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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 5, 1995
HARKEN ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 0-9207 95-2841597
(State or other jurisdiction of (Commission File (IRS Employer
incorporation) Number) Identification No.)
5605 N. MACARTHUR BLVD, SUITE 400 75038
IRVING, TEXAS 75038 (ZIP Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (214) 753-6900
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On October 5, 1995, Harken Energy West Texas, Inc., a Delaware
corporation ("HEWT") and a wholly owned subsidiary of Harken Energy
Corporation, a Delaware corporation ("Harken"), acquired the interests of
Yellowhouse Project Co., a Delaware corporation ("Yellowhouse"), in certain oil
and gas properties (the "Properties") pursuant to an Agreement of Sale and
Purchase (the "Sale and Purchase Agreement") dated October 5, 1995, by and
between Yellowhouse and HEWT. The Properties consist of a producing oil and
gas field in the Texas panhandle.
Immediately prior to the execution of the Sale and Purchase Agreement,
Yellowhouse entered into a Restructuring Agreement (P&P) dated October 5, 1995,
by and among Yellowhouse, Parker & Parsley Petroleum Company, Internationale
Nederlanden (U.S.) Capital Corporation ("INC"), New England Mutual Life
Insurance Company ("New England") and EnCap 1989-I Limited Partnership ("ELP,"
and collectively with New England and INC, the "Lenders"), pursuant to which
the Lenders agreed to forgive all outstanding indebtedness of Yellowhouse
related to the Properties except for $750,000, which amount was evidenced by
the issuance of promissory notes of Yellowhouse in favor of the Lenders (the
"Notes"), agreed to reconvey to Yellowhouse certain interest in the Properties,
and agreed to consent to the transfer of the Properties to HEWT. The
willingness of the Lenders to enter into such agreement was conditioned upon
Harken and HEWT entering into the Sale and Purchase Agreement and the
Restructuring Agreement described below.
Immediately after the execution of the Sale and Purchase Agreement,
Harken and HEWT entered into a Restructuring and Sale Agreement (Harken) (the
"Restructuring Agreement") dated as of October 5, 1995, by and among Harken,
HEWT, INC, New England and ELP. Pursuant to the Restructuring Agreement, HEWT
agreed to assume the Notes (HEWT contemporaneously issued new notes (the "New
Notes") to INC, New England and ELP in replacement of the Notes). In addition,
Harken issued to INC, New England and ELP (i) an aggregate of 3,000,000 shares
of common stock, $.01 par value per share (the "Common Stock"), of Harken and
(ii) warrants (the "Warrants") to acquire an aggregate of 1,000,000 shares of
Common Stock at an exercise price of $2.00, which Warrants are exercisable for
a period of two years.
Pursuant to a Registration Rights Agreement dated October 5, 1995 (the
"Registration Rights Agreement"), Harken granted certain registration rights to
INC, New England and ELP with respect to the 3,000,000 shares of Common Stock
issued to them and the 1,000,000 shares of Common Stock issuable upon exercise
of the Warrants.
Each of the Sale and Purchase Agreement, the Restructuring Agreement,
the New Notes, the Warrants and the Registration Rights Agreement, attached
hereto as Exhibits 2.1, 99.1, 99.2, 99.3 and 99.4 respectively, is incorporated
herein by reference.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
It is impracticable to file the financial information required by Item
7(a) at this time because such information is not yet available. The
registrant will file such information as soon as is practicable but not later
than 60 days following October 11, 1995.
(b) Pro forma financial information.
It is impracticable to file the financial information required by Item
7(b) at this time because such information is not yet available. The
registrant will file such information as soon as is practicable but not later
than 60 days following October 11, 1995.
(c) Exhibits.
Exhibit
Number Description
------- -----------
2.1 -- Agreement of Sale and Purchase dated October 5, 1995,
by and between Yellowhouse Project Co. and Harken
Energy West Texas, Inc.
99.1 -- Restructuring and Sale Agreement (Harken) dated as of
October 5, 1995, by and among Harken Energy
Corporation, Harken Energy West Texas, Inc.,
Internationale Nederlanden (U.S.) Capital Corporation,
New England Mutual Life Insurance Company and
EnCap 1989-I Limited Partnership.
99.2 -- Promissory Note of Harken Energy West Texas, Inc. dated
October 5, 1995, in the principal amount of $375,000
issued to Internationale Nederlanden (U.S.) Capital
Corporation (together with a schedule identifying
substantially identical documents and material details
in which those documents differ from the foregoing
document).
99.3 -- Stock Purchase Warrant dated October 5, 1995, of Harken
Energy Corporation issued to Internationale Nederlanden
(U.S.) Capital Corporation (together with a schedule
identifying substantially identical documents and
material details in which those documents differ
from the foregoing document).
99.4 -- Registration Rights Agreement, dated as of October 5,
1995, by and among Harken Energy Corporation,
Internationale Nederlanden (U.S.) Capital Corporation,
New England Mutual Life Insurance Company and EnCap
1989-I Limited Partnership.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HARKEN ENERGY CORPORATION
Date: October 11, 1995 By: /s/ Bruce N. Huff
----------------------------------
Bruce N. Huff,
Senior Vice President and
Chief Financial Officer
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Exhibit No. Exhibit Numbered Page
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<S> <C>
2.1 Agreement of Sale and Purchase dated October 5, 1995, by
and between Yellowhouse Project Co. and Harken Energy West
Texas, Inc.
99.1 Restructuring and Sale Agreement (Harken) dated as of
October 5, 1995, by and among Harken Energy Corporation,
Harken Energy West Texas, Inc., Internationale Nederlanden
(U.S.) Capital Corporation, New England Mutual Life
Insurance Company and EnCap 1989-I Limited Partnership.
99.2 Promissory Note of Harken Energy West Texas, Inc. dated
October 5, 1995, in the principal amount of $375,000 issued
to Internationale Nederlanden (U.S.) Capital Corporation
(together with a schedule identifying substantially
identical documents and material details in which those
documents differ from the foregoing document).
99.3 Stock Purchase Warrant dated October 5, 1995, of Harken
Energy Corporation issued to Internationale Nederlanden
(U.S.) Capital Corporation (together with a schedule
identifying substantially identical documents and material
details in which those documents differ from the foregoing
document).
99.4 Registration Rights Agreement, dated as of October 5, 1995,
by and among Harken Energy Corporation, Internationale
Nederlanden (U.S.) Capital Corporation, New England Mutual
Life Insurance Company and EnCap 1989-I Limited
Partnership.
</TABLE>
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AGREEMENT OF SALE AND PURCHASE
THIS AGREEMENT OF SALE AND PURCHASE (this "AGREEMENT") dated October
5, 1995, is made by and between Yellowhouse Project Co., a Delaware corporation
(hereinafter called "SELLER"), and Harken Energy West Texas, Inc., a Delaware
corporation (hereinafter called "BUYER");
W I T N E S S E T H:
1. PROPERTY TO BE SOLD AND PURCHASED. Seller agrees to sell and
Buyer agrees to purchase, for the consideration hereinafter set forth, and
subject to the terms and provisions herein contained, the following described
properties, rights and interests:
(a) All right, title and interest of Seller in and to the
oil, gas and/or mineral leases described on Exhibit A hereto (and any
ratifications and/or amendments to such leases, whether or not such
ratifications or amendments are described on Exhibit A); and
(b) Without limitation of the foregoing, all other right,
title and interest (of whatever kind or character, whether legal or
equitable, and whether vested or contingent) of Seller in and to the
lands described on Exhibit A hereto or described in any of the leases
described on Exhibit A (including, without limitation, interests in
oil, gas and/or mineral leases, overriding royalties, production
payments, net profits interests, fee mineral interests, fee royalty
interests and other interests insofar as they cover such lands); and
(c) All rights, titles and interests of Seller in and to, or
otherwise derived from, (i) all oil, gas and/or mineral unitization,
pooling, and/or communitization agreements, declarations and/or
orders, (ii) to the extent the same create rights among the parties
thereto to share in production from the contract areas covered
thereby, operating and similar agreements, and (iii) all amendments or
modifications of the foregoing, which relate to the properties
described in subsections (a) and (b) above; and
(d) All rights, titles and interests of Seller in and to all
presently existing and valid production sales contracts, operating
agreements, rights of way, and other agreements and contracts which
relate to any of the properties described in subsections (a), (b) and
(c) above, to the extent, and only to the extent, such rights, titles
and interests are attributable to the properties described in
subsections (a), (b) and (c) above; and
(e) All rights, titles and interests of Seller in and to all
materials, supplies, machinery, equipment, improvements and other
personal property and fixtures (including, but not by way of
limitation, all wells, wellhead equipment, pumping units, flowlines,
tanks, buildings, injection facilities, saltwater disposal
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facilities, compression facilities, gathering systems, and other
equipment) located on the properties described in subsections (a), (b)
and (c) above and used in connection with the exploration,
development, operation or maintenance thereof.
The properties and interests specified in the foregoing subsections (a), (b)
and (c) are herein sometimes collectively called the "OIL AND GAS PROPERTIES,"
and the properties and interests specified in the foregoing subsections (a),
(b), (c), (d) and (e) are herein sometimes collectively called the
"PROPERTIES".
2. ASSUMPTION OF INDEBTEDNESS. Buyer agrees to assume the
indebtedness evidenced by those certain promissory notes (the "NOTES") dated
October 5, 1995, from Seller to Internationale Nederlanden (U.S.) Capital
Corporation ("ING"), New England Mutual Life Insurance Company ("NEW ENGLAND")
and EnCap 1989-I Limited Partnership ("ELP") in the aggregate principal amount
of $750,000 (the "ASSUMED DEBT"). The Assumed Debt will be assumed by Buyer in
accordance with certain documents executed at Closing as hereinafter provided.
3. REPRESENTATIONS OF SELLER. Seller represents to Buyer that:
(a) ORGANIZATION AND QUALIFICATION. Seller is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, and is qualified to do
business and in good standing in the State of Texas.
(b) DUE AUTHORIZATION. Seller has full power to enter
into and perform its obligations under this Agreement and has taken
all proper action to authorize entering into this Agreement and the
performance of its obligations hereunder.
(c) APPROVALS. Except for approvals ("ROUTINE
GOVERNMENTAL APPROVALS") required to be obtained from governmental
entities who are lessors under leases forming a part of the Oil and
Gas Properties (or who administer such leases on behalf of such
lessors) which are customarily obtained post-closing and which Seller
has no reason to believe cannot be obtained, neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, nor the compliance with the terms hereof, will
result in any default under any agreement or instrument to which
Seller is a party or by which the Oil and Gas Properties are bound, or
violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Seller or to the Oil and Gas Properties.
(d) VALID, BINDING AND ENFORCEABLE. This Agreement
constitutes (and the Conveyance will, when executed and delivered,
constitute) the legal, valid and binding obligation of Seller,
enforceable in accordance with their respective terms, except as
limited by bankruptcy or other laws applicable generally to creditor's
rights and as limited by general equitable principles.
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(e) LITIGATION. There are no pending suits, actions, or
other proceedings in which Seller is a party and has been served with
process (or, to the best of Seller's knowledge, which have been
threatened to be instituted against Seller) which affect the Oil and
Gas Properties in any material respect (including, without limitation,
any actions challenging or pertaining to Seller's title to any of the
Oil and Gas Properties), or affecting the execution and delivery of
this Agreement or the consummation of the transactions contemplated
hereby.
(f) SPECIAL TITLE WARRANTY. Seller hereby binds itself
to warrant and forever defend all and singular title to the Oil and
Gas Properties unto Buyer, its successors and assigns, against every
person lawfully claiming or to claim the same or any part thereof, by,
through and under Seller, but not otherwise.
4. REPRESENTATIONS OF BUYER. Buyer represents to Seller that:
(a) ORGANIZATION AND QUALIFICATION. Buyer is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, and is qualified to do
business and in good standing in the State of Texas.
(b) DUE AUTHORIZATION. Buyer has full power to enter
into and perform its obligations under this Agreement and has taken
all proper action to authorize entering into this Agreement and the
performance of its obligations hereunder.
(c) APPROVALS. Except for Routine Governmental
Approvals, neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, nor the
compliance with the terms hereof, will result in any default under any
agreement or instrument to which Buyer is a party, or violate any
order, writ, injunction, decree, statute, rule or regulation
applicable to Buyer.
(d) VALID, BINDING AND ENFORCEABLE. This Agreement
constitutes the legal, valid and binding obligation of Buyer,
enforceable in accordance with its terms, except as limited by
bankruptcy or other laws applicable generally to creditor's rights and
as limited by general equitable principles.
(e) NO LITIGATION. There are no pending suits, actions,
or other proceedings in which Buyer is a party and has been served
with process (or, to Buyer's knowledge, which have been threatened to
be instituted against Buyer) which affect the execution and delivery
of this Agreement or the consummation of the transactions contemplated
hereby.
(f) KNOWLEDGEABLE BUYER, NO DISTRIBUTION. Buyer is a
knowledgeable purchaser, owner and operator of oil and gas properties,
has the ability to evaluate (and in fact has evaluated) the Oil and
Gas Properties for purchase, and is acquiring the Oil and Gas
Properties for its own account and not with the intent to make a
distribution in
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violation of the Securities Act of 1933, as amended (and the rules and
regulations pertaining thereto) or in violation of any other
applicable securities laws, rules or regulations.
5. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER. The
obligations of Buyer under this Agreement are subject to each of the following
conditions being met:
(a) REPRESENTATIONS TRUE AND CORRECT. Each and every
representation of Seller under this Agreement shall be true and
accurate in all material respects as of the date when made and shall
be deemed to have been made again at and as of the time of Closing and
shall at and as of such time of Closing be true and accurate in all
material respects except as to changes specifically contemplated by
this Agreement or consented to by Buyer.
(b) COMPLIANCE WITH COVENANTS AND AGREEMENTS. Seller
shall have performed and complied in all material respects with (or
compliance therewith shall have been waived by Buyer) each and every
covenant and agreement required by this Agreement to be performed or
complied with by Seller prior to or at the Closing.
(c) EXECUTION OF JOA. The current operator of the Oil
and Gas Properties shall have executed and delivered a new operating
agreement or agreements for the Oil and Gas Properties in a form
satisfactory to Buyer (the "JOA").
(d) EXECUTION OF RELATED AGREEMENTS. The Restructuring
Agreement (P&P) by and among Seller, Parker & Parsley Petroleum
Company, ING, New England and ELP, and all other documents and
instruments contemplated thereby, shall have been executed and
delivered by the parties thereto. The Restructuring and Sale Agreement
(Harken) by and among Harken Energy Corporation, Buyer, ING, New
England and ELP, and all other documents and instruments contemplated
thereby, shall have been executed and delivered by the parties
thereto. The agreements, documents and other instruments described in
this subsection (d) shall be herein called the "RELATED DOCUMENTS".
(e) LITIGATION. No suit, action or other proceedings
shall, on the date of Closing, be pending or threatened before any
court or governmental agency seeking to restrain, prohibit, or obtain
damages or other relief in connection with the consummation of the
transactions contemplated by this Agreement.
If any such condition on the obligations of Buyer under this Agreement is not
met as of the Closing Date and Buyer is not in breach of its obligations
hereunder in the absence of Seller being in material breach of its obligations
hereunder, this Agreement may, at the option of Buyer, be terminated. In the
event such a termination by Buyer occurs the parties shall have no further
obligations to one another hereunder (other than the obligations under Section
11 hereof, which will survive such termination).
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6. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER. The
obligations of Seller under this Agreement are subject to each of the following
conditions being met:
(a) REPRESENTATIONS TRUE AND CORRECT. Each and every
representation of Buyer under this Agreement shall be true and
accurate in all material respects as of the date when made and shall
be deemed to have been made again at and as of the time of Closing and
shall at and as of such time of Closing be true and accurate in all
material respects except as to changes specifically contemplated by
this Agreement or consented to by Seller.
(b) COMPLIANCE WITH COVENANTS AND AGREEMENTS. Buyer
shall have performed and complied in all material respects with (or
compliance therewith shall have been waived by Seller) each and every
covenant and agreement required by this Agreement to be performed or
complied with by Buyer prior to or at the Closing.
(c) EXECUTION OF JOA. The current operator of the oil
and gas properties shall have executed and delivered the JOA.
(d) EXECUTION OF RELATED AGREEMENTS. The Related
Agreements shall have been executed and delivered by the parties
thereto.
(e) LITIGATION. No suit, action or other proceedings
shall, on the date of Closing, be pending or threatened before any
court or governmental agency seeking to restrain, prohibit, or obtain
damages or other relief in connection with the consummation of the
transactions contemplated by this Agreement.
If any such condition on the obligations of Seller under this Agreement is not
met as of the Closing Date and Seller is not in breach of its obligations
hereunder in the absence of Buyer being in material breach of its obligations
hereunder, this Agreement may, at the option of Seller, be terminated, in which
case the parties shall have no further obligations to one another hereunder
(other than the obligations under Section 11 hereof, which will survive such
termination).
7. CLOSING. The closing (herein called the "CLOSING") of the
transaction contemplated hereby shall take place in the offices of Thompson &
Knight, P.C., at 1700 Pacific, Dallas, Texas, on October 5, 1995, at 11:00 a.m.
local time, or at such other date and time as the Buyer and Seller may mutually
agree upon (such date and time being herein called the "CLOSING DATE"). At the
Closing:
(a) DELIVERY OF CONVEYANCE. Seller shall execute,
acknowledge and deliver to Buyer (i) the "CONVEYANCE" (as herein
called), in the form attached hereto as Schedule I (and with Exhibit A
hereto being attached thereto), effective as to runs of oil and
deliveries of gas and for all other purposes as of 7:00 a.m., local
time at the locations of the Oil and Gas Properties, respectively, on
April 1, 1995 (herein called
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the "EFFECTIVE DATE"), and (ii) the "MINERAL DEED" (as herein called),
in the form attached hereto as Schedule II, effective as of 7:00 a.m.,
local time, on the Effective Date.
(b) NON-FOREIGN STATUS AFFIDAVIT. If Buyer so requests,
Seller will execute and deliver to Buyer an affidavit or other
certification (as permitted by such code) that Seller is not a
"foreign person" within the meaning of Section 1445 (or similar
provisions) of the Internal Revenue Code of 1986, as amended (i.e.,
Seller is not a non-resident alien, foreign corporation, foreign
partnership, foreign trust or foreign estate as those terms are
defined in such code and regulations promulgated thereunder).
(c) LETTERS IN LIEU. If Buyer so requests, Seller shall
execute and deliver letters in lieu of transfer orders (or similar
documentation), in form reasonably acceptable to both parties.
(d) PAYMENT. Seller will wire transfer, or will cause to
be wire transferred, to Buyer cash in the amount of $200,000.
At the Closing, Seller will also deliver to Buyer all of Seller's lease files,
abstracts and title opinions, division order files, production records, well
files, and other similar files and records which relate to the Oil and Gas
Properties, other than those which Seller cannot provide to Buyer without, in
its opinion, breaching, or risking a breach of, confidentiality agreements with
other parties. As soon as reasonably practicable after the Closing and, in any
event, within 30 days after the Closing Date, Seller will deliver to Buyer all
accounting records (but not including any general financial records or tax
accounting records) of Seller which relate to the Oil and Gas Properties.
8. CERTAIN ACCOUNTING ADJUSTMENTS.
(a) Appropriate adjustments shall be made between Buyer and Seller so
that (i) all expenses (including, without limitation, all drilling costs, all
capital expenditures and all overhead charges under applicable operating
agreements) which are incurred in the operation of the Oil and Gas Properties
before the Effective Date will be borne by Seller and all proceeds (net of
applicable production, severance, and similar taxes) from sales of oil, gas
and/or other minerals which are produced from (or attributable to) the Oil and
Gas Properties before the Effective Date will be received by Seller, and (ii)
all expenses (including, without limitation, all drilling costs, all capital
expenditures and all overhead charges under applicable operating agreements)
which are incurred in the operation of the Oil and Gas Properties after the
Effective Date will be borne by Buyer and all proceeds (net of applicable
production, severance, and similar taxes) from the sale of oil, gas and/or
other minerals which were produced from (or attributable to) the Oil and Gas
Properties after the Effective Date will be received by Buyer. It is agreed
that, in making such adjustments: (A) oil which was produced from the Oil and
Gas Properties and which was, on the Effective Date, stored in tanks located on
the Oil and Gas Properties and above pipeline connections shall be deemed to
have been
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produced before the Effective Date to the extent that written records indicate
such tanks were gauged on such date; otherwise oil shall be deemed to have been
produced prior to the Effective Date to the extent of the latest written record
of oil produced prior to the Effective Date, whether it be a prior tank
reading, run ticket or other record of physical measurement; (B) ad valorem and
similar taxes assessed with respect to a period which the Effective Date splits
shall be prorated based on the number of days in such period which fall on each
side of the Effective Date (with the day on which the Effective Date falls
being counted in the period after the Effective Date); and (C) no consideration
shall be given to the local, state or federal income tax liabilities of any
party.
(b) Three days prior to, and for the purposes of, the Closing, the
parties shall determine, based upon billings and payments received to that
point, the amount of the adjustments provided for above. If, based on the
foregoing, it is determined that an amount is owed to Buyer, Seller shall
tender to Buyer at Closing an amount equal to 100% of such amount less any
portion thereof that has been previously tendered to ING, New England and ELP
as payment on those certain promissory notes dated May 22, 1992, executed by
Seller in favor of ING, New England and ELP in an aggregate principal amount
equal to $12,000,000. If, based on the foregoing, it is determined that an
amount is owed to Seller, Buyer shall tender to Seller at Closing an amount
equal to 100% of such amount. On or before 90 days after Closing, Buyer and
Seller shall review any additional information which may then be available
pertaining to the adjustments provided for above, shall determine if any
additional adjustments (whether the same be made to account for expenses or
revenues not considered in making the adjustments made at Closing, or to
correct errors made in such adjustments) should be made beyond those made at
Closing, and shall make any such adjustments by appropriate payments from
Seller to Buyer or from Buyer to Seller. Following such final adjustment, no
further such adjustments shall be made pursuant to this Section.
9. INDEMNIFICATION. Buyer shall agree (and, upon the delivery to Buyer
of the documents and cash referenced in Section 7, shall be deemed to have
agreed), (a) to assume, and to timely pay and perform, all duties, obligations
and liabilities relating to (i) the Assumed Debt or (ii) the ownership and/or
operation of the Oil and Gas Properties, whether arising before, on or after
the Closing Date (including, without limitation, those arising under the
contracts and agreements related to the Oil and Gas Properties), and (b) to
indemnify and hold Seller, its affiliates, and its and their directors,
officers, employees, attorneys and agents harmless from and against any and all
claims, actions, causes of action, liabilities, damages, losses, costs or
expenses (including, without limitation, court costs and attorneys' fees) of
any kind or character arising out of or otherwise relating to (i) the Assumed
Debt or (ii) the ownership and/or operation of the Oil and Gas Properties,
whether arising before, on or after the Closing Date. THE FOREGOING ASSUMPTIONS
AND INDEMNIFICATIONS BY BUYER SHALL APPLY WHETHER OR NOT SUCH DUTIES,
OBLIGATIONS OR LIABILITIES, OR SUCH CLAIMS, ACTIONS, CAUSES OF ACTION,
LIABILITIES, DAMAGES, LOSSES, COSTS OR EXPENSES ARISE OUT OF (A) NEGLIGENCE
(INCLUDING SOLE NEGLIGENCE, SINGLE NEGLIGENCE, CONCURRENT NEGLIGENCE, ACTIVE OR
PASSIVE NEGLIGENCE, BUT EXPRESSLY NOT
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INCLUDING GROSS NEGLIGENCE) OF SELLER OR ANY OTHER INDEMNIFIED PARTY, OR (B)
STRICT LIABILITY. Seller and Buyer agree that Buyer shall be subrogated to any
and all claims, defenses, rights of setoff and other rights that Seller may
have arising in connection with the ownership and/or operation of the Oil and
Gas Properties on or before the Closing Date.
10. NO COMMISSIONS OWED. Seller agrees to indemnify and hold harmless
Buyer (and its affiliates, and its and their respective officers, directors,
employees, attorneys, contractors and agents) from and against any and all
claims, actions, causes of action, liabilities, damages, losses, costs or
expenses (including, without limitation, court costs and attorneys fees) of any
kind or character arising out of or resulting from any agreement, arrangement
or understanding alleged to have been made by, or on behalf of, Seller with any
broker or finder in connection with this Agreement or the transaction
contemplated hereby. Buyer agrees to indemnify and hold harmless Seller (and
its affiliates and its and their respective officers, directors, employees,
attorneys, contractors and agents) from and against any and all claims,
actions, causes of action, liabilities, damages, losses, costs or expenses
(including, without limitation, court costs and attorneys fees) of any kind or
character arising out of or resulting from any agreement, arrangement or
understanding alleged to have been made by, or on behalf of, Buyer with any
broker or finder in connection with this Agreement or the transaction
contemplated hereby.
11. NOTICES. All notices and other communications required under this
Agreement shall (unless otherwise specifically provided herein) be in writing
and be delivered personally, by recognized commercial courier or delivery
service which provides a receipt, by telecopier (with receipt acknowledged), or
by registered or certified mail (postage prepaid), at the following addresses:
If to Buyer: Harken West Texas, Inc.
5605 N. MacArthur, Suite 400
Irving, Texas 75038
Telecopier No.: (214) 753-6955
Attention: Mikel D. Faulkner, Chairman
with a copy to:
Larry E. Cummings, General Counsel
If to Seller: Yellowhouse Project Co.
303 West Wall Avenue, Suite 101
Midland, Texas 79701
Attention: T.A. Leach, Vice President
Telecopier No.: (915) 571-5050
and shall be considered delivered on the date of receipt. Either Buyer or
Seller may specify as its proper address any other post office address within
the continental limits of the United
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States by giving notice to the other party, in the manner provided in this
Section, at least ten (10) days prior to the effective date of such change of
address.
12. SURVIVAL OF PROVISIONS. All representations and warranties
made herein by Buyer and Seller shall be continuing and shall be true and
correct on and as of the date of Closing with the same force and effect as if
made at that time (and shall inure to the benefit of the respective successors
and assigns of Buyer and Seller), and all of such representations and
warranties shall survive the Closing and the delivery of the Conveyance. The
obligations of the parties under Section 7 (to the extent the same are, by
mutual agreement, not performed at Closing), and Sections 8, 9, 10, 11, 12 and
13 shall (subject to any limitations set forth therein) also survive the
Closing and the delivery of the Conveyance and the Mineral Deed.
13. MISCELLANEOUS MATTERS.
(a) FURTHER ASSURANCES. After the Closing, Seller and
Buyer shall execute and deliver, and shall otherwise cause to be
executed and delivered, from time to time, such further instruments,
notices, division orders, transfer orders and other documents, and do
such other and further acts and things, as may be reasonably necessary
to more fully and effectively accomplish the intent and purpose of
this Agreement, including (without limitation) the grant, conveyance
and assignment of the Properties to Buyer.
(b) DECEPTIVE TRADE PRACTICES WAIVER. To the extent
applicable to the transaction contemplated hereby or any portion
thereof, Buyer waives the provisions of the Texas Deceptive Trade
Practices Act (Sections 17.41 through 17.63, inclusive of the Texas
Business and Commerce Code, other than Section 17.555 which is not
waived. In connection with such waiver, Buyer hereby represents
warrants to Seller that Buyer (i) is in the business of seeking or
acquiring by purchase or lease, goods, or services, for commercial or
business use, (ii) has knowledge and experience in financial and
business matters that enable it to evaluate the merits and risks of
the transaction contemplated hereby, (iii) is not in a significantly
disparate bargaining position and (iv) has assets of $5,000,000 or
more according to its most recent financial statement.
(c) PARTIES BEAR OWN EXPENSES. Each party shall bear and
pay all expenses (including, without limitation, legal fees) incurred
by it in connection with the transaction contemplated by this
Agreement.
(d) ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements, understandings,
negotiations, and discussions among the parties with respect to such
subject matter; provided that any Confidentiality Agreement executed
by Buyer and Seller in connection with the transaction contemplated
hereby remains in full force and effect and is not superseded or
modified by this Agreement.
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<PAGE> 10
(e) AMENDMENTS, WAIVERS. This Agreement may be amended,
modified, supplemented, restated or discharged (and provisions hereof
may be waived) only by an instrument in writing signed by the party
against whom enforcement of the amendment, modification, supplement,
restatement or discharge (or waiver) is sought.
(f) CHOICE OF LAW. Without regard to principles of
conflicts of law, this Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Texas
applicable to contracts made and to be performed entirely within such
state and the laws of the United States of America.
(g) HEADINGS, TIME OF ESSENCE, ETC. The descriptive
headings contained in this Agreement are for convenience only and
shall not control or affect the meaning or construction of any
provision of this Agreement. Within this Agreement words of any
gender shall be held and construed to cover any other gender, and
words in the singular shall be held and construed to cover the plural,
unless the context otherwise requires. Time is of the essence in this
Agreement.
(h) NO ASSIGNMENT. Neither party shall have the right to
assign its rights under this Agreement, without the prior written
consent of the other parties first having been obtained.
(i) SUCCESSORS AND ASSIGNS. Subject to the limitation on
assignment contained in subsection (h) above, the Agreement shall be
binding on and inure to the benefit of the parties hereto and their
respective successors and assigns.
(j) CONSENT OF LENDERS. By joining in the execution of
this Agreement, ING, New England and ELP hereby evidence their consent
to the purchase and sale contemplated hereby, as required by the terms
of that certain Loan Agreement dated May 22, 1995, by and among
Seller, ING, New England and ELP, as amended.
(k) COUNTERPART EXECUTION. This Agreement may be
executed in counterparts, all of which are identical and all of which
constitute one and the same instrument. It shall not be necessary for
Buyer and Seller to sign the same counterpart.
(l) TO THE BEST OF KNOWLEDGE. The phrase "to the best
knowledge of Seller" and other terms of similar import used in this
Agreement shall mean only Seller's existing actual knowledge and are
not intended to imply that Seller in fact has actual knowledge of the
subject matter to which such terms apply; accordingly, except as may
be otherwise noted herein, Seller has not made any independent
verification of or inquiry with respect to any facts relevant to such
matter.
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<PAGE> 11
IN WITNESS WHEREOF, this Agreement is executed by the parties hereto
on the date set forth above.
YELLOWHOUSE PROJECT CO.
By: /s/ David W. Copeland
----------------------------------
Name: David W. Copeland
Title: Vice President
HARKEN ENERGY WEST TEXAS, INC.
By: /s/ Larry E. Cummings
----------------------------------
Name: Larry E. Cummings
Title: Vice President and Secretary
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION
By: /s/ Barry Borak
----------------------------------
Name: Barry Borak
Title: Vice President
NEW ENGLAND MUTUAL LIFE
INSURANCE COMPANY
By: /s/ Michael T. Zonghetti
----------------------------------
Name: Michael T. Zonghetti
Title: Investment Officer
ENCAP 1989-I LIMITED PARTNERSHIP
By: /s/ Robert L. Zorich
----------------------------------
Name: Robert L. Zorich
Title: Managing Director
<PAGE> 1
RESTRUCTURING AND SALE AGREEMENT (HARKEN)
THIS RESTRUCTURING AND SALE AGREEMENT (HARKEN) is made and entered
into as of the 5th day of October, 1995, by and among Harken Energy
Corporation, a Delaware corporation ("HARKEN") , Harken Energy West Texas,
Inc., a Delaware corporation ("HARKEN SUB"), Internationale Nederlanden (U.S.)
Capital Corporation, a Delaware corporation ("ING") , New England Mutual Life
Insurance Company, a Massachusetts corporation ("NEW ENGLAND"), and EnCap
1989-I Limited Partnership, a Texas limited partnership ("ELP").
RECITALS:
A. Reference is herein made to that certain Loan Agreement dated
as of May 22, 1992, by and among Yellowhouse Project Co., a Delaware
corporation ("YELLOWHOUSE"), ING, New England and ELP, as heretofore amended
(the "LOAN AGREEMENT"), whereunder ING, New England and ELP (collectively, the
"INVESTORS") made loans to Yellowhouse in the aggregate principal amount equal
to $12,000,000 (the "LOANS"). Immediately prior to the execution and delivery
of this Agreement, Yellowhouse, Parker & Parsley Petroleum Company, a Delaware
corporation ("PARKER & PARSLEY"), and the Investors have executed and delivered
that certain Restructuring Agreement (P&P) of even date herewith (the "P&P
AGREEMENT"), whereby (among other things) the Investors have agreed (subject to
the terms thereof) to forgive the outstanding principal amount of the Loans,
plus accrued and unpaid interest thereon, save and except for an aggregate
principal amount equal to $750,000. Under the P&P Agreement, Yellowhouse has
executed new promissory notes of even date herewith in favor of ING, New
England and ELP in an aggregate amount equal to $750,000 (the "NEW YELLOWHOUSE
NOTES").
B. Reference is herein made to that certain Agreement of Purchase
and Sale dated as of even date herewith by and between Yellowhouse, Parker &
Parsley, and the Harken Sub (the "PURCHASE AGREEMENT"). As consideration for
the sale by Yellowhouse to the Harken Sub of the "PROPERTIES" (as defined in
the Purchase Agreement) under the Purchase Agreement, the Harken Sub has agreed
to assume the indebtedness evidenced by the New Yellowhouse Notes.
Consummation of the transactions contemplated by the Purchase Agreement is
specifically conditioned (among other things) upon the agreement of the
Investors to permit the assumption of the indebtedness evidenced by the New
Yellowhouse Notes by the Harken Sub.
C. The parties hereto deem it in their mutual best interests to
set forth in writing the terms of their agreements with respect to (i) the
assumption by the Harken Sub of the indebtedness evidenced by the New
Yellowhouse Notes, (ii) the issuance by Harken to the Investors of (x) shares
of common stock of Harken and (y) warrants to purchase shares of common stock
of Harken, and (iii) certain other matters.
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<PAGE> 2
AGREEMENT:
NOW, THEREFORE, for and in consideration of the foregoing Recitals and
the mutual agreements contained herein, the sufficiency of which is hereby
acknowledged and confirmed, the parties hereto, intending to be legally bound
thereby, agree as follows:
SECTION 1. DEFINITIONS AND REFERENCES.
(a) When used in this Agreement, the following terms shall have
the respective meanings assigned to them in this Section 1 or in the sections,
subsections or other subdivisions referred to below:
"AGREEMENT" shall mean this Restructuring and Sale Agreement (Harken),
as hereafter amended, modified, supplemented or otherwise changed in accordance
with the terms hereof.
"AMENDED SECURITY DOCUMENTS" shall have the meaning assigned to it in
Section 5.
"CLOSING" shall have the meaning assigned to it in Section 8.
"CLOSING DATE" shall have the meaning assigned to it in Section 8.
"CLOSING SHARES" shall have the meaning assigned to it in Section 3(a).
"DEFICIENCY NOTE" shall have the meaning assigned to it in Section
10(a)(ii).
"ELP" shall have the meaning assigned to it in the introductory
paragraph to this Agreement.
"HARKEN" shall have the meaning assigned to it in the introductory
paragraph to this Agreement.
"HARKEN COMMON STOCK" shall mean shares of common stock of Harken,
$0.01 par value per share.
"HARKEN ENTITY" shall have the meaning assigned to it in Section 6.
"HARKEN SUB" shall have the meaning assigned to it in the introductory
paragraph to this Agreement.
"ING" shall have the meaning assigned to it in the introductory
paragraph to this Agreement.
"INVESTORS" shall have the meaning assigned to it in Paragraph A of
the Recitals.
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<PAGE> 3
"LOAN AGREEMENT" shall have the meaning assigned to it in Paragraph A
of the Recitals.
"LOANS" shall have the meaning assigned to it in Paragraph A of the
Recitals.
"NEW ENGLAND" shall have the meaning assigned to it in the
introductory paragraph to this Agreement.
"NEW NOTES" shall have the meaning assigned to it in Section 2.
"NEW YELLOWHOUSE NOTES" shall have the meaning assigned to it in
Paragraph A of the Recitals.
"PARKER & PARSLEY" shall have the meaning assigned to it in Paragraph
A of the Recitals.
"P&P AGREEMENT" shall have the meaning assigned to it in Paragraph B
of the Recitals.
"PROPERTIES" shall have the meaning assigned to it in Paragraph B of
the Recitals.
"PURCHASE AGREEMENT" shall have the meaning assigned to it in
Paragraph B of the Recitals.
"QUALIFIED OFFER" shall have the meaning assigned to it in Section
10(b)(i).
"QUALIFIED PURCHASER" shall have the meaning assigned to it in Section
10(b)(ii).
"REALIZED PROCEEDS" shall have the meaning assigned to it in Section
10(b)(iii).
"REGISTRATION RIGHTS AGREEMENT" shall have the meaning assigned to it
in Section 4.
"RELATED AGREEMENTS" shall mean the Purchase Agreement, the Warrants,
the Registration Rights Agreement and the Amended Security Documents.
"SEC DOCUMENT" shall have the meaning assigned to it in Section 10(h).
"SHARING RATIO" shall have the meaning assigned to it in Section
10(b)(iv).
"SPECIAL PROVISION OPTIONS" shall have the meaning assigned to it in
Section 10(a).
"SPECIAL PROVISION TERM" shall have the meaning assigned to it in
Section 10(b)(v).
"TARGET PROCEEDS" shall have the meaning assigned to it in Section
10(b)(vi).
"WARRANT" shall have the meaning assigned to it in Section 3(b).
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<PAGE> 4
"WARRANT SHARES" shall have the meaning assigned to it in Section 3(b).
"YELLOWHOUSE" shall have the meaning assigned to it in Paragraph A of
the Recitals.
(b) All references in this Agreement to sections, subsections and
other subdivisions refer to corresponding sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise. All
references to Exhibits are to Exhibits attached hereto, each of which is made a
part hereof for all purposes. Titles appearing at the beginning of any such
subdivisions are for convenience only and shall not constitute part of such
subdivisions and shall be disregarded in construing the language contained
herein. The words "this Agreement", "this instrument", "herein", "hereof",
"hereby", "hereunder" and words of similar import refer to this Agreement as a
whole and not to any particular subdivision unless expressly so limited. Words
in the singular form shall be construed to include the plural and vice versa,
unless the context otherwise requires. All references herein to "$" or to
"Dollars" are to U.S. dollars.
SECTION 2. ASSUMPTION OF NEW YELLOWHOUSE NOTES.
(a) Subject to the terms and conditions hereof, (i) the Harken Sub
hereby agrees to assume the indebtedness evidenced by the New Yellowhouse Notes
as of the Closing Date and (ii) the Investors hereby consent and agree to the
assumption by the Harken Sub of the indebtedness evidenced by the New
Yellowhouse Notes as of the Closing Date. The foregoing assumption shall be
evidenced by new promissory notes executed by the Harken Sub ( the "NEW
NOTES"), each of which shall be made payable to the appropriate Investor in the
principal amount set forth opposite such Investor's name below in this Section
2. Each New Note (A) will be dated the Closing Date, (B) will be
substantially in the form of Exhibit 2 in all material respects, and (C) will
be secured by the existing liens and security interests currently held by the
Investors pursuant to the Loan Agreement.
ING $375,000
New England $300,000
ELP $ 75,000
(b) Provided the transactions contemplated hereby are consummated,
the Harken Sub, ING, New England and ELP agree that: (i) as of the date hereof,
(A) an amount equal to $129,341.83 shall be deemed to have been applied against
the outstanding principal balance of the New Note executed in favor of ING, (B)
an amount equal to $103,473.47 shall be deemed to have been applied against the
outstanding principal amount of the New Note executed in favor of New England
and (C) an amount equal to $25,868.37 shall be deemed to have been applied
against the outstanding principal amount of the New Note executed in favor of
ELP; and (ii) the Harken Sub shall immediately wire transfer immediately
available funds to ING, New England and ELP an amount equal to $35,642.79,
$28,514.23 and $7,128.56, respectively, which amount shall be applied by such
party to reduce the outstanding principal balance of such party's New Note.
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<PAGE> 5
SECTION 3. ISSUANCE AND DELIVERY OF CLOSING SHARES AND WARRANTS.
(a) On the Closing Date and subject to the terms and conditions
hereof, Harken will issue and deliver to each Investor the number of shares of
Harken Common Stock set forth opposite such Investor's name below in this
Section 3(a) (such shares being called the "CLOSING SHARES"):
ING 1,500,000
New England 1,200,000
ELP 300,000
(b) On the Closing Date and subject to the terms and conditions
hereof, Harken will issue and deliver to each Investor a "WARRANT" (as herein
called), substantially in the form of Exhibit 3(b) in all material respects,
entitling such Investor to purchase on the terms and conditions contained in
such Warrant the number of shares of Harken Common Stock set forth opposite
such Investor's name below in this Section 3(b) (such shares being called the
"WARRANT SHARES"):
ING 500,000
New England 400,000
ELP 100,000
SECTION 4. REGISTRATION RIGHTS AGREEMENT. On the Closing Date
and subject to the terms and conditions hereof, the Investors and Harken agree
to execute and deliver the REGISTRATION RIGHTS AGREEMENT (as herein called)
substantially in the form of Exhibit 4 in all material respects.
SECTION 5. MORTGAGE AND OTHER SECURITY DOCUMENTS. On the
Closing Date and subject to the terms and conditions hereof, Harken and the
Harken Sub agree to execute and deliver (a) the Amended Mortgage, Deed of
Trust, Assignment of Production, Security Agreement and Financing Statement,
(b) the Statement of Amendment of Financing Statement and (c) the Financing
Statement (collectively, the "AMENDED SECURITY DOCUMENTS"), substantially in
the form of Exhibit 5 in all material respects.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF HARKEN AND HARKEN
SUB. Each of Harken and the Harken Sub (a "HARKEN ENTITY") hereby jointly and
severally represent and warrant to the Investors as follows:
(a) Each Harken Entity is a corporation duly organized,
validly existing, and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate
power and corporate authority to own, lease, and operate its
properties and to carry on its business as now being conducted. No
actions or proceedings to dissolve a Harken Entity are pending.
(b) Each Harken Entity is duly qualified or licensed to do
business and is in good standing in the State of Texas.
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<PAGE> 6
(c) Each Harken Entity has full corporate power and corporate
authority to execute, deliver, and perform this Agreement and all
Related Agreements to which it is a party and to consummate the
transactions contemplated hereby and thereby. The execution,
delivery, and performance by each Harken Entity of this Agreement and
all Related Agreements, and the consummation by it of the transactions
contemplated hereby and thereby, have been duly authorized by all
necessary corporate action of such Harken Entity. This Agreement has
been duly executed and delivered by each Harken Entity and
constitutes, and each other agreement, instrument, or document
executed or to be executed by such Harken Entity in connection with
the transactions contemplated hereby (including any Related Agreement
to which it is a party) has been, or when executed will be, duly
executed and delivered by such Harken Entity and constitutes, or when
executed and delivered will constitute, a valid and legally binding
obligation of such Harken Entity, enforceable against such Harken
Entity in accordance with their respective terms, except that such
enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium, and similar laws affecting
creditors' rights generally and (ii) equitable principles which may
limit the availability of certain equitable remedies (such as specific
performance) in certain instances.
(d) The execution, delivery, and performance by each Harken
Entity of this Agreement and the Related Agreements to which it is a
party and the consummation by it of the transactions contemplated
hereby and thereby do not and will not (i) conflict with or result in
a violation of any provision of the charter or bylaws or other
governing instruments of such Harken Entity, (ii) conflict with or
result in a violation of any provision of, or constitute (with or
without the giving of notice or the passage of time or both) a default
under, or give rise (with or without the giving of notice or the
passage of time or both) to any right of termination, cancellation, or
acceleration under, any bond, debenture, note, mortgage, indenture,
lease, contract, agreement, or other instrument or obligation to which
such Harken Entity is a party or by which such Harken Entity or any of
its properties may be bound, (iii) result in the creation or
imposition of any lien or other encumbrance upon the properties of
such Harken Entity, or (iv) violate any applicable law, rule or
regulation binding upon such Harken Entity.
(e) No consent, approval, order, or authorization of, or
declaration, filing, or registration with, any court or governmental
agency or of any third party is required to be obtained or made by any
Harken Entity in connection with the execution, delivery, or
performance by such Harken Entity of this Agreement and the Related
Agreements to which it is a party or the consummation by it of the
transactions contemplated hereby and thereby, other than (i)
compliance with any applicable requirements of the Securities Act and
any applicable state securities laws and (ii) the consent of the
Investors contemplated hereby.
(f) The Closing Shares to be issued by Harken at the Closing
have been duly authorized for such issuance and, when issued and
delivered by Harken in accordance with the provisions of this
Agreement, will be validly issued, fully paid, and nonassessable. The
issuance of the Closing Shares under this Agreement is not subject to
any preemptive or similar rights.
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<PAGE> 7
(g) The Warrants to be issued by Harken at the Closing
have been duly authorized for such issuance and, when issued and
delivered by Harken in accordance with the provisions of this
Agreement, will be validly issued and will constitute valid and
legally binding obligations of Harken enforceable against Harken in
accordance with their respective terms. The shares of Harken Common
Stock issuable upon the exercise of the Warrants have been duly
reserved for such issuance and, when issued and delivered by Harken in
accordance with the provisions of the Warrants, will be validly
issued, fully paid and nonassessable.
(h) Harken is current in its obligations to file all
periodic report and proxy statements with the Securities and Exchange
Commission required to be filed under the Securities Exchange Act of
1934, as amended, and applicable rules and regulations promulgated
thereunder. Harken's Annual Report on Form-10K for the year ended
December 31, 1994, and Harken's Quarterly Reports on Form-10Q for the
quarters ending March 31, 1995, and June 30, 1995, respectively (the
"SEC DOCUMENTS") do not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. Since June
30, 1995, there have been no material developments, transactions or
events affecting Harken (other than developments or events affecting
the oil and gas exploration and production industry gener- ally) other
than as disclosed by Harken in the SEC Documents or to the Investors
in writing. There are no material liabilities of Harken (contingent
or otherwise), other than as disclosed in the SEC Documents and the
financial statements included therein.
SECTION 7. REPRESENTATIONS AND WARRANTIES OF EACH INVESTOR.
Each Investor hereby severally (and not jointly or jointly and
severally) represents and warrants to the Harken Entities as follows:
(a) Such Investor is acquiring the Closing Shares and the
Warrant to be acquired by it hereunder for its own account for
investment and not with a view to, or for sale or other disposition in
connection with, any distribution of all or any part thereof, except
(i) in an offering covered by a registration statement filed with the
Securities and Exchange Commission under the Securities Act covering
the Closing Shares or Warrant, or (ii) pursuant to an applicable
exemption under the Securities Act.
(b) Such Investor acknowledges that it is able to fend for
itself, can bear the economic risk of its investment in the Closing
Shares and the Warrant to be acquired by it hereunder, and has such
knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of an investment in the
Closing Shares and the Warrant. Such Investor represents that it has
not been organized for the purpose of acquiring the Closing Shares and
the Warrant to be acquired by it hereunder.
(c) Such Investor understands that the Closing Shares and
the Warrant will not have been registered pursuant to the Securities
Act or any applicable state securities laws, that such Closing Shares
and the Warrant will be characterized as "restricted securities" under
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<PAGE> 8
federal securities laws, and that under such laws and applicable
regulations such Closing Shares and the Warrant cannot be sold or
otherwise disposed of without registration under the Securities Act or
an exemption therefrom.
(d) It is agreed and understood by such Investor that the
certificates representing the Closing Shares shall each conspicuously
set forth on the face or back thereof, in addition to any legends
required by applicable law or other agreement, a legend in
substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. SUCH SHARES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
UNLESS THEY ARE FIRST REGISTERED PURSUANT TO THAT ACT AND APPLICABLE
STATE SECURITIES LAWS OR UNLESS THE CORPORATION RECEIVES A WRITTEN
OPINION OF COUNSEL, WHICH OPINION AND COUNSEL ARE SATISFACTORY TO THE
CORPORATION, TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.
(e) It has received a copy of the SEC Document and has
had an opportunity to ask questions and receive answers from Harken
regarding the business, properties, prospects and financial condition
of Harken and to obtain additional information necessary to verify the
accuracy of any information furnished to it or to which it had access.
SECTION 8. CLOSING. The closing of the transactions
contemplated hereby (the "CLOSING") will take place at the offices of Thompson
& Knight, P.C., located at 1700 Pacific Avenue, Dallas, Texas, at 11:00 a.m.
local time, on October 5, 1995, or at such other date and time as the Investors
and Harken may mutually agree upon. The date on which the Closing occurs is
herein called the "CLOSING DATE".
SECTION 9. CONDITIONS PRECEDENT.
(a) The obligations of the Investors to consummate the
transactions contemplated hereby shall be subject to each of the following
conditions being met:
(i) Each and every representation of each Harken Entity
under this Agreement shall be true and accurate in all material
respects as of the date when made and shall be deemed to have been
made again at and as of the time of Closing and shall at and as of the
time of Closing be true and accurate in all material respects except
as to changes specifically contemplated by this Agreement or consented
to by the Investors.
(ii) Each Harken Entity shall have performed and complied
in all material respects with (or compliance therewith shall have been
waived by the Investors) each and every covenant and agreement
required to be performed or complied with by such Harken Entity prior
to or at Closing.
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<PAGE> 9
(iii) The Harken Sub shall have executed and delivered a
New Note in favor of each Investor.
(iv) Each Investor shall have received a certificate or
certificates in definitive form representing the Harken Shares to be
issued to such Investor pursuant to Section 3(a).
(v) No suit, action or other proceedings shall, on the
date of Closing, be pending or threatened before any court or
governmental agency seeking to restrain, prohibit, or obtain damages
or other relief in connection with the consummation of the
transactions contemplated by this Agreement or any Related Agreement.
(vi) The Purchase Agreement and the P&P Agreement shall
have been executed and delivered by the respective parties thereto and
the transactions contemplated thereunder consummated.
(b) The obligations of each Harken Entity to consummate the
transactions contemplated hereby shall be subject to each of the following
conditions being met:
(i) Each and every representation of the Investors under
this Agreement shall be true and accurate in all material respects as
of the date when made and shall be deemed to have been made again at
and as of the time of Closing and shall at and as of the time of
Closing be true and accurate in all material respects except as to
changes specifically contemplated by this Agreement or consented to by
each Harken Entity.
(ii) Each Investor shall have performed and complied in
all material respects with (or compliance therewith shall have been
waived by each Harken Entity) each and every covenant and agreement
required to be performed or complied with by such Investor prior to or
at Closing.
(iii) No suit, action or other proceedings shall, on the
date of Closing, be pending or threatened before any court or
governmental agency seeking to restrain, prohibit, or obtain damages
or other relief in connection with the consummation of the
transactions contemplated by this Agreement or any Related Agreement.
(iv) The Purchase Agreement and the P&P Agreement shall
have been executed and delivered by the respective parties thereto and
the transactions contemplated thereunder consummated.
SECTION 10. CERTAIN POST-CLOSING ELECTIONS AND OBLIGATIONS.
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<PAGE> 10
(a) If, as of the expiration of the Special Provision Term,
Realized Proceeds are less than Target Proceeds, then, within ten days after
the expiration of the Special Provision Term, each of the Investors shall elect
one of the following options (the "SPECIAL PROVISION OPTIONS") by notice to
Harken, in which event such Investor, Harken and the Harken Sub shall have the
duties and obligations hereinafter described:
(i) Such Investor may elect to receive, and the Harken
Sub shall be obligated to execute and deliver, an assignment of a
portion of the Properties, which portion shall be equal to the product
of A times B, where "A" is equal to a percentage derived from a
fraction, the numerator of which is the Realized Proceeds and the
denominator of which is the Target Proceeds, and where "B" is equal to
the Investor's Sharing Ratio. If an Investor elects the option
described in this paragraph (i), such Investor shall be obligated to
assign to Harken without consideration therefor all of such Investor's
Closing Shares not theretofore disposed of (however, such Investor
shall be permitted to retain the Harken Warrant and any Warrant Shares
then held by it).
(ii) Such Investor may elect to receive, and the Harken
Sub shall be obligated to execute and deliver to such Investor a
promissory note (a "DEFICIENCY NOTE") in the principal amount equal to
[A minus B] times C, where "A" is the Target Proceeds, where "B" is
the Realized Proceeds, and where "C" is such Investor's Sharing Ratio.
Each Deficiency Note issued to an Investor (A) shall bear interest at
a rate of 10% per annum, (B) shall be payable in 36 consecutive equal
monthly principal payments plus accrued interest, the first of which
shall be due the first month immediately after the month during which
such note is executed and delivered, (C) shall be secured by a lien
and a security interest in the Properties and (D) at the election of
such Investor, shall be guaranteed by Harken with respect to payment
and performance. If an Investor elects the option described in this
paragraph (ii), such Investor shall be obligated to assign to Harken
without consideration therefor all of such Investor's Closing Shares
not theretofore disposed of (however, such Investor shall be permitted
to retain the Warrant and any Warrant Shares then held by it).
(iii) Such Investor may elect to retain all of its Closing
Shares not theretofore disposed of (as well as the Warrant and Warrant
Shares then held by it). If an Investor elects the option described
in this paragraph (iii), such Investor shall release any and all of
the interests it then has in any liens, security interests and other
claims with respect to the Properties.
(b) As used in this Section 10:
(i) the term "QUALIFIED OFFER" shall mean an offer to
purchase Closing Shares at a price not less than $1.50 per share
(which price per share shall be proportionately adjusted in the event
of any subdivision or combination of Harken
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<PAGE> 11
Common Stock) or such other price per share as agreed upon in writing
by Harken and all of the Investors;
(ii) the term "QUALIFIED PURCHASER" shall mean a person
introduced to the Investors by Harken that, in the good faith
determination of the Investors, is financially able to consummate the
purchase of Closing Shares that is the subject of the Qualified Offer
made by such person;
(iii) the term "REALIZED PROCEEDS" shall mean the sum of A
plus B, where "A" is equal to the aggregate gross proceeds actually
received by the Investors (prior to any commissions, fees or other
costs) from the sale of Closing Shares during the Special Provision
Term, and where "B" is equal to the aggregate gross proceeds the
Investors would have received from the sale of Closing Shares during
the Special Provision Term had they elected to accept a Qualified
Offer from a Qualified Purchaser;
(iv) the term "SHARING RATIO" shall mean with respect to
each Investor the percentage amount set forth opposite such Investor's
name below in this paragraph (iv):
ING 50%
New England 40%
ELP 10%
(v) the term "SPECIAL PROVISION TERM" shall mean the
period of time commencing the Closing Date and ending three-years
thereafter; and
(vi) the term "TARGET PROCEEDS" shall mean an amount equal
to $4,000,000 plus interest thereon (less any Realized Proceeds) at
the rate of 10% per annum from the Closing Date to the date as of
which any calculation of such amount is made hereunder.
(c) Notwithstanding anything else herein to the contrary, if,
during the Special Provision Term, (i) the daily closing price of the Harken
Common Stock shall be less than $0.50 per share for ten consecutive trading
days, and (ii) Realized Proceeds have not equaled or exceeded Target Proceeds,
each of the Investors shall thereupon have the right to exercise any of the
Special Provision Options.
(d) Notwithstanding the foregoing or anything else herein to the
contrary, any obligations owed by each Investor to Harken or the Harken Sub
pursuant to this Section 10 shall be several, and not joint and several.
(e) In the event that an Investor, on the one hand, or a Harken
Entity, on the other hand, is obligated under subsection (a) above to take
certain actions under such subsection, then such actions shall be taken as
promptly as possible but in any event within 30 days after the point in time
that an Investor makes an election under such subsection.
11
<PAGE> 12
SECTION 11. NO COMMISSIONS OWED. Each Harken Entity jointly and
severally agree to indemnify and hold harmless each Investor (and its
affiliates, and its and their respective officers, directors, employees,
attorneys, contractors and agents) from and against any and all claims,
actions, causes of action, liabilities, damages, losses, costs or expenses
(including, without limitation, court costs and attorneys' fees) of any kind or
character arising out of or resulting from any agreement, arrangement or
understanding alleged to have been made by, or on behalf of, a Harken Entity
with any broker or finder in connection with this Agreement or the transactions
contemplated hereby. Each Investor severally (and not jointly or jointly and
severally) agrees to indemnify and hold harmless each Harken Entity (and their
respective officers, directors, employees, attorneys, contractors and agents)
from and against any and all claims, actions, causes of action, liabilities,
damages, losses, costs or expenses (including, without limitation, court costs
and attorneys' fees) of any kind or character arising out of or resulting from
any agreement, arrangement or understanding alleged to have been made by, or on
behalf of, such Investor with any broker or finder in connection with this
Agreement or the transactions contemplated hereby.
SECTION 12. NOTICES. All notices and other communications
required under this Agreement shall (unless otherwise specifically provided
herein) be in writing and be delivered personally, by recognized commercial
courier or delivery service which provides a receipt, by telecopier (with
receipt acknowledged), or by registered or certified mail (postage prepaid), at
the following addresses:
If to Harken or
the Harken Sub:
[Harken Energy Corporation] [Harken Energy West Texas, Inc.]
5605 N. MacArthur, Suite 400
Irving, Texas 75038
Telecopier No.: (214)753-6955
Attention: Mikel D. Faulkner, Chairman
with a copy to:
Larry E. Cummings, General Counsel
If to the Investors: See Exhibit 12 hereto.
and shall be considered delivered on the date of receipt. Any party hereto may
specify as its proper address any other post office address within the
continental limits of the United States by giving notice to the other parties,
in the manner provided in this Section, at least ten (10) days prior to the
effective date of such change of address.
12
<PAGE> 13
SECTION 13. SURVIVAL OF PROVISIONS. All representations, warranties
and covenants made by each party hereto in this Agreement or any other document
contemplated thereby or hereby shall be considered to have been relied upon by
the other parties hereto and shall survive the execution and delivery of this
Agreement or such other document, regardless of any investigation made by or on
behalf of any such party.
SECTION 14. MISCELLANEOUS MATTERS.
(a) PARTIES BEAR OWN EXPENSES. The Investors, on the one hand,
and the Harken Entities, on the other hand, shall each bear and pay all
expenses (including, without limitation, legal fees) incurred by them in
connection with the transactions contemplated by this Agreement.
(b) ENTIRE AGREEMENT. This Agreement and the other documents
contemplated hereunder contain the entire understanding of the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations, and discussions among the
parties with respect to such subject matter.
(c) AMENDMENTS. This Agreement may be amended, modified,
supplemented, restated or discharged only by an instrument in writing
signed by all of the parties hereto.
(d) NO WAIVER. The failure of any party hereto to insist upon
strict performance of a covenant hereunder or of any obligation
hereunder, irrespective of the length of time for which such failure
continues, shall not be a waiver of such party's right to demand strict
compliance in the future. No consent or waiver, express or implied, to
or of any breach or default in the performance of any obligation
hereunder shall constitute a consent or waiver to or of any other breach
or default in the performance of the same or any other obligation
hereunder.
(e) CHOICE OF LAW. Without regard to principles of conflicts of
law, this Agreement shall be construed and enforced in accordance with
and governed by the laws of the State of Texas applicable to contracts
made and to be performed entirely within such state and the laws of the
United States of America.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall be binding on
and inure to the benefit of the parties hereto and their respective
successors and assigns, provided that (i) neither Harken Entity may
assign its rights and duties hereunder without the prior written consent
of all of the Investors and (ii) no Investor may assign it rights and
duties hereunder without the prior written consent of Harken except for
any person to whom such Investor has transferred its Harken Common Stock,
Warrant or Warrant Shares.
(g) CERTAIN AGREEMENTS. Upon consummation of the transactions
contemplated hereunder, the Investors agree that neither Harken Entity
shall have any duty, obligation or liability under either the Loan
Agreement or that certain Performance Agreement dated as of May 22, 1992,
among Parker & Parsley, Yellowhouse and the Investors, and that each
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<PAGE> 14
Harken Entity's duties, obligations, and liabilities to the Investors
shall be those which are set forth in the documents contemplated hereby
or which may be hereafter executed to which either or both are parties.
Harken Sub agrees to execute an amendment to that certain Trust Agreement
dated as of May 22, 1992, between Yellowhouse, Bankers Trust Company and
the Investors as may be reasonably requested by the Investors to reflect
that Harken Sub is the "Borrower" (as such term is used in the Trust
Agreement) and to reflect such other changes as may be reasonably
necessary to correspond with the terms of the transactions contemplated
hereunder.
(h) COUNTERPARTS. This Agreement may be executed in multiple
counterparts, with each such counterpart constituting an original and all
of such counterparts constituting but one and the same agreement.
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<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
HARKEN ENERGY CORPORATION
By: /s/ Larry E. Cummings
---------------------------------
Name: Larry E. Cummings
Title: Vice President and Secretary
HARKEN ENERGY WEST TEXAS, INC.
By: /s/ Larry E. Cummings
---------------------------------
Name: Larry E. Cummings
Title: Vice President and Secretary
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION
By: /s/ Barry Borak
---------------------------------
Name: Barry Borak
Title: Vice President
NEW ENGLAND MUTUAL LIFE
INSURANCE COMPANY
By: /s/ Michael T. Zonghetti
---------------------------------
Name: Michael T. Zonghetti
Title: Investment Officer
ENCAP 1989-I LIMITED PARTNERSHIP
By: ENCAP PARTNERS, General Partner
By: /s/ Robert L. Zorich
---------------------------------
Name: Robert L. Zorich
Title: Managing Director
15
<PAGE> 1
PROMISSORY NOTE
$375,000.00 October 5, 1995
FOR VALUE RECEIVED, the undersigned, Harken Energy West Texas, Inc.,
a Delaware corporation (the "BORROWER"), hereby promises to pay to the order of
Internationale Nederlanden (U.S.) Capital Corporation, a Delaware corporation
(the "LENDER"), the principal sum of Three Hundred Seventy Five Thousand and
No/100 United States Dollars (U.S. $375,000.00), as provided herein. The
principal of this Note shall be payable in eleven installments, each shall be
in the amount of U.S.$34,090.91 and shall be due and payable on the 5th day of
each month, beginning November 5, 1995 and continuing regularly thereafter
until and including September 5, 1996. The interest on the unpaid principal
balance of this Note shall accrue at the rate of 7.00% per annum from the date
hereof, and shall be payable monthly on the 5th day of each month, commencing
November 5, 1995.
Both principal and interest are payable in lawful money of the United
States of America and in immediately available funds for the account of the
holder hereof at the offices of Bankers Trust Company in the City and State of
New York or at such other place as the holder hereof shall designate to the
Borrower in writing.
All past due principal and accrued unpaid interest of this Note shall
bear interest at a rate equal to the lesser of 9.00% per annum or the Highest
Lawful Rate (as defined herein). Interest shall be computed on the basis of a
360-day year of twelve 30-day months.
This Note is in extension and renewal of that certain Note dated as of
October 5, 1995 (the "YELLOWHOUSE RENEWAL NOTE"), executed by Yellowhouse
Project Co., a Delaware corporation ("YELLOWHOUSE"), in favor of the Lender,
which Yellowhouse Renewal Note was in extension and renewal of that certain
Note dated May 27, 1992, executed by Yellowhouse in favor of the Lender in the
principal amount of U.S.$6,000,000.00. This Note is secured by and entitled to
the benefits of certain security documents, including without limitation, that
certain Mortgage, Deed of Trust, Assignment of Production, Security Agreement
and Financing Statement dated as of May 22, 1992, executed by Yellowhouse, as
amended by that certain First Supplement to Mortgage, Deed of Trust, Assignment
of Production, Security Agreement and Financing Statement dated as of October
5, 1995, executed by the Borrower (collectively, the "MORTGAGE").
The Borrower shall never be required to pay unearned interest on this
Note and shall never be required to pay interest on this Note in excess of the
maximum rate of interest to be charged under applicable law (the "HIGHEST
LAWFUL RATE"), and if the effective rate of interest which would otherwise be
payable under this Note would exceed the Highest Lawful Rate, or if the holders
of this Note shall receive any unearned interest or shall receive monies that
are deemed to constitute interest which would increase the effective rate of
interest payable under this Note to a rate in
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<PAGE> 2
excess of the Highest Lawful Rate, then (a) the amount of interest which would
otherwise be payable under this Note shall be reduced to the amount allowed
under applicable law and (b) any unearned interest paid by the Borrower or any
interest paid by the Borrower in excess of the Highest Lawful Rate shall, at
the option of the holder of this Note, be either refunded to the Borrower or
credited on the principal of this Note.
All claims against the Borrower and liabilities of the Borrower
arising under this Note and/or the Mortgage shall be made only against and
shall be limited to the Mortgaged Property (as defined in the Mortgage), and no
recourse shall be had by the Lender against the Borrower or its assets other
than the Mortgaged Property in respect of such claims or liabilities nor shall
the Borrower be personally liable for such claims or liabilities.
This Note may be prepaid in whole or in part at any time without
penalty.
THIS NOTE IS INTENDED TO BE PERFORMED IN THE STATE OF NEW YORK AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF SUCH STATE (AS
APPLICABLE TO TRANSACTIONS TAKING PLACE WHOLLY IN SUCH STATE BETWEEN RESIDENTS
OF SUCH STATE), EXCEPT TO THE EXTENT THE SAME IS GOVERNED BY APPLICABLE FEDERAL
LAW.
HARKEN ENERGY WEST TEXAS, INC.
By: /s/ Larry E. Cummings
-------------------------------
Name: Larry E. Cummings
Title: Vice President
2
<PAGE> 3
EXHIBIT 99.2
SCHEDULE OF SUBSTANTIALLY SIMILAR DOCUMENTS
Harken Energy Corporation issued 2 promissory notes on substantially
identical terms to the promissory note issued to Internationale Nederlanden
(U.S.) Capital Corporation in the principal amount of $375,000 (the "INC
Note"). Set forth below are the material details in which those promissory
notes differ from the INC Note:
Name Principal Amount
---- ----------------
New England Mutual Life Insurance Company $300,000
EnCap 1989-I Limited Partnership $ 75,000
3
<PAGE> 1
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR UNDER ANY
STATE SECURITIES OR BLUE SKY LAWS. NEITHER THIS WARRANT NOR ANY OF SUCH SHARES
MAY BE SOLD, ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
REGISTRATION UNDER SAID ACT AND UNDER APPLICABLE STATE SECURITIES OR BLUE SKY
LAWS OR EXEMPTIONS FROM SUCH REGISTRATION. THIS WARRANT MAY NOT BE SOLD,
ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF EXCEPT UPON THE CONDITIONS
SPECIFIED IN THIS WARRANT, AND NO SALE, ASSIGNMENT, TRANSFER, OR OTHER
DISPOSITION OF THIS WARRANT SHALL BE VALID OR EFFECTIVE UNLESS AND UNTIL SUCH
CONDITIONS SHALL HAVE BEEN COMPLIED WITH.
WARRANT NO. 95B-1
Warrant to Purchase
500,000 Shares
(subject to adjustment)
of Common Stock of
Harken Energy Corporation
Void after 3:00 p.m.
Dallas, Texas
October 5, 1997
HARKEN ENERGY CORPORATION
STOCK PURCHASE WARRANT
THIS IS TO CERTIFY THAT, for value received, Internationale
Nederlanden (U.S.) Capital Corporation, its successors and permitted assigns
(the "Holder"), whose address is 135 East 57th Street, New York, New York
10022-2101, upon due exercise of this Warrant, is entitled to purchase from
Harken Energy Corporation, a Delaware corporation (the "Company"), at any time
on or after October 5, 1995, and before 3:00 P.M., Dallas, Texas local time, on
October 5, 1997 (the "Expiration Date"), all or any part of 500,000 shares (the
"Shares") of fully paid and non-assessable common stock, par value $.01 per
share (the "Common Stock"), of the Company, at an exercise price of $2.00 per
share (the "Exercise Price"), both the Exercise Price and number of shares
being subject to possible adjustment as provided below.
This Warrant is subject to the following terms, provisions and
conditions:
1. Exercise of Warrant.
(a) Subject to subsection 1(b) below, the Holder may
exercise this Warrant in whole or in part at any time, but only in such
multiples as are required to permit the issuance by the Company of one or more
full shares of Common Stock of the Company, by surrender of this Warrant with
the Form of Exercise Agreement attached hereto duly executed, to the Company at
<PAGE> 2
or prior to 3:00 P.M., Dallas, Texas local time on the Expiration Date,
together with the payment of the Exercise Price for each of the Shares into
which the Warrant is exercised. Payment for the Shares to be purchased upon
exercise of this Warrant may be made by the delivery of a certified or
cashier's check payable to the Company for the aggregate Exercise Price of the
Shares to be purchased. In case of the exercise of this Warrant in part only
prior to the Expiration Date, the Company will deliver to the Holder a new
Warrant of like tenor in the name of the Holder evidencing the right to
purchase the number of shares as to which this Warrant has not been exercised.
(b) The Warrant may not be exercised by the Holder
unless, at the time of exercise, (1) there is either (i) a registration
statement or prospectus covering the Common Stock of the Company, that is
effective under (A) the Act, and (B) the securities laws of the state of the
address of record of such Holder, or (ii) an exemption available from
registration for the Warrant exercise and issuance of Common Stock of the
Company in the opinion of satisfactory counsel provided by the Holder to the
Company, and (2) such exercise and issuance would otherwise be in compliance
with applicable law in the opinion of such counsel provided to the Company.
The Warrant may not be, directly or indirectly, transferred to, or exercised
by, any person in any state where such transfer or exercise would violate any
law, including securities law, of such state in the opinion of counsel to the
Company. Legends as required by applicable federal and state laws may be
placed on the certificates representing the Shares. The Holder and the
Company agree to execute such documents and instruments as counsel for the
Company reasonably deems necessary to effect compliance of the issuance of this
Warrant and any Shares issued upon exercise hereof with applicable federal and
state securities laws.
2. Certain Agreements of the Company. The Company hereby
covenants and agrees as follows:
(a) Shares to be Fully Paid. All Shares will, upon issuance,
be validly issued, fully paid, and non- assessable and free from all taxes,
liens, and charges with respect to the issue thereof.
(b) Reservation of Shares. During the period within which this
Warrant may be exercised, the Company will at all times have authorized, and
reserved for the purpose of issue upon exercise of this Warrant, a sufficient
number of shares of Common Stock to provide for the exercise of this Warrant.
(c) Certain Actions Prohibited. The Company will not, by
amendment of its charter or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed by it hereunder, but will at all times
in good faith assist in the carrying out of all the provisions of this Warrant
and in the taking of all such action as may reasonably be requested by the
holder of this Warrant in order to protect the exercise privilege of the holder
of this Warrant against dilution or other impairment, consistent with the tenor
and purpose of this Warrant. Without limiting the generality of the foregoing,
(i)
2
<PAGE> 3
the Company will not increase the par value of the shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, (ii) before taking any action which would cause an adjustment reducing
the Exercise Price below the then par value of the shares of Common Stock so
receivable, the Company will take all such corporate action as may be necessary
or appropriate in order that the Company may validly and legally issue fully
paid and non-assessable shares of Common Stock at such adjusted Exercise Price
upon the exercise of this Warrant.
(d) Listing. If the issuance of any Shares required to be
reserved for purposes of exercise of this Warrant requires listing on any
national securities exchange, before such Shares may be issued upon exercise
of this Warrant, the Company will, at its expense, use its best efforts to
cause such Shares to be duly approved, or listed on the relevant national
securities exchange, as the case may be, at such time, so that such Shares may
be issued in accordance with the terms hereof.
3. Stock Dividends Reclassifications, Reorganization,
Anti-Dilution Provisions, Etc.
This Warrant is subject to the following further provisions:
(a) In case, prior to the expiration of this Warrant by
exercise or by its terms, the Company issues any shares of its Common Stock as
a stock dividend or divides the number of shares of Common Stock, then, in
either of such cases, the Exercise Price per share of the Shares purchasable
pursuant to this Warrant in effect at the time of such action will be
proportionately reduced and the number of Shares at that time purchasable
pursuant to this Warrant shall be proportionately increased; and conversely,
in the event the Company shall combine such shares of its Common Stock into a
smaller number of shares, then, and in such event, the Exercise Price per share
of the Shares purchasable pursuant to this Warrant in effect at the time of
such action shall be proportionately increased and the number of Shares at that
time purchasable pursuant to this Warrant shall be proportionately decreased.
(b) In case, prior to the expiration of this Warrant by
exercise or by its terms, the Company is recapitalized by reclassifying its
outstanding Common Stock into stock with a different par value or by changing
its outstanding Common Stock with par value to stock without par value, or the
Company or a successor corporation consolidates or merges with or conveys all
or substantially all of its or of any successor corporation's property and
assets to any other corporation or corporations (any such corporation being
included within the meaning of the term "successor corporation" in the event of
any consolidation or merger of any such corporation with, or the sale of all or
substantially all of the property of any such corporation to, another
corporation or corporations), the Holder of this Warrant may thereafter
purchase, upon the terms and conditions and during the time specified in this
Warrant, in lieu of the Shares theretofore purchasable upon the exercise of
this Warrant, the kind and amount of shares of stock and/or other securities
receivable upon such recapitalization or consolidation, merger, or conveyance
by a Holder of the number of shares of Common Stock which the Holder of this
Warrant might have purchased, immediately prior to such recapitalization or
consolidation, merger, or conveyance.
3
<PAGE> 4
(c) Upon the occurrence of each event requiring an
adjustment of the Exercise Price and/or of the number of Shares purchasable
pursuant to this Warrant in accordance with, and as required by, the terms of
subdivision (a) of this Section 3, the Company shall forthwith employ a firm of
certified public accountants (who may be the regular accountants for the
Company) who shall compute the adjusted Exercise Price and the adjusted number
of Shares purchasable at such adjusted Exercise Price by reason of such event
in accordance with the provisions of subdivision (a) and shall prepare a
certificate setting forth such adjusted Exercise Price and the adjusted number
of Shares and showing in detail the facts upon which such conclusions are
based, including a statement of the consideration received or to be received by
the Company for any additional shares of Common Stock issued or sold or deemed
to have been issued or sold and of the number of shares of Common Stock
outstanding or deemed to be outstanding. The Company shall mail forthwith to
the Holder of this Warrant a copy of such certificate, and thereafter said
certificate shall be conclusive and shall be binding upon such Holder unless
contested by such Holder by written notice to the Company within ten (10) days
after receipt of the certificate by such Holder.
(d) In case:
(i) of any classification, reclassification, or
other reorganization of the capital stock of the Company, consolidation, or
merger of the Company with or into another corporation, or conveyance of all or
substantially all of the assets of the Company; or
(ii) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, and in any such case, the Company shall mail to the Holder of this
Warrant a brief statement of the event giving rise to such effect and a
description thereof.
(e) In case the Company at any time while this Warrant
remains unexpired and unexercised, sells all or substantially all of its
property or dissolves, liquidates, or winds up its affairs, the Holder of this
Warrant may thereafter receive upon exercise hereof in lieu of each Share a
distribution of a kind and amount of any securities and/or assets as may be
issuable, distributable, or payable upon any such sale, dissolution,
liquidation, or winding up with respect to each share of Common Stock of the
Company.
4. No Rights or Liabilities as a Shareholder. This Warrant
shall not entitle the Holder hereof to any voting rights or other rights
whatsoever as a shareholder of the Company. No provision of this Warrant, in
the absence of affirmative action by the Holder hereof to purchase the Shares,
and no mere enumeration herein of the rights or privileges of the Holder
hereof, shall give rise to any liability of such Holder for the Exercise Price
or as a shareholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
4
<PAGE> 5
5. Loss, Theft, Destruction, or Mutilation. Upon receipt by the
Company of evidence satisfactory to it (in the exercise of its reasonable
discretion) of the ownership of and the loss, theft, destruction, or mutilation
of this Warrant and (in the case of loss, theft, or destruction) of an
indemnity from the Holder satisfactory to the Company (in the exercise of its
reasonable discretion), and (in the case of mutilation) upon surrender and
cancellation thereof, the Company will execute and deliver to the Holder, in
lieu thereof, a new Warrant of like tenor.
6. Register. The Company shall maintain, at its principal
office located at 5605 North MacArthur Boulevard, Suite 400, Irving, Texas
75038 (or such other office or agency of the Company as it may designate by
notice to the Holder hereof), a register for this Warrant, in which the Company
shall record the name and address of the person in whose name this Warrant has
been issued, as well as the name and address of each transferee as may be
permitted under the terms of this Warrant and each prior owner of this Warrant.
7. Exercise or Transfer Without Registration. Anything in
this Warrant to the contrary notwithstanding, if, at the time of the surrender
of this Warrant in connection with any exercise, transfer, or exchange of this
Warrant, this Warrant shall not be registered under the Securities Act of 1933,
as amended, and under applicable state securities or blue sky laws, the Company
may require, as a condition of allowing such exercise, or exchange, that (i)
the Holder of this Warrant, furnish to the Company a written opinion of
counsel, which opinion and counsel are acceptable to the Company, to the effect
that such exercise, or exchange may be made without registration under said
Act and under applicable state securities or blue sky laws and (ii) the Holder
execute and deliver to the Company an investment letter in form and substance
acceptable to the Company. The Holder of this Warrant, by taking and holding
the same, hereby represents to the Company that such Holder is an "accredited
investor" as defined under the Act and is acquiring this Warrant for investment
and not with a view to the distribution thereof.
8. Notices. All notices requests and other communications
required or permitted to be given or delivered hereunder to the Holder of this
Warrant or to the Holder of shares acquired upon exercise of this Warrant shall
be in writing, and shall be personally delivered or shall be sent by first
class mail, certified or registered mail, postage prepaid and addressed, to
such Holder at the address shown for such Holder on the books of the Company,
or at such other address as shall have been furnished to the Company by notice
from such Holder. All notices, requests and other communications required or
permitted to be given or delivered hereunder to the Company shall be in
writing, and shall be personally delivered, or shall be sent by first class
mail, certified or registered mail, postage prepaid and addressed, to the
office of the Company at 5605 North MacArthur Boulevard, Suite 400, Irving,
Texas 75038, Attention: Corporate Secretary, or at such other address as shall
have been furnished to the Holder of this Warrant or to the Holder of shares
acquired upon exercise of this Warrant by notice from the Company. Any such
notice, request, or other communication may be sent by telegram, facsimile or
telex, but shall in such case be subsequently confirmed by a writing personally
delivered or sent by first class mail or by certified or registered mail as
provided above. All notices, requests, and other communications shall be
deemed to have been given either at the time of the delivery thereof to (or the
receipt by, in the case of a telegram, facsimile or telex) the person entitled
to receive such
5
<PAGE> 6
notice at the address of such person for purposes of this Paragraph 8, or, if
mailed, at the completion of the third full business day following the time of
such mailing thereof to such address, as the case may be.
9. Governing Law. This Warrant shall be construed and enforced
in accordance with and governed by the laws of the State of Delaware.
10. Miscellaneous.
(a) Amendments. This Warrant or any provision hereof may not
be changed, waived, or discharged, or terminated orally, but only by an
instrument in writing signed by the party (or any predecessor in interest
thereof) against which enforcement of the same is sought.
(b) Descriptive Headings. The descriptive headings of the
several paragraphs of this Warrant are inserted for purposes of reference only,
and shall not affect the meaning or construction of any of the provisions
hereof.
(c) Successors and Assigns. This Warrant shall be binding upon
any entity succeeding to the Company by merger, consolidation, or acquisition
of all or substantially all the Company's assets.
6
<PAGE> 7
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer under its corporate seal, attested by its duly
authorized officer, on this 5th day of October, 1995.
HARKEN ENERGY CORPORATION
By: /s/ Larry E. Cummings
---------------------------------
[Seal] Name: Larry E. Cummings
Title: Vice President
Attest:
/s/ Patricia A. Little
- --------------------------------
Name: Patricia A. Little
Title: Asst. To General Counsel
7
<PAGE> 8
FORM OF EXERCISE AGREEMENT
Dated: ______, 19___.
To: _________________________________
The undersigned, pursuant to the provisions set forth in the within
Warrant Number ________hereby agrees to purchase ________ shares of Common
Stock covered by such Warrant, and makes payment herewith in full therefor at
the price per share provided by such Warrant in cash or by certified or
official bank check in the amount of $____________. Please issue a certificate
of certificates for such shares of Common Stock in the following name:
Name:_________________________________
Address: ____________________________
____________________________
Signature: __________________________
Title of Signing Officer of Agent (if
any):_________________________________
Note: The above signature should correspond exactly with the name on
the face of the within Warrant or with the name of the
assignee appearing in the assignment form.
and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said Holder covering the balance of the shares purchasable thereunder.
8
<PAGE> 9
EXHIBIT 99.3
SCHEDULE OF SUBSTANTIALLY SIMILAR DOCUMENTS
Harken Energy Corporation issued 2 warrants to purchase common stock
on substantially identical terms as the warrant issued to Internationale
Nederlanden (U.S.) Capital Corporation which was exercisable for 500,000 shares
of common stock (the "INC Warrant"). Set forth below are the material details
in which those warrants differ from the INC Warrant:
Number of Shares
Issuable Upon
Name Exercise of Warrant
---- -------------------
New England Mutual Life Insurance Company 400,000
EnCap 1989-I Limited Partnership 100,000
9
<PAGE> 1
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made and entered into as of the
5th day of October, 1995, by and among Harken Energy Corporation, a Delaware
corporation ("HARKEN"), Internationale Nederlanden (U.S.) Capital Corporation,
a Delaware corporation ("ING"), New England Mutual Life Insurance Company, a
Massachusetts corporation ("NEW ENGLAND"), and EnCap 1989-I Limited
Partnership, a Texas limited partnership ("ELP").
RECITALS:
A. Reference is hereby made to that certain Restructuring and
Sale Agreement (Harken) dated as of even date herewith (the "RESTRUCTURING
AGREEMENT"), by and among the parties hereto.
B. In order to induce ING, New England and ELP to enter into the
Restructuring Agreement (and recognizing that ING, New England and ELP would
not be willing to enter into the Restructuring Agreement in the absence of this
Agreement), Harken has agreed to provide the Holders (as defined herein) with
the registration rights set forth herein.
AGREEMENT:
NOW, THEREFORE, for and in consideration of the foregoing Recitals
and the mutual agreements contained herein, the sufficiency of which is hereby
acknowledged and confirmed, the parties hereto, intending to be legally bound,
agree as follows:
SECTION 1. DEFINITIONS AND REFERENCES.
(a) When used in this Agreement, the following terms shall have
the respective meanings assigned to them in this Section 1 or in the sections,
subsections or other subdivisions or other documents referred to below:
"AGREEMENT", shall mean this Registration Rights Agreement, as
hereafter amended or modified in accordance with the terms hereof.
"CLOSING DATE" shall have the meaning assigned to it in the
Restructuring Agreement.
"COMMISSION" shall mean the Securities and Exchange Commission (or any
successor body thereto).
"COMMON STOCK" shall mean the common stock, par value $0.01 per share,
of Harken.
"ELIGIBLE WARRANT SHARES" shall mean Warrant Shares issued or which
would be issued upon exercise of the Warrants.
<PAGE> 2
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and all rules and regulations under such Act.
"FIRST REGISTRATION STATEMENT" shall have the meaning assigned to it
in Section 2(a).
"FIRST SHELF LIFE" shall have the meaning assigned to it in Section
2(a).
"HOLDER" shall mean any Person that holds Registrable Securities.
"ISSUED SHARES" shall mean (i) the shares of Common Stock issued to
ING, New England and ELP pursuant to Section 3(a) of the Restructuring
Agreement and (ii) any securities issued or issuable with respect to the Issued
Shares by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization.
"PERSON" shall mean any individual, corporation, partnership, joint
venture, limited partnership, limited liability company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"PIGGYBACK EXPIRATION POINT" shall mean October 5, 1997.
"PIGGYBACK REGISTRATION" shall have the meaning assigned to it in
Section 4.
"REGISTRABLE SECURITIES" shall mean the Issued Shares and (ii) the
Warrant Shares.
"REGISTRATION DEMAND" shall have the meaning assigned to it in Section
3(a)
"REGISTRATION EXPENSES" shall mean all expenses incident to Harken's
performance of or compliance with the registration rights granted hereunder,
including (without limitation) all registration and filing fees, fees and
expenses of compliance with securities and blue sky laws, printing and
engraving expenses, messenger, telephone and delivery expenses, and fees and
disbursements of counsel for Harken, all independent certified public
accountants and underwriters (excluding discounts and commissions); provided,
that Registration Expenses shall not include any Selling Expenses.
RESTRUCTURING AGREEMENT" shall have the meaning assigned to it in
Paragraph A of the Recitals hereto.
"SECOND REGISTRATION STATEMENT" shall have the meaning assigned to it
in Section 2(b).
"SECOND SHELF LIFE" shall have the meaning assigned to it in Section
2(b).
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
and all rules and regulations under such Act.
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<PAGE> 3
"SELLING EXPENSES" shall mean underwriting discounts or commissions
and any selling commissions attributable to sales of Registrable Securities.
"THIRD REGISTRATION STATEMENT" shall have the meaning assigned to it
in Section 2(c).
"WARRANTS" shall mean the Warrants to buy Common Stock issued to ING,
New England and ELP pursuant to Section 3(b) of the Restructuring Agreement.
"WARRANT SHARES" shall mean (i) the shares of Common Stock purchasable
under the terms of the Warrants and (ii) any securities issued or issuable with
respect to the Warrant Shares by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization.
(b) All references in this Agreement to sections, subsections and
other subdivisions refer to corresponding sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any of such subdivisions are for convenience only
and shall not constitute part of such subdivisions and shall be disregarded in
construing the language contained herein. The words "this Agreement", "this
instrument", "herein", "hereof", "hereby", "hereunder" and words of similar
import refer to this Agreement as a whole and not to any particular subdivision
unless expressly so limited. Words in the singular form shall be construed to
include the plural and vice versa, unless the context otherwise requires.
SECTION 2. SHELF REGISTRATION - ISSUED SHARES.
(a) Harken will use its reasonable best efforts to prepare and
file with the Commission as soon as reasonably practicable after the Closing
Date and in any event no later than 90 days after the Closing Date a shelf
registration statement on Form S-3 or other appropriate form (the "FIRST
REGISTRATION STATEMENT") pursuant to Rule 415 under the Securities Act covering
the sale by the Holders of one-third of the Issued Shares. Harken shall use
its best efforts to cause the First Registration Statement to be declared
effective as soon as reasonably practicable after the Closing Date and to keep
the First Registration Statement effective for no less than 180 days (the
"FIRST SHELF LIFE"). The Holders agree to furnish to Harken such information
regarding the distribution of the Issued Shares covered by the First
Registration Statement as Harken may from time to time reasonably request in
writing and such other information as may be legally required in connection
with the First Registration Statement.
(b) On or before 30 days subsequent to either (i) the sale by the
Holders of all of the Issued Shares covered by the First Registration Statement
or (ii) the expiration of the First Shelf Life, Harken will prepare and file
with the Commission a shelf registration statement on Form S-3 or other
appropriate form (the "SECOND REGISTRATION STATEMENT") pursuant to Rule 415
under the Securities Act covering the sale by the Holders of one-third of the
Issued Shares. Harken shall use its best efforts to cause the Second
Registration Statement to be declared effective as promptly as possible after
the filing thereof with the Commission and to keep the Second Registration
Statement effective for no less than 180 days (the "SECOND SHELF LIFE"). The
Holders agree to furnish to Harken such information regarding the distribution
of the Issued Shares covered by the Second Registration Statement as Harken may
from time to time reasonably request in writing and
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<PAGE> 4
such other information as may be legally required in connection with the Second
Registration Statement.
(c) On or before 30 days subsequent to either (i) the sale by the
Holders of all of the Issued Shares covered by the Second Registration
Statement or (ii) the expiration of the Second Shelf Life, Harken will prepare
and file with the Commission a shelf registration statement on Form S-3 or
other appropriate form (the "THIRD REGISTRATION STATEMENT") pursuant to Rule
415 under the Securities Act covering the sale by the Holders of one-third of
the Issued Shares. Harken shall use its best efforts to cause the Third
Registration Statement to be declared effective as promptly as possible after
the filing thereof with the Commission and to keep the Third Registration
Statement effective for a maximum of 180 days. The Holders agree to furnish to
Harken such information regarding the distribution of the Issued Shares covered
by the Third Registration Statement as Harken may from time to time reasonably
request in writing and such other information as may be legally required in
connection with the Third Registration Statement.
(d) In connection with any registration of Issued Shares effected
pursuant to subsection (a), subsection (b) or subsection (c) above, the number
of Issued Shares of a particular Holder to be included shall be pro rata, based
on the proportion of Issued Shares issued to such Holder pursuant to the
Restructuring Agreement to the total number of Issued Shares issued to all
Holders pursuant to the Restructuring Agreement; provided, that as to any given
registration, one or more Holders may agree with another Holder or Holders that
the first such Holder(s) will include more than its (their) pro rata share(s)
while the other such Holder(s) will include less than its (their) pro rata
share(s). In addition, at any time and from time to time following the
effectiveness of any registration statement filed pursuant to this Section 2,
the Holders of the Issued Shares covered thereby may, by agreement, reallocate
among themselves the right to sell under such registration statement the Issued
Shares covered thereby. In other words, as to any given registration, one or
more Holders may agree with another Holder or Holders that the first such
Holder(s) will have the right to sell under the registration statement more
than its (their) pro rata share(s) (or other initial allocation) of the Issued
Shares covered thereby while the other such Holder(s) will have the right to
sell under the registration statement less than its (their) pro rata share(s)
(or other initial allocation) of such Issued Shares. The prospectus included
in each registration statement shall contain appropriate disclosures regarding
the possibility of such reallocation, and in particular shall contain
disclosures to the effect that, as a result of such possible reallocation, the
number of Issued Shares covered by the registration statement to be sold by a
particular Holder could be more or less than the number initially proposed to
be sold by it, up to a maximum of the total number of Issued Shares covered by
the registration statement. The Holders agree to promptly notify Harken of any
agreement between them regarding any such reallocation of shares, and, promptly
following its receipt of such notification, Harken agrees to prepare and file
with the Commission a supplement or amendment to the prospectus relating
thereto and take all other required action under federal and state securities
laws in order to make proper disclosure thereof.
SECTION 3. PIGGYBACK REGISTRATIONS. If, on or after the 90th
day from the Closing Date but prior to the Piggyback Expiration Point, Harken
proposes to register any of its securities (including securities to be
registered under Section 2) under the Securities Act other than (i) under
employee compensation or benefit programs or (ii) an exchange offer or an
offering of securities solely to the existing stockholders or employees of
Harken, and the registration form to be used
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<PAGE> 5
may be used for the registration of Warrant Shares, Harken will give prompt
written notice to all holders of Eligible Warrant Shares of its intention to
effect such a registration and will include in such registration all Eligible
Warrant Shares with respect to which Harken has received written requests for
inclusion therein within 20 days after the receipt of Harken's notice (a
"PIGGYBACK REGISTRATION"). Harken shall use its best efforts to cause the
managing underwriters of a proposed underwritten offering to permit the Warrant
Shares requested to be included in the registration statement (or registration
statements) for such offering to be included therein on the same terms and
conditions as any similar securities of Harken included therein.
Notwithstanding the foregoing, if Harken gives notice of such a proposed
registration, the total number of Warrant Shares which shall be included in
such registration shall be reduced pro rata to such number, if any, as in the
reasonable opinion of the managing underwriters of such offering would not
adversely affect the marketability or offering price of all of the securities
proposed to be offered by Harken in such offering; provided however, that (x)
if such Piggyback Registration is incident to a primary registration on behalf
of Harken, and to the extent not prohibited by any registration rights
agreements existing as of the date hereof, the securities to be included in the
registration statement (or registration statements) for any person other than
the Holders and Harken shall be first reduced prior to any such pro rata
reduction, and (y) if such Piggyback Registration is incident to a secondary
registration on behalf of holders of securities of Harken, the securities to be
included in the registration statement (or registration statements) for any
person not exercising "demand" registration rights other than the Holders shall
be first reduced prior to any such pro rata reduction.
SECTION 4. REGISTRATION PROCEDURES. In connection with the
First Registration Statement, the Second Registration Statement and the third
Registration Statement and whenever the holders of Registrable Securities have
requested that any Registrable Securities be registered pursuant to Section 3
or 4, Harken will use its best efforts to effect the registration of the
Registrable Securities in accordance with the intended method of disposition
thereof, and pursuant thereto Harken will as expeditiously as possible:
(a) prepare and file with the Commission a registration statement
on the appropriate form with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become effective
(provided, that before filing a registration statement or prospectus or any
amendments or supplements thereto, Harken will furnish copies of all such
documents proposed to be filed to any holder of Registrable Securities covered
by such registration statement);
(b) in connection with a registration effected pursuant to either
Section 2 or Section 3 prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective for a period of not less than the period set forth in such section or
such shorter period which will terminate when Registrable Securities covered by
such registration statement have been sold (but not before the expiration of
the applicable prospectus delivery period) and comply with the provisions of
the Securities Act with respect to the disposition of all securities covered by
such registration statement during such period in accordance with the intended
methods of disposition by the sellers thereof set forth in such registration
statement;
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<PAGE> 6
(c) furnish to each seller of Registrable Securities such number
of copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including,
without limitation, each preliminary prospectus) and such other documents as
such seller may reasonably request in order to facilitate the disposition of
the Registrable Securities owned by such seller;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions
within the United States as any seller reasonably requests and do any and all
other acts and things which may be reasonably necessary or advisable to enable
such seller to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such seller (provided that Harken will not be
required to qualify generally to do business or subject itself to any general
service of process in any jurisdiction where it is otherwise not then so
subject);
(e) notify each seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event which requires the making of any
change in the prospectus included in such registration statement so that such
document will not contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading, and, at the request of any such seller,
Harken will prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading;
(f) use its best efforts to cause all such Registrable Securities
to be listed on each securities exchange or exchanges, automated quotation
system or over-the-counter market upon which securities of Harken of the same
class are then listed;
(g) enter into such customary agreements (including, without
limitation, underwriting agreements in customary form, substance, and scope)
and take all such other actions as the holders of a majority of the Registrable
Securities being sold or the underwriters, if any, reasonably request in order
to expedite or facilitate the disposition of such Registrable Securities;
(h) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to its
security holders an earnings statement no later than 90 days after the end of
the 12 month period beginning with the first day of Harken's first full
calendar quarter after the effective date of the registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder;
(i) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the disqualification
of any common stock included in such registration statement for sale in any
jurisdiction, Harken will use its best efforts promptly to obtain the
withdrawal of such order; and
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<PAGE> 7
(j) use its best efforts to cause such Registrable Securities
covered by such registration statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to enable
the Sellers thereof to consummate the disposition of such Registrable
Securities.
SECTION 5. EXPENSES. Harken shall pay all Registration Expenses
in connection with each registration effected pursuant to Section 2 and Section
3, in any event, shall pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal and accounting duties), the expense of any annual audit and the fees and
expenses incurred in connection with the listing of the securities to be
registered on each securities exchange on which similar securities issued by
Harken are then listed. All Selling Expenses incurred in connection with a
registration effected pursuant to the terms hereof shall be borne by the seller
or sellers of Registrable Securities pro rata based upon the number of
Registrable Securities included in such registration.
SECTION 6. INDEMNIFICATION.
(a) Harken shall indemnify and hold harmless, with respect to any
registration statement filed by it, to the full extent permitted by law, each
holder of Registrable Securities covered by such registration statement, and
each other Person, if any, who controls such holder within the meaning of
Section 15 of the Securities Act (collectively, "HOLDER INDEMNIFIED PARTIES")
against all losses, claims, damages, liabilities and expenses, joint or several
to which any such Holder Indemnified Party may become subject under the
Securities Act, the Exchange Act, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon (i) any untrue statement or alleged untrue statement of a material fact
contained in any registration statement in which such Registrable Securities
were included as contemplated hereby or any 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, final
or summary prospectus, together with the documents incorporated by reference
therein (as amended or supplemented if Harken shall have filed with the
Commission any amendment thereof or supplement thereto), or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or (iii) any
violation by Harken of any federal, state or common law rule or regulation
applicable to Harken and relating to action of or inaction by Harken in
connection with any such registration; and in each such case, Harken shall
reimburse each such Holder Indemnified Party for any reasonable legal or other
expenses incurred by any of them in connection with investigating or defending
any such loss, claim, damage, liability, expense, action or proceeding;
provided, however, that Harken shall not be liable to any such Holder
Indemnified Party in any such case to the extent, that any such loss, claim,
damage, liability or expense (or action or proceeding, whether commenced or
threatened, in respect thereof) arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement or amendment thereof or supplement thereto or in
any such preliminary, final or summary prospectus in reliance upon and in
conformity with written information furnished to Harken by or on behalf of any
such Holder Indemnified Party for use in the preparation thereof.
-7-
<PAGE> 8
Such indemnity and reimbursement of expenses and other obligations shall remain
in full force and effect regardless of any investigation made by or on behalf
of the Holder Indemnified Parties and shall survive the transfer of such
securities by such Holder Indemnified Parties.
(b) Each holder of Registrable Securities participating in any
registration hereunder shall severally (and not jointly or jointly and
severally) indemnify and hold harmless, to the fullest extent permitted by law,
Harken, its directors, officers, employees and agents, and each Person who
controls Harken (within the meaning of Section 15 of the Securities Act)
(collectively, "HARKEN INDEMNIFIED PARTIES") against all losses, claims,
damages, liabilities and expenses to which any Harken Indemnified Party may
become subject under the Securities Act, the Exchange Act, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions or proceedings, whether commenced or threatened, in respect thereof)
are caused by (i) any untrue statement or alleged untrue statement of a
material fact contained in any registration statement in which such holder's
Registrable Securities were included 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, final
or summary prospectus, together with the documents incorporated by reference
therein (as amended or supplemented if Harken shall have filed with the
Commission any amendment thereof or supplement thereto), or the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading to the extent in the
cases described in clauses (i) and (ii), that such untrue statement or omission
was furnished in writing by such holder for use in the preparation thereof, or
(iii) any violation by such holder of any federal, state or common law rule or
regulation applicable to such holder and relating to action of or inaction by
such holder in connection with any such registration. Such indemnity
obligation shall remain in full force and effect regardless of any
investigation made by or on behalf of the Harken Indemnified Parties (except as
provided above) and shall survive the transfer of such securities by such
holder.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) of written notice of the commencement of any action,
suit, proceeding, investigation or threat thereof made in writing with respect
to which a claim for indemnification may be made pursuant to this Section 6,
such indemnified party shall, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the indemnifying party of
the threat or commencement thereof; provided, however, that the failure to so
notify the indemnifying party shall not relieve it from any liability which it
may have to any indemnified party except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. If any such claim
or action referred to under subsection (a) or (b) is brought against any
indemnified party and it then notifies the indemnifying party of the threat or
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it wishes, jointly with any other indemnifying
party similarly notified, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. After notice from the indemnifying
party to such indemnified party of its election so to assume the defense of any
such claim or action, the indemnifying party shall not be liable to such
indemnified party under this Section 6 for any legal expenses of counsel or any
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation unless
the indemnifying party has failed to assume the
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<PAGE> 9
defense of such claim or action or to employ counsel reasonably satisfactory to
such indemnified party. Under no circumstances will the indemnifying party be
obligated to pay the fees and expenses of more than one law firm for all
indemnified parties. The indemnifying party shall not be required to indemnify
the indemnified party with respect to any amounts paid in settlement of any
action, proceeding or investigation entered into without the written consent of
the indemnifying party, which consent shall not be unreasonably withheld. No
indemnifying party shall consent to the entry of any judgment or enter into any
settlement without the consent of the indemnified party unless (i) such
judgment or settlement does not impose any obligation or liability upon the
indemnified party other than the execution, delivery or approval thereof, and
(ii) such judgment or settlement includes as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a full release
and discharge from all liability in respect of such claim for all persons that
may be entitled to or obligated to provide indemnification or contribution
under this Section 6.
(d) Indemnification similar to that specified in the preceding
subsections of this Section 6 (with appropriate modifications) shall be given
by Harken and each seller of Registrable Securities with respect to any
required registration or qualification of securities under any state securities
or blue sky laws.
(e) If the indemnification provided for in this Section 6 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b), then each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of the losses,
claims, damages, liabilities or expenses (or actions or proceedings in respect
thereof) referred to in subsection (a) or (b) in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and the indemnified party on the other in connection with the statements,
omissions, actions or inactions which resulted in such losses, claims, damages,
liabilities or expenses as well as any other relevant equitable considerations.
The relative fault of the indemnifying party and the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the indemnifying party
or the indemnified party, any action or inaction by any such party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement, omission, action or inaction. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect thereof)
pursuant to this subsection (e) shall be deemed to include, without limitation,
any reasonable legal or other expenses incurred by such indemnified party in
connection with investigating or defending any such action or claim (which
shall be limited as provided in subsection (c) if the indemnifying party has
assumed the defense of any such action in accordance with the provisions
thereof) which is the subject of this subsection (e). No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Promptly after receipt by an
indemnified party under this subsection (e) of written notice of the
commencement of any action, suit, proceeding, investigation or threat thereof
made in writing with respect to which a claim for contribution may be made
against an indemnifying party under this subsection (e), such indemnified party
shall, if a claim for contribution in respect thereof is to be made against an
indemnifying party, give written notice to the indemnifying party in writing of
the commencement thereof (if
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<PAGE> 10
the notice specified in subsection (c) has not been given with respect to such
action); provided, however, that the failure to so notify the indemnifying
party shall not relieve it from any obligation to provide contribution which it
may have to any indemnified party under this subsection (e) except to the
extent that the indemnifying party is actually prejudiced by the failure to
give notice.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this paragraph were determined by pro rata allocation
or by any other method of allocation which does not take account the equitable
considerations referred to in the immediately preceding paragraph.
If indemnification is available under Section 6, the indemnifying
parties shall indemnify each indemnified party to the fullest extent provided
in subsections (a) and (b), without regard to the relative fault of said
indemnifying party or any other equitable consideration provided for in this
paragraph. The provisions of this paragraph shall be in addition to any other
rights to indemnification or contribution which any indemnified party may have
pursuant to law or contract, shall remain in full force and effect regardless
of any investigation made by or on behalf of any indemnified party, and shall
survive the transfer of securities by any such party.
(f) In connection with any underwritten offering contemplated by
this Agreement which includes Registrable Securities, Harken and all sellers
of Registrable Securities included in any registration statement shall agree to
customary provisions for indemnification and contribution (consistent with the
other provisions of this Section 6) in respect of losses, claims, damages,
liabilities and expenses of the underwriters of such offering.
SECTION 7. SELECTION OF UNDERWRITERS.
(a) If any registration effected pursuant to Section 2 is an
underwritten offering, or a best efforts underwritten offering, the investment
banker or investment bankers and manager or managers that will administer the
offering shall be selected by the holders of a majority of the Registrable
Securities to be included in such offering; provided, that such investment
bankers and managers must be reasonably satisfactory to Harken.
(b) If any Piggyback Registration is an underwritten offering,
Harken shall have the right to select the investment banker or investment
bankers and manager or managers to administer the offering; provided, that such
investment bankers and managers must be reasonably satisfactory to the holders
of a majority of the Registrable Securities to be registered in such Piggyback
Registration, if any Person (other than Harken) has the right, in the case of
an underwritten secondary offering, to select the same.
SECTION 8. RULE 144. Harken covenants to each Holder that, to
the extent that Harken shall be required to do so under the Exchange Act,
Harken shall (a) timely file the reports required to be filed by it under the
Exchange Act or the Securities Act (including, but not limited to, the reports
under Section 13 and 15(d) of the Exchange Act referred to in subparagraph (c)
(1) of Rule 144 adopted by the Commission under the Securities Act) and the
rules and regulations adopted by the Commission thereunder, and (b) take such
further action as any Holder may reasonably request, all to the extent required
from time to time to enable such Holder to sell Registrable
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Securities without registration under the Securities Act within the limitations
of the exemption provided by Rule 144 under the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission. Upon the request of any Holder, Harken shall
deliver to such Holder a written statement as to whether it has complied with
such requirements.
SECTION 9. MISCELLANEOUS.
(a) From and after the date of this Agreement, Harken will not,
without the prior written consent of the holders of a majority of the number of
Registrable Securities then outstanding, enter into any agreement with respect
to its securities which is inconsistent with or violates the rights granted to
the holders of Registrable Securities in this Agreement.
(b) Each Holder agrees as follows:
(i) If any Registrable Securities are included in a
registration statement, the holder thereof will not (until further notice)
effect sales thereof after receipt of telegraphic or written notice from Harken
to suspend sales to permit Harken to correct or update a registration statement
or prospectus; provided that the obligations of Harken with respect to
maintaining any registration statement current and effective shall be extended
by a period of days equal to the period said suspension is in effect.
(ii) If any Registrable Securities are being registered in
any registration pursuant to this Agreement, the holder thereof will comply
with all anti-stabilization, manipulation and similar provisions of Section 10
of the Exchange Act, as amended, and any rules promulgated thereunder by the
Commission and, at the request of Harken, will execute and deliver to Harken
and to any underwriter participating in such offering, an appropriate agreement
to such effect.
(iii) At the end of any period during which Harken is
obligated to keep a registration statement current and effective as described
herein, the holders of Registrable Securities included in the registration
statement shall discontinue sales thereof pursuant to such registration
statement.
(c) All questions concerning the construction, validity and
interpretation of this Agreement shall be governed by the internal law, and not
the law of conflicts, of the State of Texas.
(d) All covenants and agreements in this Agreement by or on behalf
of any of the parties hereto will bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not.
(e) This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect
of the subject matter herein contained. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to the registration rights granted by Harken to the holders of the
Registrable Securities. This
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<PAGE> 12
Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
(f) All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally or
sent by reputable express courier service (charges prepaid), or mailed to the
recipient by certified or registered mail, return receipt requested and postage
prepaid, or sent by telefax, to the parties at the following address (or to
such other address or to the attention of such other person as the recipient
party has specified by prior like notice to the sending party):
If to Harken:
Harken Energy Corporation
5605 N. MacArthur, Suite 400
Irving, Texas 75038
Telecopier No.: (214)753-6955
Attention: Mikel D. Faulkner, Chairman
with a copy to:
Larry E. Cummings, General Counsel
If to Holders, to the addresses set forth in Schedule 9(a).
(g) If any provision of this Agreement is held to be
unenforceable, this Agreement shall be considered divisible and such provision
shall be deemed inoperative to the extent it is deemed unenforceable, and in
all other respects this Agreement shall remain in full force and effect;
provided, however, that if any such provision may be made enforceable by
limitation thereof, then such provision shall be deemed to be so limited and
shall be enforceable to the maximum extent permitted by applicable law.
(h) This Agreement may be executed by the parties hereto in any
number of counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same agreement. Each counterpart may
consist of a number of copies hereof each signed by less than all, but together
signed by all, the parties hereto.
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<PAGE> 13
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
HARKEN ENERGY CORPORATION
By: /s/ Larry E. Cummings
---------------------------------
Name: Larry E. Cummings
Title: Vice President and Secretary
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION
By: /s/ Barry Borak
---------------------------------
Name: Barry Borak
Title: Vice President
NEW ENGLAND MUTUAL LIFE
INSURANCE COMPANY
By: /s/ Michael T. Zonghetti
---------------------------------
Name: Michael T. Zonghetti
Title: Investment Officer
ENCAP 1989-I LIMITED PARTNERSHIP
By: ENCAP PARTNERS, Its General Partner
By: /s/ Robert L. Zorich
---------------------------------
Name: Robert L. Zorich
Title: Managing Director
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