent shall, after reduction by
the amounts referred to in the next succeeding sentence of this paragraph,
release the Escrow Funds to or upon the order of the Corporation and shall
release the certificates for the Shares to the Buyer. After receipt of such
notice, a portion of the Escrow Funds shall be released by the Escrow Agent as
follows: an amount equal to the fees and expenses due to Tanner, Owen & Co.
Incorporated, a New York corporation ("TOC"), pursuant to the engagement
letter, dated February 1, 1995, between the Corporation and TOC, as amended
from time to time (the "Engagement Letter"), such amount to be specified in
writing by TOC to the Escrow Agent prior to release of the Escrow Funds, shall
be released to or upon the order of TOC. If the Corporation or the Buyer
notifies the Escrow Agent that on the Closing Date (as defined in the
Agreement), the conditions precedent to the obligations of the Corporation or
the Buyer, as the case may be, under the Agreement were not satisfied
<PAGE> 10
or waived, then the Escrow Agent shall return the Escrow Funds to the Buyer and
shall return the certificates for the Shares to the Corporation. Prior to
return of the Escrow Funds to the Buyer, the Buyer shall furnish such tax
reporting or other information as shall be appropriate for the Escrow Agent to
comply with applicable United States laws. The Escrow Agent shall deposit all
funds received hereunder in the Escrow Agent's attorney escrow account at
Citibank, N.A.
2. The Escrow Agent's duties hereunder may be altered,
amended, modified or revoked only by a writing signed by the Corporation, the
Buyer and the Escrow Agent.
3. The Escrow Agent shall be obligated only for the
performance of such duties as are specifically set forth herein and may rely
and shall be protected in relying or refraining from acting on any instrument
reasonably believed by the Escrow Agent to be genuine and to have been signed
or presented by the proper party or parties. The Escrow Agent shall not be
personally liable for any act the Escrow Agent may do or omit to do hereunder
as Escrow Agent while acting in good faith, and any act done or omitted by the
Escrow Agent pursuant to the advice of the Escrow Agent's attorneys-at-law
shall be conclusive evidence of such good faith.
4. The Escrow Agent is hereby expressly authorized to
disregard any and all warnings given by any of the parties hereto or by any
other person or corporation, excepting only orders or process of courts of law
and is hereby expressly authorized to comply with and obey orders, judgments or
decrees of any court. In case the Escrow Agent obeys or complies with any such
order, judgment or decree, the Escrow Agent shall not be liable to any of the
parties hereto or to any other person, firm or corporation by reason of such
decree being subsequently reversed, modified, annulled, set aside, vacated or
found to have been entered without jurisdiction.
5. The Escrow Agent shall not be liable in any respect
on account of the identity, authorities or rights of the parties executing or
delivering or purporting to execute or deliver the Agreement or any documents
or papers deposited or called for hereunder.
6. The Escrow Agent shall not be liable for the
outlawing of any rights under the Statute of Limitations with respect to these
Joint Escrow Instructions or any documents or Escrow Funds deposited with the
Escrow Agent.
7. The Escrow Agent shall be entitled to employ such
legal counsel and other experts as the Escrow Agent may deem necessary properly
to advise the Escrow Agent in connection with the Escrow Agent's obligations
hereunder, may rely upon the advice of such counsel, and may pay such counsel
reasonable compensation therefor. The Escrow Agent has acted as legal counsel
for the
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<PAGE> 11
Buyer in connection with the transactions contemplated by the Agreement and may
continue to act as legal counsel for the Buyer notwithstanding its duties as
Escrow Agent hereunder.
8. The Escrow Agent's responsibilities as Escrow Agent
hereunder shall terminate if the Escrow Agent shall resign by written notice to
the Corporation and the Buyer. In the event of any such resignation, the Buyer
shall appoint a successor Escrow Agent.
9. If the Escrow Agent reasonably requires other or
further instruments in connection with these Joint Escrow Instructions or
obligations in respect hereto, the necessary parties hereto shall join in
furnishing such instruments.
10. It is understood and agreed that should any dispute
arise with respect to the delivery and/or ownership or right of possession of
the documents or Escrow Funds held by the Escrow Agent hereunder, the Escrow
Agent is authorized and directed to retain in the Escrow Agent's possession
without liability to anyone all or any part of said documents or Escrow Funds
until such disputes shall have been settled either by mutual written agreement
of the parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but the Escrow Agent shall be under no duty whatsoever to
institute or defend any such proceedings.
11. The Corporation and the Buyer agree jointly and
severally agree to indemnify and hold harmless the Escrow Agent from any and
all claims, liabilities, costs or expenses in any way arising from or relating
to the duties or performance of the Escrow Agent hereunder other than any such
claim, liability, cost or expense to the extent the same shall have been
determined by final, unappealable judgment of a court of competent jurisdiction
to have resulted from the gross negligence or willful misconduct of the Escrow
Agent.
12. Any notice required or permitted hereunder shall be
given in writing (unless otherwise specified herein) and shall be deemed
effectively given upon personal delivery or three business days after deposit
in the United States Postal Service, by registered or certified mail with
postage and fees prepaid, addressed to each of the other parties thereunto
entitled at the following addresses, or at such other addresses as a party may
designate by ten days advance written notice to each of the other parties
hereto.
CORPORATION: At the address set forth in the introductory
paragraph of the Agreement
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<PAGE> 12
BUYER: At the notice address set forth in the
Agreement
ESCROW AGENT: Brian W. Pusch
Penthouse Suite
29 West 57th Street
New York, New York 10019
13. By signing these Joint Escrow Instructions, the
Escrow Agent becomes a party hereto only for the purpose of these Joint Escrow
Instructions; the Escrow Agent does not become a party to the Agreement. The
Corporation and the Buyer have become parties hereto by their execution and
delivery of the Agreement, as provided therein.
14. This instrument shall be binding upon and inure to
the benefit of the parties hereto, and their respective successors and
permitted assigns and shall be governed by the laws of the State of New York.
15. Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings provided in the Agreement.
ACCEPTED BY ESCROW AGENT:
_____________________________
Brian W. Pusch
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<PAGE> 13
ANNEX II
TO
SUBSCRIPTION
AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of ____________,
1995 (this "Agreement"), is made by and among HARKEN ENERGY CORPORATION, a
Delaware corporation (the "Company"), and the person named on the signature
page hereto (the "Initial Investor").
W I T N E S S E T H:
WHEREAS, in connection with the Subscription Agreement, dated
as of ____________, 1995, between the Initial Investor and the Company (the
"Subscription Agreement"), the Company has agreed, upon the terms and subject
to the conditions of the Subscription Agreement, to issue and sell to the
Initial Investor shares (the "Shares") of Common Stock, $0.01 par value (the
"Common Stock"); and
WHEREAS, to induce the Initial Investor to execute and deliver
the Subscription Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), and applicable state securities laws with respect to the
Shares;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Company and
the Initial Investor hereby agree as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall
have the following meanings:
(i) "Investor" means the Initial Investor and any
transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
(ii) "register," "registered," and "registration" refer to
a registration effected by preparing and filing a registration statement or
statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such registration statement by the United States Securities and Exchange
Commission (the "SEC").
<PAGE> 14
(iii) "Registrable Securities" means the Shares.
(b) As used in this Agreement, the term Investor includes
(i) each Investor (as defined above) and (ii) each person who is permitted
transferee or assignee of the Registrable Securities pursuant to Section 9 of
this Agreement.
(c) Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings set forth in the Subscription
Agreement.
2. REGISTRATION.
(A) PIGGY-BACK REGISTRATIONS. If at any time the Company
shall determine to register for its own account or the account of others under
the Securities Act any of its equity securities, other than on Form S-4 or Form
S-8 or their then equivalents relating to equity securities to be issued solely
in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans, the Company shall send to each Investor, who is entitled to registration
rights under this Section 2(a) written notice of such determination and, if
within twenty (20) days after receipt of such notice, such Investor shall so
request in writing, the Company shall include in such registration statement
all or any part of the Registrable Securities such Investor requests to be
registered, except that if, in connection with any underwritten public offering
for the account of the Company the managing underwriter(s) thereof shall impose
a limitation on the number of shares of Common Stock which may be included in
the registration statement because, in such underwriter(s)' judgment, such
limitation is necessary to effect an orderly public distribution, then the
Company shall be obligated to include in such registration statement only such
limited portion of the Registrable Securities with respect to which such
Investor has requested inclusion hereunder. Any exclusion of Registrable
Securities shall be made pro rata among the Investors seeking to include
Registrable Securities, in proportion to the number of Registrable Securities
sought to be included by such Investors; provided, however, that the Company
shall not exclude any Registrable Securities unless the Company has first
excluded all outstanding securities the holders of which are not entitled by
right to inclusion of securities in such registration statement; and provided
further, however, that, after giving effect to the immediately preceding
proviso, any exclusion of Registrable Securities shall be made pro rata with
holders of other securities having the right to include such securities in the
registration statement. No right to registration of Registrable Securities
under this Section 2(a) shall be construed to limit any registration required
under Section 2(b) hereof. The obligations of the Company under this Section
2(a) may be waived by Investors holding a majority in interest of the
Registrable Securities and shall expire after the Company has afforded the
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<PAGE> 15
opportunity for the Investors to exercise registration rights under this
Section 2(a) for two registrations; provided, however, that any Investor who
shall have had any Registrable Securities excluded from any registration
statement in accordance with this Section 2(a) shall be entitled to include in
an additional registration statement filed by the Company the Registrable
Securities so excluded.
(B) DEMAND REGISTRATION. If at any time after the date which
is 30 days after the closing under the Subscription Agreement, Investors who
are entitled to registration rights under this Section 2(b) shall notify the
Company in writing that it or they intend to offer or cause to be offered for
public sale Registrable Securities held by such Investors, the Company shall
cause such of the Registrable Securities as may be requested by any Investor to
be registered, on one occasion only, under the Securities Act and applicable
state laws as expeditiously as possible. Once the right for registration of
any Registrable Securities under this Section 2(b) has been exercised by any
Investor, the Company shall prepare and file a registration statement covering
such Registrable Securities with the SEC within thirty (30) days of the
exercise of such registration right.
(c) If any offering pursuant to a Registration Statement (as
defined herein) pursuant to Section 2(b) hereof involves (at the Company's
election) an underwritten offering, the Investors who hold a majority in
interest of the Registrable Securities subject to such underwritten offering
shall have the right to select one legal counsel and an investment banker or
bankers and manager or managers to administer the offering, which investment
banker or bankers or manager or managers shall be reasonable satisfactory to
the Company. The Investors who hold the Registrable Securities to be included
in such underwriting shall pay all underwriting discounts and commissions and
other fees and expenses of such investment banker or bankers and manager or
managers so selected in accordance with this Section 2(c) (other than fees and
expenses relating to registration of Registrable Securities under federal or
state securities laws which are payable by the Company pursuant to Section 5
hereof) with respect to their Registrable Securities and the fees and expenses
of such legal counsel so selected by the Investors.
(D) PAYMENTS BY THE COMPANY. If the registration statement
covering the Registrable Securities for which a demand for registration has
been made pursuant to Section 2(b) hereof, is not effective within 120 days
after such demand has been made, then the Company will make payments to the
Initial Investor in such amounts and at such times as shall be determined
pursuant to this Section 2(d). The amount to be paid by the Company to the
Initial Investor shall be determined as of each Computation Date, and such
amount shall be equal to (1) in the case of the first Computation Date, two
percent (2%) and (2) in the case of each other Computation Date, three percent
(3%), in each case of the
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<PAGE> 16
aggregate subscription price paid by the Initial Investor for the Shares
pursuant to the Subscription Agreement (the "Periodic Amount"); provided,
however, that if any Computation Date is less than 30 days subsequent to
another Computation Date, then the Periodic Amount payable on the later
Computation Date shall be pro rated. The Periodic Amount shall be paid by the
Company within five business days after each Computation Date and shall be
payable in cash; provided, however, that the Company may elect in lieu of
payment of any Periodic Amount in cash to deliver to the Initial Investor
shares of Common Stock having an Aggregate Market Value equal to the amount of
the Periodic Amount if, but only if, such shares are freely tradable by the
Initial Investor without any restriction under the Securities Act or any state
securities or "blue sky" law.
As used in this Section 2(d), the following terms shall have
the following meanings:
"Aggregate Market Value" of any shares of Common Stock as of
any Computation Date means the product obtained by multiplying (a) such number
of shares of Common Stock times (b) the Average Market Price of the Common
Stock for the Measurement Period for such Computation Date.
"Average Market Price" of any security for any period shall be
computed as the mean average of the daily mean average of the high and low
sales prices of such security (or the mean average of the high and low bid
prices for such security on any trading day for which no sales are reported)
for each trading day in such period on the principal trading market for such
security, as reported in The Wall Street Journal.
"Computation Date" means the date which is 120 days after the
exercise of demand registration rights under Section 2(b) and, if the
registration statement required to be filed by the Company pursuant to Section
2(b) has not theretofore been declared effective by the SEC, each date which is
30 days after a Computation Date and, if the registration statement required to
be filed by the Company pursuant to Section 2(b) is not declared effective by
the SEC within 120 days after the exercise of demand registration rights under
Section 2(b), the date on which such registration statement is declared
effective.
"Measurement Period" means the period of ten consecutive
trading days for the Common Stock ending on (or on the last trading day
preceding) each Computation Date.
3. OBLIGATIONS OF THE COMPANY. In connection with the
registration of the Registrable Securities, the Company shall:
(a) prepare promptly and file with the SEC promptly (but in no
event later than 30 days) after a request in accordance with Section 2(b)
hereof a registration statement or statements (the
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<PAGE> 17
"Registration Statement") with respect to all Registrable Securities to be
included therein, and thereafter use its best efforts to cause the Registration
Statement to become effective as soon as reasonably possible after such filing,
and keep the Registration Statement effective pursuant to Rule 415 at all times
until such date as is six months after the date such Registration Statement is
first ordered effective by the SEC, which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any 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, in light of the circumstances in which they were made, not misleading;
provided, however, that, subject to the conditions set forth in Section 4(a)
below, each Investor may notify the Company in writing that it wishes to
exclude all or a portion of its Registrable Securities from such Registration
Statement;
(b) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and
the prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times until such
date as is six months after the date such Registration Statement is first
ordered effective by the SEC, and, during such period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(c) furnish to each Investor whose Registrable Securities are
included in the Registration Statement, such number of copies of a prospectus,
including a preliminary prospectus, and all amendments and supplements thereto
and such other documents, as such Investor may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such
Investor;
(d) use reasonable efforts to (i) register and qualify the
Registrable Securities covered by the Registration Statement under such other
securities or blue sky laws of such jurisdictions as the Investors who hold a
majority in interest of the Registrable Securities being offered reasonably
request, (ii) prepare and file in those jurisdictions such amendments
(including post-effective amendments) and supplements, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications
in effect at all times until the such date as is the earlier of six months
after the date such Registration Statement is first ordered effective by the
SEC or is three years after the Initial Investor acquired the Shares and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided,
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<PAGE> 18
however, that the Company shall not be required in connection therewith or as a
condition thereto to (I) qualify to do business in any jurisdiction where it
would not otherwise be required to qualify but for this Section 3(d), (II)
subject itself to general taxation in any such jurisdiction, (III) file a
general consent to service of process in any such jurisdiction, (IV) provide
any undertakings that cause more than nominal expense or burden to the Company
or (V) make any change in its charter or by-laws, which in each case the Board
of Directors of the Company determines to be contrary to the best interests of
the Company and its stockholders;
(e) in the event Investors who hold a majority in interest of
the Registrable Securities being offered in the offering select underwriters
for the offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, including, without limitation,
customary indemnification and contribution obligations, with the managing
underwriter of such offering;
(f) as promptly as practicable after becoming aware of such
event, notify each Investor of the happening of any event of which the Company
has knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact
or omits to state material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, and use its best efforts promptly to prepare a
supplement or amendment to the Registration Statement to correct such untrue
statement or omission, and deliver a number of copies of such supplement or
amendment to each Investor as such Investor may reasonably request;
(g) as promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold (or, in
the event of an underwritten offering, the managing underwriters) of the
issuance by the SEC of any stop order or other suspension of effectiveness of
the Registration Statement at the earliest possible time;
(h) permit a single firm of counsel designated as selling
stockholders' counsel by the Investors who hold a majority in interest of the
Registrable Securities being sold to review the Registration Statement and all
amendments and supplements thereto a reasonable period of time prior to their
filing with the SEC, and shall not file any document in a form to which such
counsel reasonably objects;
(i) make generally available to its security holders as soon
as practical, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions
of Rule 158 under the
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<PAGE> 19
Securities Act) covering a twelve-month period beginning not later than the
first day of the Company's fiscal quarter next following the date of the
Registration Statement;
(j) at the request of the Investors who hold a majority in
interest of the Registrable Securities being sold, furnish on the date that
Registrable Securities are delivered to an underwriter for sale in connection
with the Registration Statement (i) a letter, dated such date, from the
Company's independent certified public accountants in form and substance as is
customarily given by independent certified public accountants to underwriters
in an underwritten public offering, addressed to the underwriters; and (ii) an
opinion, dated such date, from counsel representing the Company for purposes of
such Registration Statement, in form and substance as is customarily given in
an underwritten public offering, addressed to the underwriters and the
Investors;
(k) make available for inspection by any Investor, any
underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by any such
Investor or underwriter (collectively, the "Inspectors"), all pertinent
financial and other records, pertinent corporate documents and properties of
the Company (collectively, the "Records"), as shall be reasonably necessary to
enable each Inspector to exercise its due diligence responsibility, and cause
the Company's officers, directors and employees to supply all information which
any Inspector may reasonably request for purposes of such due diligence;
provided, however, that each Inspector shall hold in confidence and shall not
make any disclosure (except to an Investor) of any Record or other information
which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement, (ii) the release of such Records is ordered pursuant to
a subpoena or other order from a court or government body of competent
jurisdiction or (iii) the information in such Records has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The Company shall not be required to disclose any
confidential information in such Records to any Inspector until and unless such
Inspector shall have entered into confidentiality agreements (in form and
substance satisfactory to the Company) with the Company with respect thereto,
substantially in the form of this Section 3(k). Each Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential. The Company shall hold
in confidence and shall not make any disclosure of information concerning an
Investor provided
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<PAGE> 20
to the Company pursuant to Section 4(e) hereof unless (i) disclosure of such
information is necessary to comply with federal or state securities laws, (ii)
the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other order from a court
or governmental body of competent jurisdiction or (iv) such information has
been made generally available to the public other than by disclosure in
violation of this or any other agreement. The Company agrees that it shall,
upon learning that disclosure of such information concerning an Investor is
sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to such Investor, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, such information;
(l) use its best efforts either to (i) cause all the
Registrable Securities covered by the Registration Statement to be listed on a
national securities exchange and on each additional national securities
exchange on which similar securities issued by the Company are then listed, if
any, if the listing of such Registrable Securities is then permitted under the
rules of such exchange or (ii) secure designation of all the Registrable
Securities covered by the Registration Statement as a National Association of
Securities Dealers Automated Quotations System ("NASDAQ") "national market
system security" within the meaning of Rule 11Aa2-1 of the SEC under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
quotation of the Registrable Securities on the NASDAQ National Market System
or, if, despite the Company's best efforts to satisfy the preceding clause (i)
or (ii), the Company is unsuccessful in satisfying the preceding clause (i) or
(ii), to secure listing on a national securities exchange or NASDAQ
authorization and quotation for such Registrable Securities and, without
limiting the generality of the foregoing, to arrange for at least two market
makers to register with the National Association of Securities Dealers, Inc.
("NASD") as such with respect to such Registrable Securities;
(m) provide a transfer agent and registrar, which may be a
single entity, for the Registrable Securities not later than the effective date
of the Registration Statement;
(n) cooperate with the Investors who hold Registrable
Securities being sold and the managing underwriter or underwriters, if any, to
facilitate the timely preparation and delivery of certificates (not bearing any
restrictive legends) representing Registrable Securities to be sold pursuant to
the Registration Statement and enable such certificates to be in such
denominations or amounts as the case may be, and registered in such names as
the managing underwriter or underwriters, if any, or the Investors may
reasonably request; and
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<PAGE> 21
(o) take all other reasonable actions necessary to expedite
and facilitate disposition by the Investor of the Registrable Securities
pursuant to the Registration Statement;
4. OBLIGATIONS OF THE INVESTORS. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations:
(a) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Agreement with respect to each
Investor that such Investor shall furnish to the Company such information
regarding itself, the Registrable Securities held by it and the intended method
of disposition of the Registrable Securities held by it as shall be reasonably
required to the effect the registration of the Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request. At least fifteen (15) days prior to the first anticipated
filing date of the Registration Statement, the Company shall notify each
Investor of the information the Company requires from each such Investor (the
"Requested Information") if such Investor elects to have any of such Investor's
Registrable Securities included in the Registration Statement. If within five
(5) business days prior to the filing date the Company has not received the
Requested Information from an Investor (a "Non-Responsive Investor"), then the
Company may file the Registration Statement without including Registrable
Securities of such Non-Responsive Investor;
(b) Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement;
(c) In the event Investors holding a majority in interest of
the Registrable Securities being registered determine to engage the services of
an underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor has notified
the Company in writing of such Investor's election to exclude all of such
Investor's Registrable Securities from the Registration Statement;
(d) Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(f)
or 3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the
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<PAGE> 22
Registration Statement covering such Registrable Securities until such
Investor's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(f) or 3(g) and, if so directed by the Company, such
Investor shall deliver to the Company (at the expense of the Company) or
destroy (and deliver to the Company a certificate of destruction) all copies in
such Investor's possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice; and
(e) No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting arrangements
approved by the Investors entitled hereunder to approve such arrangements, (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements and (iii) agrees to pay its pro rata share of
all underwriting discounts and commissions and other fees and expenses of
investment bankers and any manager or managers of such underwriting and legal
expenses of the underwriter applicable with respect to its Registrable
Securities, in each case to the extent not payable by the Company pursuant to
the terms of this Agreement.
5. EXPENSES OF REGISTRATION. All expenses, other than
underwriting discounts and commissions and other fees and expenses of
investment bankers and other than brokerage commissions, incurred in connection
with registrations, filings or qualifications pursuant to Section 3, including,
without limitation, all registration, listing and qualifications fees, printers
and accounting fees and the fees and disbursements of counsel for the Company,
shall be borne by the Company; provided, however, that the Investors shall bear
the fees and out-of-pocket expenses of the one legal counsel selected by the
Investors pursuant to Section 2(d) hereof.
6. INDEMNIFICATION. In the event any Registrable
Securities are included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor,
each person, if any, who controls any Investor within the meaning of the
Securities Act or the Exchange Act, any underwriter (as defined in the
Securities Act) for the Investors, the directors, if any, of such underwriter
and the officers, if any, of such underwriter, and each person, if any, who
controls any such underwriter within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Person"), against any losses, claims,
damages, expenses or liabilities (joint or several) (collectively, "Claims") to
which any of them may become subject under the Securities Act, the
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<PAGE> 23
Exchange Act or otherwise, insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations in the
Registration Statement, or any post-effective amendment thereof, or any
prospectus included therein: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
post-effective amendment thereof or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus if used
prior to the effective date of such Registration Statement, or contained in the
final prospectus (as amended or supplemented, if the Company files any
amendment thereof or supplement thereto with the SEC) or the omission or
alleged omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which the
statements therein were made, not misleading or (iii) any violation or alleged
violation by the Company of the Securities Act, any state securities law or any
rule or regulation by the Company of the Securities Act, the Exchange Act or
any state securities law (the matters in the foregoing clauses (i) through (iv)
being, collectively, "Violations"). Subject to the restrictions set forth in
Section 6(d) with respect to the number of legal counsel, the Company shall
reimburse the Investors and each such underwriter or controlling person,
promptly as such expenses are incurred and are due and payable, for any legal
fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a) (I) shall not apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by any Indemnified Person or underwriter
for such Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c) hereof; (II) with respect to any preliminary
prospectus shall not inure to the benefit of any such person from whom the
person asserting any such Claim purchased the Registrable Securities that are
the subject thereof (or to the benefit of any person controlling such person)
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected in the prospectus, as then amended or
supplemented, if such prospectus was timely made available by the Company
pursuant to Section 3(c) hereof; and (III) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior
written consent of the Company, which consent shall not be unreasonably
withheld. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Indemnified Person and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9.
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<PAGE> 24
(b) In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to indemnify and hold
harmless, to the same extent and in the same manner set forth in Section 6(a),
the Company, each of its directors, each of its officers who signs the
Registration Statement, each person, if any, who controls the Company within
the meaning of the Securities Act or the Exchange Act, any underwriter and any
other stockholder selling securities pursuant to the Registration Statement or
any of its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the Securities Act or the Exchange Act
(collectively and together with an Indemnified Person, an "Indemnified Party"),
against any Claim to which any of them may become subject, under the Securities
Act, the Exchange Act or otherwise, insofar as such Claim arises out of or is
based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Investor expressly for use in
connection with such Registration Statement; and such Investor will reimburse
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such Claim; provided, however, that the
indemnity agreement contained in this Section 6(b) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the
prior written consent of such Investor, which consent shall not be unreasonably
withheld; provided, further, however, that the Investor shall be liable under
this Section 6(b) for only that amount of a Claim as does not exceed the net
proceeds to such Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 9. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of
material fact contained in the preliminary prospectus was corrected on a timely
basis in the prospectus, as then amended or supplemented.
(c) The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information such persons so furnished in writing by such
persons expressly for inclusion in the Registration Statement.
(d) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in
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<PAGE> 25
respect thereof is to made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying parties; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel, with the fees and expenses to paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and
any other party represented by such counsel in such proceeding. The Company
shall pay for only one separate legal counsel for the Investors; such legal
counsel shall be selected by the Investors holding a majority in interest of
the Registrable Securities. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action. The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as such expense, loss, damage or liability is incurred and is due
and payable.
7. CONTRIBUTION. To the extent any indemnification by
an indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which
it would otherwise be liable under Section 6 to the fullest extent permitted by
law; provided, however, that (a) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6, (b) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
seller of Registrable Securities who was not guilty of such fraudulent
misrepresentation and (c) contribution by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such
seller from the sale of such Registrable Securities.
8. REPORTS UNDER EXCHANGE ACT. With a view to making
available to the Investors the benefits of Rule 144 promulgated under the
Securities Act or any other similar rule or regulation of the SEC that may at
any time permit the Investors to sell securities of the Company to the public
without registration ("Rule 144"), the Company agrees to:
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<PAGE> 26
(a) make and keep public information available, as those terms
are understood and defined in Rule 144, at all times after ninety (90) days
after the effective date of the registration statement filed by the Company for
the initial public offering of its securities;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange
Act; and
(c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the company), the Securities Act and Exchange
Act (at any time after it has become subject to such reporting requirements),
(ii) a copy of the most recent annual or quarterly report of the Company and
such other reports and documents so filed by the Company and (iii) such other
information as may be reasonably requested to permit the Investors to sell such
securities without registration pursuant to Rule 144.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to
have the Company register Registrable Securities pursuant to this Agreement
shall be automatically assigned by the Investors to transferees or assignees of
all or any portion of such securities only if: (a) the Company is, within a
reasonable time after such transfer or assignment, furnished with written
notice of (i) the name and address of such transferee or assignee and (ii) the
securities with respect to which such registration rights are being transferred
or assigned, (b) immediately following such transfer or assignment the further
disposition of such securities by the transferee or assignee is restricted
under the Securities Act and applicable state securities laws, (c) such
assignment is in accordance with and permitted by all other agreements between
the transferor or assignor and the Company, including, without limitation,
stockholder's agreements, warrants and subscription agreements, and the
transferor or assignor otherwise is not in material default of any obligation
to the Company under any such other agreement and (d) at or before the time the
Company received the written notice contemplated by clause (a) of this sentence
the transferee or assignee agrees in writing with the Company to be bound by
all of the provisions contained herein.
10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of
this Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Investors who
hold a majority in interest of the Registrable Securities. Any amendment or
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<PAGE> 27
waiver effected in accordance with this Section 10 shall be binding upon each
Investor and the Company.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
(b) Notices required or permitted to be hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
or sent by registered mail, return receipt requested, addressed (i) if to the
Company, at Harken Energy Corporation, 5605 North MacArthur, Suite 400, Irving,
Texas 75038, Attention: President, (ii) if to the Initial Investor, at the
address set forth under its name in the Subscription Agreement and (iii) if to
any other Investor, at such address as such Investor shall have provided in
writing to the Company, or at such other address as each such party furnishes
by notice given in accordance with this Section 11(b).
(c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be enforced, governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such State. In the event
that any provision of this Agreement is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision hereof
which may prove invalid or unenforceable under any law shall not affect the
validity or enforceability of any other provision hereof.
(e) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(f) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
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<PAGE> 28
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a
party, may be delivered to the other party hereto by telephone line facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
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<PAGE> 29
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
day and year first above written.
HARKEN ENERGY CORPORATION
By__________________________
Name:
Title:
INITIAL INVESTOR:
NAME:_______________________
By__________________________
Name:
Title:
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<PAGE> 30
ANNEX III
TO
SUBSCRIPTION
AGREEMENT
[LETTERHEAD OF COMPANY COUNSEL]
[Date of Closing]
[NAME AND ADDRESS OF BUYER]
HARKEN ENERGY CORPORATION
Ladies and Gentlemen:
We have acted as counsel to Harken Energy Corporation, a
Delaware corporation (the "Company"), in connection with the Subscription
Agreement, dated ________________, between you and the Company. Capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings assigned to such terms in the Agreement.
As such counsel, we have reviewed the actions heretofore taken
by the Company in connection with the Agreement and the transactions
contemplated thereby and we have examined originals, or copies certified or
otherwise authenticated to our satisfaction, of all such corporate documents,
records, agreements, certificates and other instruments of the Company and of
such certificates of public officials, and have made such investigations of law
and have discussed with officers and representatives of the Company such
questions of fact as we have deemed necessary or appropriate as the basis for
the opinions hereinafter expressed. We have assumed the accuracy and
completeness of all corporate records and information made available to us by
the Company upon which we have relied.
Based upon the foregoing, we are of the opinion that:
(1) The Shares have been duly authorized and, when issued
and paid for in accordance with the Agreement, will be validly issued,
fully paid and non-assessable; and
(2) The Registration Rights Agreement has been duly and
validly authorized, executed and delivered by the Company and,
assuming the due authorization, execution and delivery thereof by you,
constitutes the legal, valid and binding obligation of the Company
enforceable against the Company in
<PAGE> 31
accordance with its terms subject, as to enforcement of remedies, to
applicable bankruptcy, insolvency, moratorium, reorganization, or
similar laws affecting creditors' rights generally and general
principles of equity and except that rights to indemnification may be
limited by public policy.
These opinions are limited to the matters expressly stated
herein and are rendered solely for your benefit and may not be quoted or relied
upon for any other purpose or by any other person.
Very truly yours,
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<PAGE> 32
Draft of 4/6/95
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT, dated as of the date of
acceptance set forth below, by and between HARKEN ENERGY CORPORATION, a
Delaware corporation, with headquarters located at 5605 North MacArthur, Suite
400, Irving, Texas 75038 (the "Company"), and the undersigned (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and
delivering this Agreement in reliance upon the exemption from securities
registration afforded by Rule 506 under Regulation D ("Regulation D") as
promulgated by the United States Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Buyer wishes to subscribe for and purchase shares
of Common Stock, $0.01 par value (the "Common Stock"), of the Company upon the
terms and subject to the conditions of this Agreement, subject to acceptance of
this Agreement by the Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
A. SUBSCRIPTION. The undersigned hereby subscribes for
and agrees to purchase the number of shares of Common Stock set forth on the
signature page of this Agreement (the "Shares") at the price per Share set
forth on the signature page of this Agreement. The aggregate purchase price
for the Shares shall be as set forth on the signature page hereto and shall be
payable in United States Dollars.
B. FORM OF PAYMENT. The Buyer shall pay the purchase
price for the Shares by delivering good funds in United States Dollars to the
escrow agent identified in the Joint Escrow Instructions attached hereto as
ANNEX I (the "Escrow Agent"). Such delivery of funds shall be made against
delivery by the Company of a certificate for the Shares. Promptly following
payment by the Buyer to the Escrow Agent of the subscription price for the
Shares, the Company shall deliver a certificate for the Shares to the Escrow
Agent. By signing this Agreement, the Buyer and the Company each agrees to all
of the terms and conditions of, and becomes a party to, the Joint Escrow
Instructions attached hereto as ANNEX I, all of the provisions of which are
incorporated herein by this reference as if set forth in full.
C. METHOD OF PAYMENT. Payment of the purchase price for
the Shares shall be made by wire transfer of funds to:
<PAGE> 33
Citibank, N.A.
153 East 53rd Street
New York, New York 10043
ABA#021000089
For Further Credit to A/C#37179446
for credit to the account of Brian W. Pusch Attorney Escrow
Account
Not later than 4:00 p.m., New York City time, on the date which is three New
York Stock Exchange trading days after the Company shall have accepted this
Agreement and returned a signed counterpart of this Agreement to the Buyer, the
Buyer shall deposit with the Escrow Agent the aggregate subscription price for
the Shares.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees
with, the Company as follows:
a. The Buyer is purchasing the Shares for its own
account for investment only and not with a view towards the public sale or
distribution thereof;
b. The Buyer is an "Accredited Investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act by
reason of Rule 501(a)(3);
c. All subsequent offers and sales of the Shares by the
Buyer shall be made pursuant to registration of the Shares under the 1933 Act
or pursuant to an exemption from registration;
d. The Buyer understands that the Shares are being
offered and sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying upon the truth and accuracy of, and the Buyer's compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Shares;
e. The Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Shares which
have been requested by the Buyer. The Buyer and its advisors, if any, have
been afforded the opportunity to ask questions of the Company and have received
complete and satisfactory answers to any such inquiries. Without limiting the
generality of the foregoing, the Buyer has had the opportunity to obtain and to
review the Company's (1) Annual Report on Form 10-K for the year ended December
31, 1994, and (2) Proxy Statement for the Company's 1994 Annual Meeting, in
each
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<PAGE> 34
case as filed with the SEC. The Buyer understands that its investment in the
Shares involves a high degree of risk;
f. The Buyer understands that no United States federal
or state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Shares; and
g. This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Buyer and is a valid and binding
agreement of the Buyer enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to bankruptcy or other laws
affecting the enforcement of creditors' rights generally.
3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Buyer that:
A. CONCERNING THE SHARES. The Shares, when issued,
delivered and paid for in accordance with this Agreement, will be duly and
validly authorized and issued, fully paid and non-assessable and will not
subject the holder thereof to personal liability by reason of being such
holder. There are no preemptive rights of any stockholder of the Company, as
such, to acquire the Shares.
B. SUBSCRIPTION AGREEMENT. This Agreement has been duly
and validly authorized, executed and delivered on behalf of the Company and is
a valid and binding agreement of the Company enforceable in accordance with its
terms, subject as to enforceability to general principles of equity and to
bankruptcy or other laws affecting the enforcement of creditors' rights
generally.
C. NON-CONTRAVENTION. The execution and delivery of
this Agreement by the Company and the consummation by the Company of the
issuance of the Shares and the other transactions contemplated by this
Agreement do not and will not conflict with or result in a breach by the
Company of any of the terms or provisions of, or constitute a default under,
the certificate of incorporation or by-laws of the Company, or any indenture,
mortgage, deed of trust or other material agreement or instrument to which the
Company is a party or by which it or any of its properties or assets are bound,
or any existing applicable law, rule or regulation or any applicable decree,
judgment or order of any court, United States federal or state regulatory body,
administrative agency or other governmental body having jurisdiction over the
Company or any of its properties or assets.
D. APPROVALS. The Company is not aware of any
authorization, approval or consent of any governmental body which is required
to be obtained by the Company for the issuance and sale of the Shares as
contemplated by this Agreement.
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<PAGE> 35
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
A. TRANSFER RESTRICTIONS. The Buyer acknowledges that
(1) the Shares to be issued to it hereunder have not been and are not being
registered under the provisions of the 1933 Act (except as provided in the
Registration Rights Agreement referred to in Section 4(c) of this Agreement),
and may not be transferred unless (A) the Shares are subsequently registered
thereunder or (B) the Buyer shall have delivered to the Company an opinion of
counsel, reasonably satisfactory in form, scope and substance to the Company,
to the effect that the Shares may be sold or transferred pursuant to an
exemption from such registration; (2) any sale of the Shares made in reliance
on Rule 144 promulgated under the 1933 Act may be made only in accordance with
the terms of said Rule and further, if said Rule is not applicable, any resale
of such Shares under circumstances in which the seller, or the person through
whom the sale is made, may be deemed to be an underwriter, as that term is used
in the 1933 Act, may require compliance with some other exemption under the
1933 Act or the rules and regulations of the SEC thereunder; and (3) neither
the Company nor any other person is under any obligations to register the
Shares (other than pursuant to the Registration Rights Agreement referred to in
Section 4(c) of this Agreement) under the 1933 Act or to comply with the terms
and conditions of any exemption thereunder.
B. RESTRICTIVE LEGEND. The Buyer acknowledges and
agrees that the certificates for the Shares may bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of the certificates for the Shares):
The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The
shares have been acquired for investment and may not be sold,
transferred or assigned in the absence of an effective
registration statement for these shares under the Securities
Act of 1933, as amended, or an opinion of the Company's
counsel that registration is not required under said Act.
C. REGISTRATION RIGHTS AGREEMENT. The parties hereto
agree to enter into an Amendment to Registration Rights Agreement in the form
attached hereto as ANNEX II on or before the Closing Date.
D. FORM D. The Company agrees to file a Form D with
respect to the Shares as required under Regulation D.
E. REPORTING STATUS. So long as the Buyer beneficially
owns any of the Shares, the Company shall file all reports required to be filed
with the SEC pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended (the
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<PAGE> 36
"1934 Act"), and the Company shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would permit such termination.
5. TRANSFER AGENT INSTRUCTIONS.
Promptly following the delivery by the Buyer of the aggregate
subscription price for the Shares in accordance with Section 1(c) hereof, the
Company's transfer agent will be instructed to issue one or more certificates
for the Shares, bearing the restrictive legend specified in Section 4(b) of
this Agreement, registered in the name of the Buyer or its nominee and in such
denominations to be specified by the Buyer prior to the closing. The Company
warrants that no instruction other than such instructions referred to in this
Section 5 and stop transfer instructions to give effect to Section 4(a) hereof
will be given by the Company to the transfer agent and that the Shares shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement. Nothing in this Section shall affect
in any way the Buyer's obligations and agreement to comply with all applicable
securities laws upon resale of the Shares. If the Buyer provides the Company
with an opinion of counsel that registration of a resale by the Buyer of any of
the Shares in accordance with clause (1)(B) of Section 4(a) is not required
under the 1933 Act, the Company shall permit the transfer of the Shares and
promptly instruct the Company's transfer agent to issue one or more share
certificates in such name and in such denominations as specified by the Buyer.
6. STOCK DELIVERY INSTRUCTIONS.
The certificate for the Shares shall be delivered by the
Company to the Escrow Agent pursuant to Section 1(b) hereof on a delivery
against payment basis at the closing.
7. CLOSING DATE.
The date and time of the issuance and sale of the Shares (the
"Closing Date") shall be 12:00 noon, New York City time, on the date which is
five New York Stock Exchange trading days after the date on which the Buyer has
deposited the aggregate subscription price for the Shares with the Escrow Agent
in accordance with Section 1(c) hereof, or such other mutually agreed to time.
The closing shall occur on the Closing Date at the offices of the Escrow Agent.
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<PAGE> 37
8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell
the Shares to the Buyer pursuant to this Agreement is conditioned upon:
a. The receipt and acceptance by the Company of the
Buyer's subscription for the Shares as evidenced by execution of this Agreement
by the Company;
b. Delivery by the Buyer to the Escrow Agent of good
funds as payment in full of an amount equal to the aggregate subscription price
for the Shares in accordance with Section 1(c) hereof; and
c. The accuracy on the Closing Date of the
representations and warranties of the Buyer contained in this Agreement and the
performance by the Buyer on or before the Closing Date of all covenants and
agreements of the Buyer required to be performed on or before such Closing
Date.
9. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the
Shares is conditioned upon:
a. Delivery by the Company to the Escrow Agent of one or
more certificates for the Shares in accordance with this Agreement;
b. The accuracy on the Closing Date of the
representations and warranties of the Company contained in this Agreement and
the performance by the Company on or before the Closing Date of all covenants
and agreements of the Company required to be performed on or before such
Closing Date; and
c. On the Closing Date, the Buyer shall have received an
opinion of counsel for the Company, in form, scope and substance reasonably
satisfactory to the Buyer, to the effect set forth in ANNEX III attached
hereto.
10. GOVERNING LAW; MISCELLANEOUS. This Agreement shall
be governed by and interpreted in accordance with the laws of the State of New
York. A facsimile transmission of this signed agreement shall be legal and
binding on all parties hereto. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement. Any notices
required
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<PAGE> 38
or permitted to be given under the terms of this Agreement shall be sent by
mail or delivered personally or by courier and shall be effective five days
after being placed in the mail, if mailed, or upon receipt, if delivered
personally or by courier, in each case addressed to a party at such party's
address shown in the introductory paragraph or on the signature page of this
Agreement or such other address as a party shall have provided by notice to the
other party in accordance with this provision.
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<PAGE> 39
IN WITNESS WHEREOF, this Agreement has been duly executed by
the Buyer or one of its officers thereunto duly authorized as of the date set
forth below.
NUMBER OF SHARES: ____________
PRICE PER SHARE: $ ____________(1)
AGGREGATE SUBSCRIPTION PRICE: $ ____________
NAME OF BUYER: ____________________________
SIGNATURE ____________________________
Title: _______________________________
Date: ____________________________
Address: ____________________________
____________________________
____________________________
This Agreement has been accepted as of the date set forth below.
HARKEN ENERGY CORPORATION
By: ________________________
Title: _____________________
Date: _____________________
__________________________________
(1) Closing bid price of the Common Stock on __________ __, 1995, as reported by
NASDAQ/NMS, less 25%.
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<PAGE> 40
ANNEX II
TO
SUBSCRIPTION
AGREEMENT
AMENDMENT NO.1 TO REGISTRATION RIGHTS AGREEMENT
AMENDMENT NO.1, dated as of April 7, 1995 (this "Amendment")
to Registration Rights Agreement, dated as of March 1, 1995, between HARKEN
ENERGY CORPORATION, a Delaware corporation (the "Company"), and Banque Franck
S.A. (the "Initial Investor").
W I T N E S S E T H :
WHEREAS, the Company and the Initial Investor are parties to a
Registration Rights Agreement, dated as of March 1, 1995 (the "Registration
Rights Agreement"), between the Company and the Initial Investor; and
WHEREAS, the Company and the Initial Investor wish to amend
the Registration Rights Agreement upon the terms and subject to the conditions
set forth herein.
NOW THEREFORE, in consideration of the premises and the
covenants contained in this Amendment and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
1. AMENDMENTS. (a) The first Recital of the
Registration Rights Agreement is hereby amended by deleting the phrase "(the
"Subscription Agreement")" and substituting in lieu thereof the phrase "(the
"Original Subscription Agreement")".
(b) Section 1(a) of the Registration Rights Agreement is
hereby amended by deleting clause (iii) thereof in its entirety and inserting
in lieu thereof the following:
(iii) "Registrable Securities" shall mean the Shares and the
"Shares" as defined in the Second Subscription Agreement.
(iv) "Second Subscription Agreement" shall mean the
Subscription Agreement, dated as of April 7, 1995, between the Company and the
Initial Investor.
(v) "Subscription Agreement" shall mean the Original
Subscription Agreement and the Second Subscription Agreement.
(c) Section 2(a) of the Registration Rights Agreement
shall be amended by deleting the last sentence thereof in its entirety and
inserting in lieu thereof the following new sentence:
The obligations of the Company under this Section 2(a) may be
<PAGE> 41
waived by Investors holding a majority in interest of the Registrable
Securities and shall expire after the Company has afforded the
opportunity for the Investors to exercise registration rights under
this Section 2(a) for two registrations for each Subscription
Agreement;provided, however, that any Investor who shall have had any
Registrable Securities excluded from any registration statement in
accordance with this Section 2(a) shall be entitled to include in an
additional registration statement filed by the Company the Registrable
Securities so excluded.
(d) Section 2(b) of the Registration Rights Agreement is
hereby amended by deleting the text thereof in its entirety and inserting in
lieu thereof the following text:
(B) DEMAND REGISTRATION. If at any time after the date which
is 30 days after the closing under a Subscription Agreement, Investors
who are entitled to registration rights under this Section 2(b) shall
notify the Company in writing that it or they intend to offer or cause
to be offered for public sale Registrable Securities sold under such
Subscription Agreement and held by such Investors, the Company shall
cause such of the Registrable Securities as may be requested by any
Investor to be registered, for each Subscription Agreement on one
occasion only, under the Securities Act and applicable state laws as
expeditiously as possible; provided, however, that, if, in the case of
the Registrable Securities issued and sold by the Company pursuant to
the Second Subscription Agreement, the Company has not, on or before
the Closing Date (as defined in the Second Subscription Agreement)
filed with the SEC a registration statement covering the Registrable
Securities issued and sold by the Company pursuant to the Original
Subscription Agreement, then any notice given by any Investor pursuant
to this Section 2(b), whether given before, on or after such Closing
Date, shall be deemed to also include the Registrable Securities
issued and sold by the Company pursuant to the Second Subscription
Agreement, and the Company shall register the Registrable Securities
issued and sold by the Company pursuant to the Second Subscription
Agreement at the same time and on the same terms as the Registrable
Securities issued and sold by the Company pursuant to the Original
Subscription Agreement. Notwithstanding the proviso to the
immediately preceding sentence, the period of 120 days contained in
Section 2(d) hereof shall commence with respect to the Registrable
Securities issued and sold by the Company pursuant to the Second
Subscription Agreement 30 days after the Closing Date (as defined in
the Second Subscription Agreement). Once the right for registration
of any Registrable Securities under this Section 2(b) has been
exercised by any Investor, the Company shall prepare and file a
registration statement covering such Registrable Securities with the
SEC within thirty (30) days of the exercise of such registration
right.
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<PAGE> 42
2. EFFECTIVENESS. This Amendment shall become effective
on the date (the "Effective Date") when counterparts hereof shall have been
executed and delivered by the Company and the Initial Investor. From and after
the Effective Date, all references in the Registration Rights Agreement to the
Registration Rights Agreement shall be deemed to be references to such
Registration Rights Agreement as amended hereby.
3. REGISTRATION RIGHTS AGREEMENT. Except as amended by
this Amendment, the Registration Rights Agreement shall remain in effect in
accordance with its terms.
4. MISCELLANEOUS. (a) Capitalized terms used in this
Amendment and defined in the introductory paragraph or recitals of this
Amendment shall have the respective meanings provided therein. Capitalized
terms used in this Amendment and not otherwise defined in this Amendment shall
have the respective meanings provided in the Registration Rights Agreement.
(b) This Amendment shall be construed and interpreted in
accordance with the laws of the State of New York.
(c) This Amendment may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which counterparts when so executed and delivered, shall be deemed to be an
original and all of which counterparts, taken together, shall constitute but
one and the same instrument. This Amendment may be executed and delivered by a
party by a telephone line facsimile transmission bearing a signature on behalf
of such party transmitted by such party to the other party.
(d) Section and paragraph headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose.
(e) Any provision of this Amendment that is prohibited,
unenforceable or not authorized in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or non-authorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
(f) No amendment or waiver of any provision of this
Amendment shall in any event be effective unless the same shall be in writing
and signed by the party to be charged with enforcement thereof and any such
waiver shall be effective only in the specific instance and for the specific
purpose for which given. No failure on the part of any party to exercise, and
no delay in exercising, any right under this Amendment shall operate as a
waiver thereof by such party. No single or partial exercise of any right under
this Amendment shall preclude any other or further exercise thereof or the
exercise of any other right.
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<PAGE> 43
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date first
above written.
HARKEN ENERGY CORPORATION
By_________________________
Name:
Title:
BANQUE FRANCK S.A.
By________________________
Name:
Title:
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